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Quilter backs FCA platform transfers and exit fees plans as it calls for industry to consider new in-specie transfer process

17/06/2019

Responding to the consultation on Investment Platforms Market Study remedies, Quilter today calls on the industry to support an overhaul of the re-registration process, which would see fund managers conduct share class conversions in order to facilitate in-specie transfers.

Quilter is backing the FCA’s proposals to make transferring platforms simpler and quicker. It is supporting the FCA’s suggestions that customers should always have the option of an in-specie transfer; that receiving platforms should offer customers the option to invest in the cheapest available share class appropriate for them; and that exit fees should be banned with the rules extended to firms offering ‘comparable services’ to platforms.

This will enable simple and effective transfers, increasing competition and making the process of moving between platforms and other providers quicker and easier for customers.

Some industry players are calling for the ceding platform to conduct share class conversions, however Quilter believes this would carry a number of disadvantages:

  • Platforms would be required to hold thousands of new share classes, increasing the risk of customers inadvertently selecting an unintended share class and/or not the cheapest available.
  • There may be an additional cost for platforms holding thousands of new share classes, which may be passed on to customers in higher platform fees.
  • Increased operational complexity for platforms holding additional share classes, potentially increasing the likelihood of error.


It is instead recommending that the industry go one step further to provide an optimal solution which would see fund managers, who are already instrumental in the process for in specie transfers, conduct share class conversions at the same time as they are updating ownership records on unit registers as in specie transfers are completed.

Quilter is calling for ‘in-flight’ conversions – effectively conducting the in specie transfer and the share class conversion simultaneously. This would be the most efficient solution across the industry and would remove the need for platforms to hold multiple share classes purely for re-registration. 

Steven Levin, CEO of Quilter’s platform, Old Mutual Wealth, says:

“Switching platforms should be simple, straightforward and efficient for customers and the whole industry has a responsibility to deliver that.

“Quilter is supporting the FCA’s aim to make moving platforms simpler for customers. This includes our support for the proposals to end exit fees, incorporating ‘comparable services’ providers within these rules and requiring receiving platforms to give customers the option to convert into discounted share classes where available.

“We are also calling on the industry to go one step further to implement the best possible in specie conversion process in customers’ best interests.

“In order to do so we need to agree, as an industry, how it is most appropriate to execute the conversions. Enhancements to existing technology used across the industry will be required, but we believe that making fund managers responsible for undertaking the conversion is most likely to produce a good outcome for the customer. We ask the industry to come together, with the support of the FCA, to explore this option in detail.”

Background

Many platforms negotiate favourable terms with fund managers, benefitting customers that can access cheaper share classes on certain platforms as a result.

However, where customers move platforms this can present challenges in the re-registration process. In order for a customer’s investment to be moved ‘in-specie’ (meaning the customer stays invested without the need for a cash transfer) both the ceding and receiving platform must hold the same share class. Where this is not the case, a conversion is required at some point in the transfer process to move the holding into a share class held on the receiving platform.

The FCA’s Investment Platforms Markets Study explores how to enable in specie transfers when a re-registration occurs in these circumstances.

The FCA has proposed that the ceding platform should convert the share class into one that the receiving platform has access too. Quilter is recommending that fund managers instead conduct the conversion ‘in-flight’ between the two platforms.  This is an alternative to either the receiving or ceding platform requesting a conversion before or after the re-registration and would avoid the need for all platforms to hold many different share class variants of the same fund.

Quilter has submitted its response to the FCA consultation, which closed to responses on Friday 14 June.

For more information contact

Tim Skelton-Smith02380 916 99807824 145 076tim.skelton-smith@quilter.com
Michael Glenister020 7778 963807469 144535michael.glenister@quilterinvestors.com

Notes to editors:

About Quilter plc:

Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Quilter plc oversees £114.9 billion in investments (as at 31 March 2019).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions; and discretionary fund management.

The business is comprised of two segments: Advice and Wealth Management and Wealth Platforms.

Advice and Wealth Management encompasses the financial advice business, Quilter Financial Planning; the discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.

Wealth Platforms includes Old Mutual Wealth UK platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

The Quilter plc businesses are being re-branded as follows: 

  • Quilter Financial Planning (previously Intrinsic)
  • Quilter Private Client Advisers (previously Old Mutual Wealth Private Client Advisers)
  • Charles Derby Group (becoming Quilter Financial Advisers)
  • Quilter Financial Adviser School
  • Quilter Cheviot
  • Quilter Investors
  • Old Mutual Wealth (becoming Quilter Wealth Solutions in 2020)
  • Old Mutual International (becoming Quilter International in 2020)

This press release is for journalists only and should not be relied upon by financial advisers or customers.

Please remember that past performance is not a guide to future performance. The value of investments and the income from them can go down as well as up and investors may not get back any of the amount originally invested. Exchange rate changes may cause the value of overseas investments to rise or fall.

This communication is issued by Quilter plc.  Registered office: Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ, United Kingdom. Registered number: 6404270.  Registered in England.