History suggests July is a month of revolutionary zeal. Perhaps it is something to do with the weather.
From the cerebral and philosophical declaration of independence across the Atlantic to the physical and brutal storming of a city stronghold across the Channel – to mention just two events – barriers, rules and old ways have been swept aside in Julys gone past.
The changes afoot in the UK financial services industry are similarly revolutionary, although, thankfully, there will be no blood on the office carpet.
From 1 July, the processing of fund transfers should take no more than six working days. Before the question “so what?” springs to mind, it is worth remembering that, at present, clients often have to tolerate many weeks, if not months, of waiting to see their holdings re-registered.
It has often struck me as strange that, in this increasingly automated world, the financial services industry – which likes to see itself as being at the cutting edge of social change – should demonstrate distinctly laggardly tendencies when it comes to rudimentary customer service. Hospitals have to accept standards of practice for waiting times; surely it is not unreasonable to expect financial institutions to fulfil their responsibilities more swiftly than they have managed to thus far.
Two and a half years ago, the FSA made clear its intention to compel the industry to introduce automated standards for the re-registration of funds, unless it saw an improvement in the provision of quick, secure transfers between providers.
Tisa responded to this gauntlet by establishing an industry committee of senior executives from fund groups, platforms and third-party service providers to oversee the development of an automated services utility to support asset re-registration.
This resulted in the creation of a set of standards and associated service level agreements (SLAs) and contracts for the transfer of funds (unit trusts and Oeics) between providers, and support for the automated in-specie transfer of assets within an agreed six-day SLA. This has been positively received by both the industry and the regulator.
So far, so good – in theory – but the all-important questions surrounding practical implementation remained. After pan-industry consultation, TeX (Tisa Exchange Limited), a not-for-profit, industry-funded ‘contract club’, was founded to provide the necessary implementation controls and services. Members reported very early on that their TeX fees were more than offset by the savings generated by no longer having to spend on individual re-registration contracts. In the past, each company had to implement a plethora of contracts and associated service standards and approaches.
Now the race is on to continue improving standards, not just for open-ended funds, but for offshore funds and Sipps. For that matter, why not auto-enrolment and pensions more generally? Also, consumers are likely to find platform propositions more compelling if they know it is quick and easy to transfer to other providers.
Over 50 financial groups have signed up to TeX and plan to meet its SLAs, which came into effect on 1 July. While it is not an automated service but a contract club, setting out process, contractual terms and SLA, it will greatly improve industry procedure, to the long-term benefit of end investors and their advisers. Indeed, the new TeX SLA will encourage more providers to move to automated processes, as current manual intervention falls short of regulatory requirements. Ready or not, change is coming to the way things are done.
After all the past revelations of disappointing industry practice, it is pleasing to see that a pan-industry initiative can be set in motion with a nudge, rather than menacing demands from the regulator. Establishing common standards, SLAs, contracts and a dispute resolution process that dramatically reduce the time it takes to re-register assets is a rare achievement by the industry, and something to be proud of. It will not stop at unit trusts and Oeics, either. Indeed, fund managers in Dublin and Luxembourg have already been in touch to express an interest in joining TeX. And while a Sipp typically takes two to three months to transfer, it is not beyond the realms of possibility to see that reduced to a few days.
Solutions are in sight. This quiet revolution is underway.
Tony Vine-Lott is director general of Tisa
From 1 July, the processing of fund transfers should take no more than six working days
It was clear client service levels were woefully inadequate, and action to rectify the situation was long overdue
Now the race is on to continue improving standards, not just for open-ended funds, but for offshore funds and Sipps
