The row started after US investment company Dimensional Fund Advisors asked Selestia to keep its £20m funds on the platform but close them to new money. It claimed not to want the wider distribution that will come when the Selestia and Skandia platforms merge next month.
DFA has an unusual business model in that it requires advisers to undergo a training procedure before investing in its funds because it uses an academic-based investment approach and only wants to attract assets that are going to be held with it for a long time.
Helm Godfrey is a keen supporter of DFA, with £4m invested in the funds, and managing director Bruce Wilson says it is outrageous that Selestia will not offer in specie transfers for Pep and Isa holdings.
This means clients will have to cash in holdings, transfer the tax wrappers to another platform and then reinvest. DFA does not charge up front so investors will not be hit on this basis and they will not lose their tax allowances. However, Wilson has criticised Selestia for giving clients only two months’ notice.
He says: “Even though they will not lose their tax status, they will be out of the market, face possible dilution levies and the time and effort. We are taking legal advice and will be speaking to the FSA.”
Selestia says it only wants funds open to new money on the platform because it does not want to build up legacy pots of assets. Marketing director Bill Vasilieff says it went out of its way to accommodate DFA by building special systems to accommodate its pricing structure.
Vasilieff says: “Dimensional created this problem, not us. We went out of our way to accommodate it but do not want to build up legacy pots.”
Selestia is offering free switches to other funds and in specie transfers on unwrapped holdings but will automatically encash any holdings, including pension investments, unless instructed otherwise by the end of July deadline.
Wilson believes Selestia is “not treating his clients with respect or giving them enough time to consult their adviser”.
DFA was happy to leave its closed funds on the platform and says Selestia is forcing it off. Head of financial adviser services Sam Adams says: “We wanted to leave our legacy assets there and it is Selestia’s requirement they move, not ours, but we understand its position.”
It is a thorny issue. Re-registration is a growing issue and many advisers are critical of the situation where they are offered free re-registration on to a platform but are not allowed to re-register assets off it.
At the Money Marketing Retirement Planning Summit in Nice last month, FundsNetwork head of sales and marketing Rob Fisher faced a barrage of criticism from advisers who wanted to know why the re-registration issue has not been resolved seven years after many platforms launched.
Advisers were not singling out FundsNetwork as the issue is industrywide. Despite repeated statements by the newly formed Platform Committee that re-registration remains its priority, little action has been seen.
Nucleus managing director David Ferguson believes the big platforms are seemingly dragging their heels on the issue because they are adopting a defensive strategy.
Ferguson says: “It is unbelievable these platforms are not offering re-registration off their platforms and looks like a defensive move because they are being challenged by the new IFA-led wraps entering the marketplace.”
The Selestia case is unusual as Wilson was perfectly happy using the platform and only chose to move assets off because of the DFA issue.
But Ferguson believes it is a sign of things to come. He says: “It has always been an issue but now it is increasingly becoming a very hot one,” he says.
When fund supermarkets such as FundsNetwork and Cofunds launched in the early part of the decade, their offerings were commoditised, with very similar selections of Isas, Peps and unwrapped fund holdings. Now they are differentiated in several ways including asset allocation tools, with-profits analysis products, tax wrappers and breadth of offering.
As advisers increasingly move to make wrap a core part of their business, it is likely that some will want to move assets and consolidate them on a single platform. It looks as if FSA action may be needed to force the platforms into offering full re-registration.