Platform switching has become a hot topic in recent months, as many providers have engaged in a replatforming exercise, and it has not always gone exactly to plan.
Some platforms have found it hard to migrate all client assets to their new system, which in some instances means advisers have been locked out of their accounts, or it is taking a long time to move client assets across. Some have considered transferring to a different provider, partly out of frustration, but this issue of smooth transfers between platforms has been growing for a number of years.
Back in 2016, an industry group connected with the Association of British Insurers put together plans for good working practices for making transfers – whether an actual transfer of assets or re-registration; that is, in-specie transfer where the assets are automatically transferred without cashing in and losing time in the market.
In June 2018, the Transfers and Re-Registration Industry Group published a document, called Industry-wide framework for improving transfers and re-registrations. It sets out goals that it believes members should adopt, suggesting there should be standard timescales end-to-end for all transfers and re-registrations.
It says: “Organisations should adopt a maximum standard of two full business days for completing each of their own steps in all transfer and re-registration processes within the scope of this framework, with the exception of pension cash transfers.”
In July, the FCA published an interim report on its investment platforms market study, where it highlighted the problems clients found with switching between platforms.
The report said: “The switching process for investors is complex and time-consuming. Almost half of consumers who have not switched nor considered switching platforms are happy as they are. But we found that 7 per cent of consumers have tried to switch at some point but failed mainly because of the time involved, the complexity of the process and exit fees.
“A further positive step would be for the industry to publish data on transfer times, so consumers and third parties can compare platform performance and put pressure on platforms to make improvements.”
Key points
- The FCA and industry are looking to make platform switching easier.
- Problems with replatforming have led advisers to rethink their commitments.
- It's important to think about what's suitable for the client.
Steve Nelson, consulting director at the Lang Cat, said: “There’s a huge focus on the platform market and the FCA is trying to get to the root of value for money. The regulator is very much looking at areas of client detriment.
“It’s a huge enterprise. It’s not just about transferring from one provider to another. Providers are embedded within advisers’ day-to-day business – integrated with back-office, end-to-end systems, risk-profiling and fund research, adviser charging reconciliation. This is why you find platform assets are very sticky and there isn’t a huge amount of transfer activity.”
Selection process
However, due to the process of replatforming being undertaken by Aegon, with the original Cofunds assets, and the recent Aviva replatforming process, as well as the forthcoming Quilter exercise, it means many advisers are revisiting their commitments.
Mr Nelson said: “There are a number of adviser firms – because of ongoing regulatory focus and trends in the market – that are starting to review their current panel and selection processes, and as a result of that it’s a bit of a moment in the market and they’re starting to [look at] these things.”
A frequent issue is the transition from one share class to another, as an adviser may have access to a certain share class on one platform and may not have the same share class on the new system.
Verona Kenny, head of intermediary at Seven Investment Management, said: “If one platform has got a certain share class and the other doesn’t, that’s one of the challenges: some will do the share class conversion before transfer and some after. Whenever there’s the conversion that takes more time. It’s just timing, it’s another step in the process. In some cases it’s more steps in the process and every step takes a bit more time.
“I think the FCA is trying to get the industry to make it as easy as possible, and the industry group Trig has done a lot to make this process a lot more streamlined. If someone is doing a cash transfer, I don’t see any reason for any obstacle.”
Scott Gallacher, a director at Rowley Turton, said he would not automatically switch a new client using a different platform to one of the regular providers that he uses unless it is really necessary, because of the hassles involved in switching share classes.
He said: “The issue is whether the assets can be transferred across or not. Even if the providers let you do that, what you’ll find is you get different share classes on different platforms and that creates a [capital gains tax] event, which is a problem.
“Some will allow you to do a share conversion on the same platform, so converting from A to B on the one platform. And some providers are very good, and will temporarily offer the A share class, so you can do A to A [between platforms] and then do the conversion.”
He also prefers to keep clients on their existing platform, because making the transfer could mean they are potentially out of the market.
Origo offers a service to help make transfers smoother by looking ‘under the bonnet’ at the connections between platforms and advisers’ back-office systems.
Managing director Anthony Rafferty said: “For example, Platform A has connections with adviser back-office systems and cash flow/risk-profiling modelling tools. Origo helps these parties and systems [platforms, BOS, tools] to connect in a much more efficient way, so that such integration problems, and costs, are dramatically reduced.”
Regarding the replatforming exercises being undertaken at present, he said: “We have noted that often the integration links are left towards the end of the project. This can be frustrating for advisers who mainly service their clients via their BOS and are reliant on those integration links for updates to their BOS [for example, to automatically update all of their policy valuations].”
Origo offers its Integration Hub, which reduces the connections between platforms and back-office systems, making the process a lot simpler.
Mr Rafferty said: “It’s important for advisers as part of their due diligence to not only consider the connections available through a platform, but also just how efficient and future-proof these connections are, so that they can continue to run a service to their clients’ expectations.”
Functionality
What else should advisers consider when trying to transfer to a new platform?
Ms Kenny said: “It’s really what’s suitable for the client. I think it comes down to who are they replatforming to, and no platform says: ‘I’m going to replatform to give less functionality.’ It comes downto the adviser – he or she is going to get more functionality and it’s going to be suitable for the client.
“It all comes down to what the client needs the platform to provide and that will be based on the advice. Is it really good value for money for what the client is receiving?”
Melanie Tringham is deputy features editor of Financial Adviser and FTAdviser.com
