The majority of clients arrive at an adviser’s office with a mixed bag of goodies – an Isa here, an ageing Pep there, some pension contributions, a few shares and a couple of savings accounts. While consolidating this all onto one platform to provide a one-stop shop for managing and reviewing a client’s wealth is still some way off, re-registration
provides an opportunity to corral a significant proportion of client assets in one place, making for a better informed
client, easier admin and potentially higher trail income.
What products can currently be re-registered? The process is still restricted to collective investments and Isas as collectives have a trustee or a depository and, as such, it is simply a question of changing custodian. Life and pension products are written under contract and therefore remain outside the scope – and they are likely to continue to do so. The only way to transfer these contracts would be to break the old contract and establish a new one, which would create a taxable event. For products such as investment bonds, this can generate real complexity.
Re-registering collective investments, on the other hand, has a number of advantages. First, clients are not out of the market. If a holding is bought and sold, the client will inevitably be out of the market – even if it is just for a few days – and, in the case of an Isa transfer, it could be as much as four or five days. If there is anything the markets of the past year have demonstrated, it is that being out of the market for four or five days can make a world of difference to performance. To take an extreme example, the FTSE 100 rose from 3,762 on March 30, 2009 to 4,124 on April 2, 2009, a jump of almost 10 per cent. Furthermore, re-registering does not create a taxable event for capital gains.
For advisers, re-registering does not end up costing the customer more but it does create a new transaction point and therefore a new disclosure point. It has been the case that fund groups could not pay trail commission for a fund that didnot previously include it – this would include old holdings of unit trusts and certainly many of those that had been around for five years or more but, by creating a new disclosure
point, these funds can start paying out trail commission.
According to Peter Hicks, head of the IFA channel at Fidelity FundsNetwork, the way advisers use platforms has changed over the past few years and most now approach it on a client-by-client basis. He explains: “Many will use two main types of platform. Platform A offers a bit more – investors can trade in equities or commodities, for example, and they will pay a bit more for that flexibility. Platform B will offer a basic Sipp, investment bond, and tends to be centred on collectives and Isas. It will tend to be cheaper than Platform A.”
Hicks adds that many advisers may want to re-register a husband and wife onto the same platform to build a picture of overall family wealth and therefore ensure risk is properly spread across different assets. The whole process can also help create a better-informed client, with review meetings being more productive as the client already knows the value of their portfolio.
Re-registration also means advisers can draw more of their clients’ wealth under their influence. When asking clients to re-register, many turn out to have holdings that the adviser did not know about up to that point. This uplift in overall assets should feed through into trail commission.
For advisers and clients, consolidating as many assets as possible onto one platform means they have one plan manager and they can see everything in one place.Re-registration is not usually complicated for the adviser although Julian Marr Editorial director www.marketinghub.co.uk
Re-registration provides an opportunity to corral a significant proportion of client assets in one place if a client has a lot of different plan providers, it can involve some form-filling. The adviser completes a form and it goes to the platform. The letter of authority comes through to the provider and it does the rest. The process can take up to five weeks.
Re-registration provides an opportunity to corral a significant proportion of client assets in one place
Hicks says: “The client does one deal. But the platform will have to do a number of deals with the different providers, so that can hold things up as the chain is only ever as good as its weakest link. Still, five weeks is usually a maximum.”
The prospect of re-registering an entire client bank in one go may be daunting but many advisers approach it in bitesized chunks, doing, say, 20 per cent every six months. Hicks says: “There are diminishing returns that way but once 75 per cent or 80 per cent of existing and new clients are re-registered, it makes a massive difference to the efficiency and admin costs for the adviser.”
Platform-to-platform re-registration is far more complex and remains some way off. However, a number of the major platform providers, including Cofunds, Fidelity FundsNetwork, Hargeaves Lansdown, Skandia and Standard Life, have committed to work together to introduce common standards.
Hicks believes there is still an inclination among some advisers to wait for the perfect platform before starting out on any re-registration process. However, they are missing out on significant admin and client service benefits while they wait.
This article first appeared on Marketing Hub, a free online support site dedicated to helping advisers communicate with clients – visit ww.marketing-hub.co.uk.