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.”
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.