Ben Cocks
Making Transfers Worse?
Written by Ben Cocks on
It’s a year since the FCA’s Making Transfers Simpler regulations came into effect but investors are yet to see any benefit.

The FCA’s new policy was intended to make it easier for investors to transfer their investments between platforms. And ultimately, if it’s easier for customers to transfer to a better deal then providers will need to compete more keenly to maintain their market share.

The central thrust of the regulations was to ensure investors could transfer in-specie (in other words without having to sell and rebuy their assets) even where they were invested in a restricted fund share class. However, the statistics suggest that the situation for investors has actually got worse since the regulations were introduced. It seems that investors are having to sell assets even more often than before – an especially risky move in the current volatile market.

We took a sample of around 50 restricted fund share classes which are available to investors on some platforms but not on others. We looked at transfers involving those share classes for the 3 months before the regulations came into effect and found that 70% of these were sold and 30% were re-registered (i.e. transferred in specie). For the fund universe overall we find that 35% are sold on average and 65% re-registered so it’s clear that restricted share classes do result in many more investors having to sell.

If the FCA’s new regulations were to have the intended effect then we would expect the proportion of restricted share class re-registrations to increase to the same level as other funds.

However, for our sample of restricted share classes the proportion of re-registrations in the last year has actually reduced from 30% to 25%, with investors having to sell their assets for 75% of transfers. Meanwhile, the proportion of re-registrations for the fund universe overall has remained roughly the same (63% re-registered and 37% sold) suggesting the demand for in-specie transfers is undiminished.  (Our statistics are taken from the Altus Transfer Gateway service used by the majority of UK platforms.)

Some platforms have made significant efforts to support the new regulations but many have not. The situation can only improve if the vast majority of platforms, fund managers and advisers all play their part. Until then, investors in restricted share classes must choose between sticking with their current platform or taking the potentially very expensive risk of spending time out of the market.

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