Going automatic

Kira Nickerson finds out the best way to move from one platform to another

The ability to move assets from one platform to another is expected to become easier as the industry works towards the implementation of agreed standards to automate the process.

Already platforms have agreed communication protocols for electronic messaging but working parties are still sketching out how these will work in practice. The issue has become vital as IFAs look to consolidate, have greater flexibility over client holdings and the FSA steps up its concentration on the services on offer by platforms.

The topic of re-registration does not just involve the platforms. Life companies, stock brokers and other administrators must also enable more mobile assets. Representatives from these types of firms are involved in the discussions with platforms to try and arrive at a solution that works for everyone. The problem is with so many interested parties, competition issues and perceived threats, the complexity of the process plus the FSA’s RDR, the work has so far been slow going.

The issues

There are two main areas concerning the re-registration of assets. Firstly the individual concerns as an investor looks to move holdings from one fund to another within the same platform. Secondly, the larger issue of platform-to-platform re-registration, where a client or IFA wants to move assets wholesale from one platform to another.

The issue of in specie transfer among individual holdings within the same platform has largely been resolved in recent years. While the ability and speed at which in-platform re-registration can occur may vary and some still struggle to accommodate all funds, due in part to the reluctance of some providers to allow such movements, this area is relatively smooth today.
Ed Dymott, head of fund partner management at FundsNetwork, says the platform has seen individual re-registration take up 20%-30% of its business annually and he believes this trend will continue for the next several years and could accelerate, especially post RDR. “There are still more assets held off platforms than on them,” he notes.

So the main issue of re-registration concerns the ability to move assets between platform offerings. There are mixed messages as to the extent of the demand for platform-to-platform exchanges but no one denies there is pressure to make the situation easier for advisers and their clients.

Alastair Conway, marketing and propositions director at Cofunds, says platform-to-platform re-registration remains a difficult area, although progress is being made. Collaboration on the issue is vital but he notes there is a genuine effort underway by members of the industry to get the issue sorted as soon as possible. “It’s in all our interests to ensure this is efficient,” Dymott adds.

Graham Hooper, business adviser to Allmyplans, an investor aggregation and reconciliation solution, says platforms have been reluctant in pushing forward with re-registration because of the potential loss of assets it could bring. IFAs currently use more than one platform because of a fear of having all their eggs in one basket if something was to screw up, Hooper notes. But as client valuations and information must still be consolidated, using several different platforms causes added work. There is a need for advisers to be able to use just one platform and be able to switch quickly if they find the service levels are not what they expected or if there is a problem, he notes.

Dymott disputes the criticism platforms have been reluctant to allow re-registration for fear of losing assets and business. He notes the process is far more complex than many understand and this has created barriers to action. For example, if an IFA with a client who has investments with several different providers wanted to move from one platform to another then numerous communications have to be passed back and forth between the old platform, the new, the individual fund managers plus the IFA and client. This manual process could end up taking weeks, if not months and is error prone. “For example if the client had assets with say, five different providers, then that is 19 different messages alone,” he says.

David Ferguson, chief executive of Nucleus, adds: “Moving clients is still very difficult. It’s cumbersome, messy and paper-based. Such is the level of communication that sometimes we don’t even know it has been moved until six or seven weeks after it has happened. If we could do it all electronically it would be cleaner and easier.”

Automation of the platform-to-platform re-registration would also aid individual in specie transfer, so clients should see an overall improvement, Dymott says.

Ferguson notes the past year has seen some movement in the ability to re-register assets with an agreement of messaging standards reached but implementation is still some way off. Last year following a review into how best to deliver platform-to-platform re-registration, members of the UK Platform Group agreed the International Organisation for Standardisation (ISO) protocol 20022 was the best approach to streamline this process. Adopting it as the standard and implementation is the next stage and while platform members say the work is underway, the timeline remains hazy. The FSA’s forthcoming consultation paper on platforms and RDR may be a needed impetus in this process.

The impact

While the automation of re-registration will reduce cost and complexity and increase the mobility of assets, platform providers do not believe it will necessarily lead to a surge in transfers between offerings. FundsNetwork says it began enabling platform-to-platform re-registration on a manual basis 18 months ago and since then it has not had a noticeable impact. Just as many have moved off the platform as have joined, Dymott says.

He adds advisers may still prefer to use a wide range of platforms as some platforms have specialisations in product areas where a competitor may be weak or where one service better suits a certain client segment over another. An automated re-registration process, would let them have greater flexibility in moving clients depending on their needs. Ferguson also notes: “It gives clients more room to move and improves service levels. It will be easier for IFAs to choose platforms rather then get stuck with just one.”

Ferguson agrees that not too long ago many companies either refused or were reluctant to allow re-registrations but he pointed out it was not just the platforms. Some providers did not want IFAs to move client assets away from their direct relationship and onto a platform. Not only would it lower their margin on the business, having to pay the platform, but it would enable a greater ability for investors to move their monies to another fund or provider.  Hooper too notes this has been a likely deterrent for providers, noting that if a fund underperforms a client can switch funds much more easily if their assets were on a platform than with the company.

Still, Ferguson points out attitudes are changing. Platforms and providers are not just waiting for the electronic ability to re-register, the majority now allow re-registration via the manual route but demand has not been high. Hooper points out that while platforms do allow re-registration on a manual basis, it is still only one client at a time, rather than enabling wholesale movements. Demand may arise if an adviser could move more than one client in this manner, he adds.

The ability to cope with the complex manual process and how they implement it varies across platforms and fund managers themselves. Dymott notes FundsNetwork allows re-registration only for unwrapped assets of £40,000 and above while Ferguson says at Nucleus there is no such minimum level. Dymott says the process is so long that for clients with smaller amounts, re-registration may not be worth it and they may be better off encashing and transferring the assets if there is such a need. A transfer can take just three to four days as opposed to the weeks involved in a re-registration.

Once the electronic process is implemented, and there is yet to be a firm timeline on this, it will not solve all problems.

Dymott and Ferguson question whether even the automation of the platform’s process will truly simplify all aspects of wholesale movement between platforms. Advisers will still be required to write to their individual clients and obtain permission, which in itself is a time consuming and manual process.

Some products, which can be bought and held on platforms, may also remain outside the scope of re-registration. Platforms are already widening their product scopes to include more offshore funds as well as investment trusts. Dymott says he sees no reason why re-registration should not also apply to these vehicles.

However, he notes there are some product areas where there will still be problems unless a separate solution is found. The main area he points out is with insurance bonds, where clients more than likely will still have to encash if they wish to move the assets. As this tends to incur either a tax liability or exit penalty, this product set still faces barriers to transferring assets.