PlatformMar 26 2020

When and how to switch platforms

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When and how to switch platforms

A troubled platform migration in 2018 left Aviva advisers facing problems for months.

Aegon is another company, whose platform issues have been well documented, following the acquisition of the Cofunds platform in August 2016.

After attempting to move Cofunds’ client base onto its own platform this resulted in a wide range of issues, with clients unable to access basic functions on the site for months. 

By June 2018 efforts to solve the issues had cost the company an additional £3m.

These two high profile examples still raise the question of what approach advisers should take when picking a platform.

For 18 per cent of advisers, poor experience with their existing provider forced them to contemplate a change.

Mike Barrett consulting director at the Lang Cat says the most important thing for an adviser is to think about what they want the platform to be doing.

“There’s no right or wrong with this,” Mr Barrett says.

“Some advisers will want a full feature platform. Others are happy to have no bells and whistles, no frills or maybe a mixture of both.”

A survey by the Lang Cat in November for its annual State of the Adviser Nation report found that 80 per cent of respondents had over the last year considered making changes to where they place platform business.

But only 8 per cent could be lured away by the potential of an attractive proposition elsewhere, while for 18 per cent, poor experience with their existing provider forced them to contemplate a change.

When it comes to switching platforms, difficulties remain.

But upcoming FCA plans could change this.

The FCA is introducing a package of rules that introduce requirements for platforms to: 

  • Offer consumers the choice to transfer units in investment funds that are common to both platforms via an in-specie transfer 
  • Request a conversion of unit classes, where this is necessary to enable an in-specie transfer to take place 
  • Ensure that consumers moving onto a new platform are given an option to convert to discounted units, where these are available for them to invest in

The FCA says the intention of the new rules is to complement the existing rules on transfers and re-registration and help make it easier for consumers to move their assets from one platform to another. 

The regulator adds: “In turn, we expect this along with the other remedies in the investment platforms market study (IPMS) to improve competition in the sector, increase efficiency and improve the consumer experience. 

“We consider that overall this will help us to deliver public value through a better functioning retail distribution sector.” 

In March 2019, the FCA’s IPMS final report found that customers found it difficult to move from one platform to another because of the time, complexity and cost involved, a sentiment not dissimilar from what advisers experience when they use platforms.

Kevin Okell managing director at Altus says: “If I was an adviser looking at a platform, I would want to understand; do they have service levels around transfer times and what’s the typical time it takes to move assets.”

One of the possible reasons an adviser might move from one platform to other, might be because the platform has negotiated a better AMC on a particular fund.

But not every platform can negotiate.

Mr Okell adds: “So you end up with different share classes for the same fund on different platforms and that might be one of the reasons for an adviser wanting a client to move from platform A to platform B; because they can get their portfolio cheaper there.

“But the challenge is there is no compunction on them to move clients between share class A and share class B. But the FCA has said from July there will be. They are mandating that platforms must support conversion between share classes.” 

But Jill Chadburn a chartered financial planner and paraplanner with The Timebank has said in a recent blog that until technology, or the mindset of some platforms change, it is going to continue to be hard to move clients easily.

She says advisers should look at how exposed their clients are to these difficulties.

Meanwhile they should ask the platforms their clients use for three things:

  • If the ceding and receiving platform do not hold the same share class what are the options available, that is, if a conversion is required at some point in the transfer process what is your company doing to help simplify the process?
  • Will the investors be offered the option to convert to discounted units, where these are available for them to invest in?
  • What additional paperwork if any, will the financial adviser/investor need to complete in order re-register holdings with your platform?

As the coronavirus crisis worsens, when it comes to using platforms, advisers will be thinking about business continuity.

Mr Barrett says: “The most important thing for providers to be doing is to communicate their current position clearly to advisers. 

“Obviously this is changing rapidly, so advisers need to know where they can go to self-service and see what is happening. We’ve been doing some work in the last few days to help with this. 

“Our platform directory now has operational readiness information for just over half of adviser platforms, and more are coming on board as we speak.

"This allows advisers to see how providers are reacting to the current crisis, all in one place.”