In-specie transfers (transferring assets in their current form) are relatively common and should be more prevalent than their countertype cash transfers – especially given their advantages. There’s no time out-of-market, trading remains possible so long as assets are not in the process of re-registration and there are no dealing charges. However, due to the long lead times associated with in-specie transfer, with some platforms reporting in-specie transfers taking double or triple the time of cash transfers, and an inability to transfer in-specie due to a lack of asset commonality, IFAs today are still regularly electing cash transfers for their clients over in-specie.
The 2019 FCA regulation ‘Making Transfers Simpler’ was introduced to enhance the adoption and experience of in-specie transfers. As a result, platforms are required to offer consumers the choice to transfer in-specie, and request a conversion of unit classes if required, where funds are common to both platforms. Platforms must additionally ensure consumers moving to a new platform are provided with an option to convert to discounted units, where available. Whilst this regulation has led platforms to implement solutions to support in-specie transfers and share class conversions, it has not materially improved the lengthy in-specie processing times that make these transfers so challenging. In 2022, the Financial Times reported it was still taking ‘months’ to transfer share portfolios between firms. Given the current focus on Consumer Duty and optimizing client outcomes, there is no better time for platforms to improve this process.
Whilst the process varies between platforms, the key challenges of in-specie transfers are common:
- Inaccurate transfer requests: for transfers to be progressed without delay, transfer requests must be submitted with accurate and current client data that matches the valuations provided by the ceding provider.
- Poor share-class conversions: understanding of the conversion process when a like-for-like asset match is not available.
- Misaligned parties: the acquiring provider, ceding provider and fund/asset managers must align timelines.
- Technology: significant advancements have been made by the industry to move from paper transfers to digital processes to support transfers, however, there is a long way to go. Not all providers have bought into the new technologies and many transfers are still processed using paper, elongating transfer timelines. On top of this, many platform providers are still processing the vast majority of in-specie transfers manually with minimal automation adoption and STP (in contrast to cash transfers).
- Timelines: the simple fact is: these transfer types take too long due to the compounding of the problems described above.
The truth is that nobody in the market is doing this better than anyone else but there are ways to improve this process. At Alpha FMC, we believe there is no silver bullet but, through our work with a number of platforms, we have developed a methodology that seeks to drive multiple marginal gains across the in-specie transfer in/out process, through the identification of key pain points and the application of technology and non-technology based solutions. The result is a significant improvement across all client and operational metrics evaluated. If all providers made a conscious effort to improve their processes, the days of the ‘cash transfer as default’, or the consumer waiting months to access their re-registered funds, would soon be gone.
If you want to learn more about how Alpha FMC can support you with improvements to your in-specie transfers process to optimize client outcomes, please contact us here.
About the Authors
Duncan Ng'enda
Associate Director
Duncan is an Associate Director at Alpha with over 9 years of experience in financial services spanning retail and investment banking, wealth and asset management, and insurance.
Duncan specialises in business and technology transformation to deliver specific business outcomes within budget and on time. Duncan co-led on a pioneering programme of operational improvements, including the implementation of Payments and Transfers systems for a large UK platform provider and most recently led the delivery of a new Pension platform delivery.
Duncan has extensive knowledge of the UK platform market and has recently been leading projects in cost optimisation and digital transformation for key clients.
Eleanor Hassall-Marlow
Senior Manager
Eleanor is a Senior Manager at Alpha, with a strong track record of complex platform delivery programmes, both at implementation and BAU change phases.
Before joining Alpha, El held various roles within FNZ including Project Manager, and most recently, Director of Sales Operations, providing a deep understanding of the platform space.
El has most recently been leading projects working with major UK platforms to support process improvement programmes and proposition implementation projects to support and optimise client outcomes.