Making transfers simpler – Policy Statement 19-29

The intended proposals

In March 2019, the FCA consulted on the process for customers transferred funds in between platforms. Following this consultation, the FCA has now published its policy statement surrounding this, which can be found here.

Main findings

The main findings were:

  • Customers find it costly, complex and time-consuming to transfer funds between platforms.
  • Providers need to offer consumers the choice to transfer units in investment funds that are common to both platforms via an in-specie transfer.
  • There needs to be a conversion of unit classes, where this is necessary to enable an in-specie transfer to take place.
  • Those consumers moving onto a new platform need to be given an option to convert to discounted units, where these are available for them to invest in.

Platforms have until 31 July 2020 to implement this.

Our thoughts

In-specie transfers

Transferring an asset ‘in specie’ means to transfer the ownership of that asset from one person/company to another without the need to convert the asset to cash.

Under the existing process, not all platforms offer an in-specie transfer option, this means at present that some customers have to sell their holdings on one platform to buy the same investments on the new one.

The offering of in-specie transfers by all providers will help customers not be financially penalised from changing platforms.

Unit Class Conversion

Not all platforms offer the same funds, as such the regulator is concerned that customers would not be able to take advantage of in-specie transfers mentioned above. As such the regulator has proposed that where an investment is in a unit class which is not available for purchase in the receiving platform, then the fund manager will need to carry out a conversion of the units to enable an ‘in-specie’ transfer.

The FCA has promoted the STAR initiative as a method of improving the switching process in general but in particular concerning unit class conversions.

Discounted Units

Platforms will also need to offer, as part of the in-specie transfer process, to convert (where available) units into a discounted unit on the receiving platform.

This will hopefully again prevent any customer detriment on transferring funds where a discounted alternative is available.

Costs of Leaving

The industry had expected that the FCA would as part of this Policy Statement set out a ban on exit fee charges. The FCA has however backtracked from this and confirmed that it will be publishing a consultation paper specifically covering this in the new year. With Brexit already scheduled for next year, and other regulatory changes in the pipeline, it could be Q4 2020 at the earliest before we see the outcome of that paper.

On the whole, these changes are nothing radical and will hopefully lead to better customer outcomes once fully implemented. It is disappointing to see that the FCA has delayed its consultation on exit fees but we will hopefully see this in the early New Year.

Tom Richmond – Technical Consultant