Jill Chadburn, chartered financial planner and paraplanner with The Timebank, highlighted the rule changes the Financial Conduct Authority is bringing in on July 31 this year, as laid out in its December 2019 Policy Statement: Making transfers simpler.
In a blog post for The Timebank, Ms Chadburn, who is also a Fellow of the Chartered Insurance Institute, said: "With more emphasis on centralised investment processes, due diligence and Prod, the need to be able to move clients between platforms is very real.
"The FCA aims to make it easier for consumers to transfer their asset from one platform to another."
However, she added: "The reality is that until technology, or even the mindset of some platforms, changes, it is going to continue to be hard to move clients easily.
"Until such time, you should at the very least look at how exposed your clients (and subsequently you for giving the advice to use the platform in the first place) are to these difficulties."
She said to help overcome potential difficulties, it would be important to ask for three specific things from the platforms used by clients.
These are:
- If the ceding and receiving platform do not hold the same share class what are the options available - for example, 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.
Ms Chadburn said: "This will help you identify any problems so that you can start to think about solutions."
The FCA's new rules came as a result of feedback to a consultation it carried out in March 2019. The feedback suggested competition in the platform market was limited by the barriers facing consumers when they try to switch platforms.
One of the main barriers was the imposition of exit fees. A consultation on this had been expected at the end of 2019; when this was postponed until quarter one this year, there was much disappointment among advisers, as reported by FTAdviser at the time.
The second barrier related to ‘in-specie’ transfers and unit class conversions.
Ms Chadburn added: "Customers should be able to make ‘in-specie’ transfers between platforms without liquidating their assets, especially if liquidating assets could lead to a tax charge or incur a loss in growth during the period of disinvestment."
As a result of the consultation, the FCA's Policy Statement states that platforms should 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; and ensure consumers moving onto a new platform are given an option to convert to discounted units, where these are available for them to invest in.
However, as Ms Chadburn pointed out, the technology available to allow this to happen easily and efficiently has not been implemented by all firms; indeed, the FCA has not been prescriptive about how such technological solutions need to be put in place to accommodate the changes.
As a result, advisers and their clients can still expect delays and frustration after July 31 this year, despite the new rules aiming to make the whole process better.
simoney.kyriakou@ft.com
