Fancy a 10 per cent discount off the price of flights? Or how about half-price entry into some of the UK’s top racecourses? Perhaps free chocolate is more your thing? Or a few thousand pounds off the purchase price of a new house? If you invest in the right company, these perks and benefits could be yours, simply because you’re a shareholder.
Although investing in the stock market is generally intended as a way to achieve a combination of growth in income and growth in capital, holding certain shares in your portfolio can often save you money, too. Companies often give shareholders discounts on products and services, while others encourage shareholder attendance at annual general meetings by giving away discount vouchers or goodie bags containing samples of the firm’s products.
But is an attractive perk reason enough to buy a particular share? “Probably not” seems to be the general consensus among the experts.
“I think it’s a mistake to buy shares purely to get perks,” says Ed Bowsher, head of consumer finance at lovemoney.com. “The danger is that you’ll end up making duff investment decisions that will cost you more than anything you might have gained from the perk. What’s more, the perks are often discounts to full price. You may be able to get similar discounts by other routes.”
His view is backed up by Ben Yearsley, of stockbroker Hargreaves Lansdown. He says: “I wouldn’t advise anyone to buy a particular share just for the perk. First and foremost the company should be a good investment. Otherwise, if it loses value, you could lose a whole lot more than you gained from the perk.”
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Existing shareholders should be able to find out what perks and benefits they’re entitled to by reading the literature sent to them when they buy shares. For those choosing shares to buy, there are several online guides that outline the various perks on offer. Stockbroker Wills & Co has a guide at willsandcoperksguide.com/download, while Hargreaves Lansdown has a similar list at h-l.co.uk/shares/shareholder_perks/action/list.
In some cases there will be rules about how many shares you need to hold to benefit from the perk. Clem Chambers, chief executive of financial markets website ADVFN, says that investors should always check the small print. “Often a minimum subscription is required to qualify for the benefits; sometimes shares have to be held for a minimum period and there can be a delay in receiving the perks,” he warns.
Another thing to look out for is the type of account that your shares are held in. When you buy shares, they may be in a nominee account, ie, registered in the name of the broker, or in a certified account whereby the shares are registered in your own name. Holders of some shares in nominee accounts may not be eligible for shareholder benefits. Barclays Stockbrokers Shareholder Benefits Guide makes the distinction between the two groups and has two separate lists of shareholder benefits.
Barbara-Ann King, head of investments at Barclays Stockbrokers, says: “Shareholder benefits alone are not a reason to buy shares, but they are certainly a bonus for those investors keen to own equity in a company. This guide provides investors with a quick and easy point of reference to the offers and discounts available to certain shareholders — and, as the guide shows, there are some interesting and attractive benefits linked to many of the shares listed.”
So what can you get? British Airways offers one of the best shareholder perks around, especially if you’re a frequent traveller. If you own 200 shares, you can get 10 per cent discount for flight bookings online. The discount is available to the shareholder and up to eight travelling companions.
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The current share price is 218p, so you need to invest only £440 to be eligible for this perk. If you travel a lot, this could be an attractive offer and you could easily recoup the cost of the shares on one long-haul first-class fare.
Another good company for those looking for perks is Bloomsbury Publishing, which offers shareholders 35 per cent off the recommended retail price of its books. So if you wanted to buy the seven-book Harry Potter boxed set, you’d save £21 off the £59.99 purchase price.
The Restaurant Group, which owns, among others, Garfunkel’s, Chiquito and Frankie & Benny’s, gives all shareholders 25 per cent discount on meals for up to ten people.
Other perks may not be as good as they sound. Bellway Homes, for example, offers shareholders £625 off each £25,000, or part thereof, of the price of a new home. Although this would net you a £5,000 discount off a £200,000 property, homebuyers would probably be able to get a decent chunk off the advertised price in the current market anyway. Mr Yearsley says: “Housebuilders will be biting your hand off to sell you a property at the moment anyway, so the chances are that you could get this sort of discount without being a shareholder.”
Case study: Getting a sweet taste of the stock market
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Kenneth Jackson, 76, from Nottingham, has 4,000 shares in Thorntons. The chocolate company gives shareholders who have more than 200 shares £34 in vouchers each year to be spent in Thorntons shops.
Mr Jackson says: “I first bought shares in Thorntons about ten years ago, then bought some more two years ago. We use our vouchers to buy chocolates for ourselves and our family. We bought shares in Thorntons because they are a local company.”
Since Mr Jackson has held his Thorntons shares, they have gone up in value, then down again, and are more or less holding their original price. “They’re not doing too badly,” he says. “We’re not making a fortune out of the shares themselves — it’s more a case of steady as she goes.”
Mr Jackson also holds shares in ferry company P&O, which was taken over by Dubai Ports in 2006. P&O shareholders used to get discounts on ferry crossings, which, Mr Jackson says, came in very useful over the years.
“We bought them just to get the discount on the boat,” he says. “We have fixed-dividend shares and bought the right amount to make sure that we got the discount. We used to go to France every year with the car and the family, and the discount came in very useful.”