In its 60-page final report on Investment Platforms Market Study, published today (March 14), the regulator welcomed the progress industry is making to improve the switching process.
More specifically, it praised the Star initiative, which aims to improve the efficiency of the transfer process across the retail investment and pensions sectors.
Launched in October 2018, the partnership between Criterion and TeX is working on delivering the Transfers and Re-registration Industry Group framework, which was published in July and proposes a 14-day maximum limit for cash transactions and 15 days for occupational scheme transfers.
Trig, a collaboration of 10 industry bodies created in 2016, aims to improve the customer experience by identifying and encouraging good practice so outlying firms improve their own processes in the defined contribution space.
The FCA is encouraging firms which aren't already involved in this initiative "to consider taking part as a way of improving the switching process and achieving better outcomes for consumers".
The watchdog stated that it will review progress made by the industry to improve the switching process later this year, and again in 2020, if needed.
However, it warned that it "will consider taking forward further regulatory action if the efficiency of the switching process does not improve".
Tom McPhail, head of policy at Hargreaves Lansdown and chairman of the Star governance steering committee, said that the FCA has made it "very clear to the industry it has to collectively put its house in order, or face further regulatory intervention and censure".
He added: "This issue presents unique challenges, given firms' dependence on counterparties to cooperate in executing customers' instructions."
Mr McPhail noted that Hargreaves Lansdown is one of the 17 providers which already committed to the switching framework.
He said: "Our goal is to be able to routinely execute transfers in a matter of hours, rather than the days or weeks it still too often takes at the moment.
"All firms that have an interest in the transfer of customer assets should join us in signing up to the Star initiative."
Caroline Mansley, managing director of Criterion – one of the two firms behind the initiative – stressed that there is a lot of work ahead of the industry to meet the expectations of the FCA.
She said: "The industry must now step up to the plate and commit to making improvements. The first step companies can take is to join Star."
Ms Mansley added that once sufficient momentum has been gained, Star intends publishing transfer performance data of member firms to highlight where the industry is in terms of transfer times, and to further drive improvements across the whole industry.
She said: "The first 30 members of Star will be awarded the Founder Accreditation Mark, a visible endorsement of their commitment to improving outcomes for consumers."
Martin Bamford, chartered financial planner and managing director at Informed Choice, noted that "some pension providers seem reluctant to switch, as there’s nothing in it for them".
He said: "They are losing assets and spending money on the administration resource needed to process a switch in a timely fashion. Having an industry-led initiative to improve the consumer experience of pension switching is a step in the right direction.
"I suspect further regulatory intervention will still be needed though, especially in respect of ‘zombie’ pension funds and some older schemes, where systems and resources dictate slower turnaround times."
maria.espadinha@ft.com
