The Financial Conduct Authority (FCA) have today announced some measures to improve competition in the platforms market. Experienced investors who use electronic trading platforms will be well aware of the problems of switching to another provider if they are dissatisfied with the service, wish to move to a cheaper provider or for other reasons such as consolidating on one provider or spreading their risk over several. It simply takes too long to move “in-specie” holdings from one platform to another ̶ it can take many months to transfer with endless chasing required.
Such transfers are also discouraged, resulting in an uncompetitive market, by the charging of exit fees by platforms. Together with the delays that investors face, this tends to lock in investors to their existing platform providers.
You can read my response to the FCA’s previous public consultation on this subject here: https://www.roliscon.com/Investment-Platforms-Market-Study.pdf . I mentioned my and others past experiences of delays of over 3 months on transfers. ShareSoc’s response can be found here: https://www.sharesoc.org/sharesoc-news/response-to-fca-on-platforms-study-sep-2018/
The FCA is proposing to ban or limit exit fees. The FCA is also encouraging firms to take part in the STAR initiative (see https://www.joinstar.co.uk/) to improve the efficiency of the transfer process.
One particular problem with fund transfers is that sometimes a conversion of unit class is required, or it is preferable to move to a discounted class. They have set out proposals to mitigate that issue.
More information on the FCA’s proposals and a public consultation on the subject, to which I will certainly be responding, is here: https://tinyurl.com/yyjw2jpf . ShareSoc is expected to respond on behalf of its member’s too. If you have comments regarding this consultation, or would like to help with its response (as our policy team is grossly overloaded!), please contact us.
At least one platform provider, AJ Bell Youinvest, has welcomed the FCA’s findings. They say a restriction on exit fees will not have a material impact on their business, and as a net receiver of assets they would expect to benefit from more transfers if they are made easier. Other platform providers may not be so happy, and may complain they won’t be able to cover their real costs of handling transfers. But there is little incentive to reduce those costs and reduce the complexity and delays in transfers at present. Therefore surely these are positive proposals that all investors should support. Everyone can respond to the consultation so if you have been affected by these problems in the past, please do so.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )