Re-reg victory puts fund supermarkets under pressure

The Financial Services Authority has mandated that all platforms need to offer in specie re-registration by 2012, but wrap providers are putting pressure on the big three platforms to offer the process much sooner.

Skandia Investment Solutions, Fidelity FundsNetwork and Cofunds – which make up the UK Platform Group along with Standard Life and Hargreaves Lansdown – have the most work to do to meet the regulator’s deadline.

Ascentric managing director Hugo Thorman (pictured below) argued they need to work much faster, pushing for them to allow in specie transfers, with a 20-day working period, from September.

‘We need to have a date when everyone will accept transfers,’ said Thorman, speaking at a Cofunds round table on re-registration. ‘If we want to get good at this by [2012] then we need to start now.’

Not soon enough

Ian Thomas, head of customer experience at AXA Elevate (pictured below), agreed. ‘In my opinion the FSA’s deadline of the end of 2012 for all platforms to allow re-registration off is just not soon enough,’ he said. ‘The industry should have already solved this issue for itself, without the threat of regulatory intervention.’

Transact chief executive Ian Taylor (pictured below) supported the call for a 20-day target but said it was ‘irrelevant’ when some platforms would not consider allowing re-registration if they required manual transfers. The platforms have agreed on a common automated re-registration solution but it is only just set to enter the pilot stage.

Transact, Ascentric and AXA Elevate said that co-operation between wraps and platforms in the meantime over manual in specie transfers could speed up the move towards universal re-registration.

Platforms speak out

But Cofunds and Fidelity FundsNetwork argued that without the co-operation of fund managers, offering manual re-registration would be too laborious.

‘We cannot physically manage to do up to a thousand fund transactions we do in a day,’ said Stephen Mohan, managing director of operational services at Cofunds (pictured below), adding that the platform has set aside £2 million over two years to help deliver automated re-registration.

Ed Dymott, head of UK fund partners at Fidelity, said that even if platforms agreed on offering a manual re-registration process, it would still require the co-operation of fund managers.

‘We can agree that but it is getting the 100-plus fund managers to do it as well,’ he said.

Mohan pointed to the difficulties in drawing up indemnity agreements between platforms and fund managers.

‘For this to work we need to get all the indemnities…between every single platform and every single fund manager’ he said.

Alastair Conway, Cofunds sales and marketing director (pictured below), said that other areas of financial services were lagging behind platforms over transfers of assets.

‘We are trying to bring things from six days to six minutes in terms of moving from manual to technology but there are other parts of the industry that take six months to move things,’ said Conway.

Taylor agreed, adding that the same pressure on re-registration should apply to stockbrokers and discretionary managers. ‘What about all the other caretakers of other peoples’ assets that look after things for Mrs Miggins but when she says I would like to…[move them] they say no?’ asked Taylor.

A phased approach

Conway said that advisers should expect to see progress in phases rather than a single big bang moment. ‘My sense is that we will see moments of progress but we are not starting at a point where it does not happen today,’ he said.

He pointed to the in specie re-registration services that Cofunds currently offers on and off the platform for unwrapped funds and funds in a Sipp.

‘I would personally like absolute clarity,’ he said. ‘When I tell people what we can do they are surprised. We are in a grey area that needs to get clearer and clearer.’

But that is not enough for advisers like Alan Mellor, managing director of Cheshire-based adviser Philip Bates & Company. He said he feels that clients are trapped on the Skandia, FundsNetwork and Cofunds platforms.

‘They are like the life offices – we have got your money and will make it difficult to get it back,’ said Mellor. ‘Clients are not locked in by clauses but being out of the market for several weeks means missing potential returns and could trigger charges for capital gains tax.’

A Swift solution

The Tax Incentivised Savings Association (Tisa) has spearheaded work on re-registration, and come to an agreement on an automated solution. Earlier this month it called for fund management groups to adopt the Swift messaging network.

A single messaging network would mean that platforms can speed up transfers and reduce the numbers of errors associated with re-registration.

A pilot project involving Swift, platforms and fund managers will be launched this summer with the aim of having a working system in place by early 2011, according to David Moffat of third party administration provider IFDS, who sits on the Tisa wrap council.

That project could hold the key to whether 2013 will finally see a breakthrough on re-registration, or platforms wake up in the new year with a serious hangover.

Re-registration: who has the most to do?

The re-registration debate divides wraps and platforms. Open architecture wraps allow in specie transfers off their platforms, while the three big fund supermarkets, Fidelity FundsNetwork, Skandia Investment Solutions and Cofunds do not allow the process on all wrappers. None of the platforms can accept transfers involving life company funds or insurance bonds. Here is where all the platforms involved in the Cofunds debate stand on the issue:

• Transact: The UK’s biggest wrap can re-re-register in specie any fund on or off, in any wrapper, with the exception of investment bonds and life company personal pensions.
• Standard Life: Allows in specie transfers on and off the wrap for unwrapped funds and those in an ISA or Sipp wrapper.
• AXA Elevate: Allows in specie registration on and off for funds held in any wrapper apart from those in an offshore bond.
• Cofunds: Allows in specie re-registration on and off platform for unwrapped funds and funds in a Sipp wrapper. ISA funds can be transferred in specie onto the platform but not off it.
• Skandia: Accepts in specie re-registration onto the platform for all eligible products but cannot deal with outgoing ISA transfers.
• Fidelity FundsNetwork: Accepts incoming in specie ISA transfers from fund managers but not platforms and only allows Fidelity funds to be transferred out. Allows in specie transfers into its investment account from any provider but only clients with more than £40,000 invested can move out.
• Ascentric: Allows in specie re-registration of unwrapped funds and funds held inside an ISA, Sipp or offshore bond on or off the wrap.

Re-registration: it was New Model Adviser® wot won it

The New Model Adviser® campaign helped to influence the FSA’s strong stance on re-registration, according to Hugo Thorman of Ascentric.

‘If New Model Adviser® had not started making a fuss I’m sure that the FSA would not have picked this up,’ said Thorman. ‘It made a huge difference because it made advisers aware and built a head of steam for the FSA to take action.’

Thorman said many advisers were unaware of the barrier to re-registration on some platforms until New Model Adviser® threw a spotlight on the issue. ‘In the past they were being mugged and they did not realise it.’

Registration time line

• 1994: Skandia MultiFunds, the first platform for financial advisers, launches
• 2001: Transact, the first UK wrap, launches, allowing in-specie re-registration
• 5 August 2008: New Model Adviser® launches its re-registration campaign, attracting the support of more than 700 advisers.
• 25 February 2009: The UK Platform Group commits to work towards allowing re-registration
• 5 March 2009: Parliament approves the ‘wet signatures’ bill which removed the need for clients to sign paper transfer documents paving the way for electronic re-registration
• 26 March 2010: FSA releases platform paper mandating re-registration
• 27 April 2010: Tisa calls for fund management groups to adopt the Swift message network
• 31 January 2012: The deadline for the retail distribution review and mandatory re-registration