Greater regulatory intervention needed on platform transfers – Andy Bell

Andy Bell
17 June 2019

AJ Bell is calling on the regulator to set expectations for how long platform transfers should take and reintroduce cash rebates to help speed up the process.  In a letter accompanying its response to the Investment Platforms Market Study consultation (CP 19/12) which closed on Friday, chief executive of the platform operator Andy Bell said:

Platform transfers

“Whilst we support the FCA’s approach of allowing the industry to improve transfer processing times by working together, we feel that it would be helpful for the FCA to set expectations in relation to the timeliness of transfers for the industry to work towards.  For any transfer process to work efficiently and not be a barrier for customers, it takes a commitment from all parties to implement improvements as soon as possible.  

“The problem is that those parties who are net receivers of transfers will have a desire to make changes as soon as possible, whereas those who experience regular net outflows will be less enthusiastic.  If this is the case, there will remain delays in the process in many cases and transfer times between platforms will not be improved.

“Additionally, different share classes of the same fund act as a significant barrier to transfers, as not all platforms can hold all share classes.  The solution here is to reintroduce cash rebates, on the basis that these must all be paid to the customer’s account and cannot be retained by the platform.  

“This would enable there to be a single retail share class for each fund with platforms able to negotiate discounts for their customers in the form of cash rebates that are paid into the customer cash account on the platform. I believe that any fears that these cash rebates will be used to confuse platform pricing are unfounded and a single share class per fund would enable easy transfers between platforms.”  

Exit fees

“Whilst I appreciate what the FCA is trying to achieve with the proposed rules for a restriction or ban on exit fees there are a number of issues which I feel the FCA need to take into consideration.

“One of the main issues is how the FCA distinguishes product exit fees from other exit fees.  If this is not dealt with in the right way it will create an uneven playing field whereby some exit fees are permitted and some aren’t.  This will be confusing for consumers, open to manipulation by product providers and hence difficult to regulate. 

“We believe that there is a very considerable difference between fees that are applied to effectively penalise a client wishing to withdraw from a firm’s services and those that are levied purely with the aim of covering the costs involved in administering transfers.

“Firms incur specific costs when transferring clients assets and we believe we should have the ability to recover those costs from the clients involved rather than subsuming them within our general business costs, which would then inevitably be recouped via charges levied on all clients regardless of activity.  

“The platform industry rarely charges an exit fee on customers wishing to transfer cash.  Where an in-specie transfer between platforms is being initiated, our favoured solution to recognise the work involved, is that exit fees are restricted to the maximum cost as if all of the assets were converted to cash, using the cheapest dealing option available.  This would significantly lower the charges for consumers whilst enabling platforms to recoup reasonable costs.” 

Follow us: