Progess report: Where are we now on re-reg?

Transferring clients’ assets between organisations can be a major headache – often time consuming, frequently frustrating and possibly uneconomic.

The FSA has proposed making re-registration between nominee companies including all platforms compulsory from 1 January 2013. So how is the industry gearing up for 2013?

Right now, most pension-to-pension and pension-to-annuity transfers are cash based. Customers’ assets are sold and all of the resulting cash is re-invested, leading to potential taxable events.

Cash is fine for many transfers, but not all. Given the broad agreement in the industry that a significant amount of assets will transfer from place to place in the coming years, it is clear that a simple, quick and holistic way to transfer assets is required.

Re-registration

As most of us know, assets can also be transferred in specie. Instead of selling the assets, the name recorded on the fund register is simply altered from one provider to another. This process is known as ‘re-registration’ and as customers’ assets remain invested throughout the process, they are not subject to potential taxable events.

Additionally, the re-registration transfer process takes away the element of out-of-market risk from the customer as their assets are not cashed in, and then re-bought, during the process. Combine the ability to do a cash transfer, with an in-specie solution, and this takes care of all your SIPP and ISA transfer needs.

Timing is everything

This is all well and good, but there remains the issue of time. Performing an in specie transfer for a customer can take a long period of time, as it is typically a labour-intensive process. There are numerous forms that need to be completed to satisfy the different information requirements of the businesses involved in the transfer.

What this can mean for your customers is that while in specie transfer is best for the transfer of some assets, it can still be far from ideal.

However, better processes can be found. For example, prior to 2008, cash transfers took on average 51 days to complete. Since Origo launched the Options Transfer service to help customers exercise their Open Market Option in 2008, that time can be reduced by 80% and the system handles in excess of tens of thousands of transactions.

Bringing the industry together

Help is at hand once again. Origo has extended its Options system to automate the process of re-registration, following the success made previously on cash transfers.

The information required will be standardised, the form filling will be reduced, and the transfer of assets will be done electronically – all with the ultimate goal of reducing in-specie transfer time to a handful of days – making the once costly process an efficient, paperless transaction for both advisers and their clients.

As with most complex issues in the financial services world, a degree of collaboration in the industry usually provides a better solution than individual companies working alone; and with the help and support of TISA, a solution with the following key goals is now obtainable:

• Transfer of assets is efficient and smooth, so customers have confidence in the transfer;
• Is simple for advisers to manage, in order to lower the time spent on administration; and
• Is as automated as possible, so costs are reduced for both advisers and product providers.

There is an important dependency upon the establishment of TISA’s ‘contract club’, of which Origo is fully supportive, that aims to assist platforms in the legalities of re-registration and transfer of funds.