Written by Howard Finnegan on Tuesday 15 October 2013
You may have seen the comments from Richard Taylor, from the FCA’s retail distribution team, that progress on electronic in-specie re-registration was ‘less than satisfactory’ and ‘there had been slower than expected update of TeX’. Whilst there is some truth in this assessment, it is based on slightly out of date information. During the last quarter, July to September, we’ve seen significant increases in all aspects of automated transfers and re-registrations including transfer volumes, number of live participants and number of live vendors interoperating. In fairness to the FCA many of the new participants went live in September and were probably not included in their metrics.
The main highlights are:
- There are now 14 platforms operating live transfers representing 80% of AUA on platforms (8 currently using the Altus Transfer Gateway).
- 41 fund managers are now live representing 75% of UK FUM (34 are currently using the Altus Transfer Gateway).
- Calastone and EMX/Euroclear started live interoperable services during the quarter. There are now four vendor provided live services all interoperating.
- We’ve seen monthly transfer volumes almost triple when compared to the monthly average for the second quarter of the year.
These are great strides forward and everyone involved should be congratulated for their efforts, particularly the early adopters who invested in early stages to shake out the operational issues; these are the real pioneers. The results have been quite spectacular in some cases, we’ve seen transfers and in-specie re-registrations complete in minutes or hours. However, there is still a lot more we need to do to achieve the operational efficiencies automated transfers and re-registrations can deliver and meet the FCA’s expectations.
- Ensure everyone is connected – although 80% of AUA on platforms and 75% of FUM with fund managers can now be transferred electronically, not all the participants are connected to each other. We would encourage all platforms and fund managers to actively ensure they are connected to each other, even if the current transfer volumes with a particular counterparty are low.
- Reduce exception/rejection rates – We have seen a big reduction in the number of electronic transfers or re-registrations being rejected by one of the parties in the process, but we still need to improve on this. Every exception or rejection causes a manual intervention and results in delay to the transfer process, not to mention the cost implications for everyone in the chain. There are some well understood operating practices involving the capturing and validation of transfer information that can help reduce these exceptions and rejections.
- Get ready for V2.1 of the Market Practice – there are two important capabilities being introduced on 17th November, when the new version of the Transfer Market Practice goes live, which will reduce exceptions/rejections and make the transfers and re-registrations reconciliation process a lot more effective. These are support for Intermediate Unit Holders/Custodians and pension wrappers. Participants using custodians can use the current standard but it introduces major reconciliation issues for the custodian and the platform. Resolving these issues can be time consuming and expensive so, as we see more participants who use custodians starting live operations, the change to the ISO messaging and the Transfers Market Practice is timely. Extending the automated transfer process to include pensions wrappers and other assets (equities) will further increase the efficiency of the process for pensions providers, wealth managers and execution only brokers – for more on this, I would suggest you read our White Paper ‘Perfect Storm for Pension Transfers’.
The last quarter of this year will be an interesting one and not without its challenges for the whole transfers and re-registration project with more participants starting live operations and enhanced capabilities to support a wider range of participants. The opportunity for platforms and fund managers to achieve very high electronic transfer rates resulting in reduced transfer and re-registration times will only benefit the industry as a whole and ultimately the end consumer.