Fresh calls have emerged for all platforms to be pre-funding, arguing that clients benefit as they are in the position they want within 24 hours and so not losing out on opportunities.
Pre-funding is when platforms are prepared to invest funds, that have not yet cleared, on behalf of clients, such as cheques.
At present, of the platforms affiliated to life insurance companies, Axa and Zurich both pre-fund across the board, whilst Aegon, Aviva and Standard Life offer pre-funding for some transactions.
Aviva, Axa, Standard Life and Zurich all pre-fund for ‘switching’ - selling some funds and buying others within an account like and Isa or a self-invested personal pension.
However, for transferring within wrappers - selling some funds in one account and using the money to buy others in a different account - only Zurich and Axa do this at present.
Mike Wintle, independent financial adviser at St Martins Partners, told FTAdviser that the key issue with pre-funding is not on set-up, but on the first switch an adviser makes on behalf of a client.
He stated that if an adviser is not using a pre-funded platform, a switch, which he defined as moving the assets from one fund to another within the platform, could take up to a week or longer, whereas pre-funded platforms allow it to happen within 24 hours.
“We know that if you ask for a switch to take place [once the funds have been invested] it only happens once a platform receives money back [from the fund they are currently in], for example it may take a week to get your money back from some fund houses.
“If a platform is not using pre-funding then an investor might lose money or miss the opportunity.”
Mr Wintle added that if the money is in pure cash on the platform, then there is no pre-funding to be done; for example the first transaction.
“Most of the market might not fully understand what prefunding is and therefore don’t understand its benefits until it is too late. Advisers who don’t use pre-funded [platforms] might not fully understand its benefits.”
Alistair Wilson, heard of retail platform strategy at Zurich, said that platforms need to enable advisers to react quickly to changing markets. “Platforms that don’t pre-fund trades and await settlement before buying new funds can lead to missed opportunities for advisers, or at the very least slow the transaction process down.
“In some cases, advisers need to undertake two steps across different days to complete the switch, which introduces additional business and financial risk for advisers.”
Steve Owen, head of platform proposition at Axa Wealth, said that pre-funding gives advisers and their clients the certainty about when their money will be invested and paid. “Without it, there’s an element of guesswork around how long the delays on payment can be.
“Who wants to wait up to six weeks for tax relief, for example? The ability to prefund differs across the market, there’s not many providers who have the broad range that we offer.”
ruth.gillbe@ft.com
