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Tom McPhail: How can transfers work better for clients?

Tom McPhail sets out the behind the scenes work being carried out to improve transfer processes

Tom-McPhail-2009-700x450.jpgInvestors have a legitimate right to expect the financial services industry to execute their instructions in a timely and efficient manner.

This is particularly relevant when they are moving their investments and assets between institutions, for example when transferring a pension between providers.

Since early 2016, a cross-industry collaborative group has been working with regulators and policymakers to improve customer experiences. The following is a quick summary of the work we have done to date and what is likely to happen next.

Where we started

The catalyst for this initiative came from the FCA, resulting in a coalition of industry trade bodies and individual participants forming a working group to deliver a ‘self-regulation’ solution. This makes sense, given the complex technical challenges involved and the need for cross-industry buy-in.

The UK financial services landscape is extremely diverse, with over 400 different transactions which could become subject to an agreement on transfer times, so the key challenges are the complexity of the product landscape, and the multiple counter-parties involved. This means a simple requirement that all transfers must take place within a given fixed time period would not work: you would need to know which transfers are in scope and which are not.

If it is simply not possible to deliver a completion within say 10 days (a Sipp with non-standard assets in it, for example), there is not much point in demanding it and any policymaker who tried to impose it would just end up looking foolish.

The working group consists of a comprehensive industry trade body representation. It was originally chaired by Ed Dymott of Fidelity. When he left that organisation towards the end of last year, I took over as chairman.

We have conducted a scoping exercise to look at all the different financial institutions, individual product wrappers, underlying investments and technology systems involved in the transfers landscape. This resulted in an initial set of project parameters.

We have also looked at customer expectations, which threw up some useful insights; for example customers very often do not mind if a transaction takes several weeks, provided they know that in advance. We also conducted a series of workshops and an industry consultation to explore support for various options.

Where we have got to

We have established there is strong appetite for a broad open-standards approach to this challenge from the majority of respondents. While a fixed time-period guarantee like the banks’ seven-day current account switching service is a desirable end goal, as an interim we are looking to develop 48-hour time cut-offs for each of the individual steps involved in a transfer.

Within this though, there may be some easy wins, such as the electronic transfer of pensions across modern multi-employer schemes, where an early move to an end-to-end transaction time guarantee may be possible.

We need to do more work on defining the standards for all the multitude of different transactions, look at the carve-outs of transactions which are definitively out of scope, as well as looking at performance monitoring and reporting. We need to establish process improvement mechanisms, a long-term governance structure and a sustainable funding system to ensure the project can be run in the long term.

We are going to run a further series of workshops in the next couple of months to dig further into some of the practical challenges. We will also be continuing our dialogue with policymakers around the governance, funding and overall scope of the project.

Institutions supporting the transfers project

  • The Association of British Insurers
  • The Association of Member Directed Pension Schemes
  • The British Bankers’ Association
  • The Investment Association
  • The Pensions Administration Standards Association
  • The Pensions and Lifetime Savings Association
  • The Personal Investment Management & Financial Advice Association
  • The Society of Pension Professionals
  • Tisa
  • The UK Platform Group

Tom McPhail is head of policy at Hargreaves Lansdown



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