Platform transfer remedies set for July 2020 as FCA delays exit fee ban consultation

In a policy statement published on Friday (13 December), the regulator said it needed to intervene in both exit fees and ‘in-specie' transfers but plans to consult separately on the former in the first quarter of next year.

The regulator said the latest report "complements" the existing rules on transfers that were laid out in its interim report published in March. It said platforms must offer clients the option of ‘in-specie' transfers so investors do not have to sell down their holdings to own the same investments after switching to a new provider.

It also said it wanted platforms to take steps to bring about unit class conversions, tying in with the in-specie transfer rules, so clients switching platforms are not forced to sell their investments unnecessarily because they are in a different share class of the same fund. 

The watchdog added: "We would also reiterate that this remedy is part of a wider package of actions to improve the switching process, including the industry-wide STAR initiative. We expect that our overall package of remedies will result in a prevalence of in-specie transfers for most client assets."

The FCA has advised firms to consider what changes you need to make to ensure they have implemented necessary changed by 31 July 2020.

The regulator seems to have shied away from introducing harsher rules in its latest paper and instead has encouraged further adoption of the STAR initiative to improve transfer times and customer communications. 

The government-backed initiative, launched in November 2018, has set out to define the processes required to complete a transfer and specify good-practice targets for each of those processes. It has also set out to measure, recognise and accredit performance excellence across the industry.

Members of STAR have said they are "determined" to galvanise the industry into signing up to the initiative and its goal of speeding up the transfer of pension and investment assets between providers. It has previously called on the CEOs of companies to sign up.

The problem of slow, painful and expensive transfers between platforms and pension providers alike has become more prominent in recent years. Consultancy firm the lang cat has described the platform market as "broken" because advisers struggle to move clients from one platform to another.

'Disappointing'

In March, the FCA proposed a ban on exit fees that would affect around half of the players in the D2C platform market and five adviser platforms. It said exit fees are one of the three "main barriers" that prevent clients switching platforms.

The regulator said a ban on exit fees, which would apply to new business going forward, would be more likely to be effective in breaking down barriers to switching than any cap. 

Tom Ellis: The FCA must be tough on platform switching

The lang cat consulting director Mike Barrett said he was disappointed the industry is still no further forward on addressing the issue of exit fees: "It's right that this needs consultation, but the process is dragging on, and it's a real shame that promise of a consultation before the end of 2019 has not happened."

He continued: "With a consultation paper now due in Q1 2020, realistically it could be well into 2021 before any ban or cap on exit fees will be implemented."

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• Topics
• Platforms
• FCA
• Platforms
• STAR
• lang cat
• Mike Barrett