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Origin of the in-specie

Summit in Nice gets to grips with serious issue of in-specie transfers.

I was very fortunate recently to be invited to be on the panel discussing the role of wrap in retirement planning at Money Marketing’s Retirement Planning Summit in Nice.

While I was delighted with the choice of location, I was even more pleased with some of the issues that were debated during the course of the event.

One topic which all the advisers in the room agreed on and was referred to by Gareth Marr as the “the elephant in the room” but more commonly known as the farce that is the re-registration of assets (in-specie transfers), off fund supermarkets and other similarly defensively behaving platforms.

While the issue of in-specie transfers has been with us for some time, it has never really received the sort of attention it deserves.

This has now clearly changed. Advisers are getting increasingly fed up and frustrated with the excuses and inefficiencies of the so-called “bad guys” out there and are not prepared to accept this totally unsatisfactory situation.

In the spirit of open architecture and with the growing competition we are seeing from the latest wrap offerings, it is perfectly reasonable for clients to change platforms.

It is also reasonable, I will concede, for a platform to charge a small admin fee to cover any costs associated with the transfer.

What is not reasonable, or acceptable is for a platform to refuse to conduct in-specie transfers out when a client wants to move their assets off a platform.

When this happens, advisers are forced to cash in their clients’ assets before the transfer can occur. This can result in unnecessary CGT charges (for non-tax-wrapped accounts) and additional brokerage costs for the sale and repurchase of the investments.

In addition, if the client has been invested in funds that charge an up-front load, they are forced to bear this additional charge again on the repurchase.

Finally, the client is forced to be out of the market during the transfer process.

In my opinion, the only way we are going to bring about the necessary change is if we continue to have the sort of open and well publicised debate that took place in Nice. It is only then that the “bad guys” will be exposed for what they are and can be pressured into change.

As with many of the big decisions in our industry, the final word may well have to come from the FSA. I am confident that its ‘Treating Customers Fairly’ task force would find stories of clients’ assets being unwillingly stuck in cash for up to two months as unacceptable as the many advisers and clients who have had to experience it.

What irks me most, however, is that many of the worst offenders have spent a great deal of time and money over the years telling the world what a force for good they were, with administration systems and technology to die for.

It is strange how, when faced with losing business, those very same systems do not seem quite so leading-edge.

In Nice, Rob Fisher of FundsNetwork took the lion’s share of advisers’ questions and probably managed the best defence job that he could.

However, the reasons and excuses he trotted out to those asking the questions were uttered with admirable conviction. Unfortunately, they were the same ones we have all heard many times before. Fisher is, you will be pleased to know, working with the other culprits to come up with a resolution.

The fact of the matter is that, in 2007, it should be quick and easy to move assets from one platform to another. What is more, it should be cheap to do so, too.

The reason it is not is that those organisations with most to lose are doing what they can to protect what they have already got for as long as possible.

They can only hold on for so long and when they finally do lose their grip, the flood-gates will open.

Bruce Wilson is managing director of Helm Godfrey.


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