Join our community of smart investors

Investors switching brokers face wait of up to five months

Savvy investors switching to the cheapest broker are being forced to endure agonisingly long waiting periods, during which time their investments cannot be traded
April 14, 2014

Account transfers from some of the UK's biggest DIY brokers are taking up to five months to complete, Investors Chronicle has discovered.

A number of investors who switched brokers in November and December 2013 are still waiting for their transfers to complete, which has left them in limbo because they are unable to trade their investments until the transfer has completed, even though they are still left exposed to the peaks and troughs of the market.

These 'in specie' transfers are already notorious for being slow because brokers' back offices are inefficient and under-staffed, and investors are routinely warned that they may face a six to eight week wait.

But since a number of brokers introduced new fees earlier this year, a flood of investors have switched to get a cheaper deal. This has put even more pressure on their creaking systems, which has led to even longer delays.

The Financial Conduct Authority says transfers should be conducted "efficiently and in a reasonable timeframe" and should take less than a week.

AJ Bell YouInvest has written an apology letter to around 200 incoming customers who left Hargreaves Lansdown three months ago in January, as they are still waiting for their transfers to complete.

An Investors Chronicle reader is still waiting after he asked to have his Sipp funds transferred from Fidelity to Charles Stanley Direct five months ago on 20 November. A spokesperson from Charles Stanley said: "We have been chasing and chasing for this customer, but Fidelity just do not seem to be co-operating with us."

Arnie Vashisht, a chartered financial planner at financial adviser firm Chase de Vere, says he has clients who requested to transfer their investments out of Hargreaves Lansdown four months ago in December, who are still waiting for completion.

"There is no excuse for this level of service. To me, it looks like some brokers aren't allocating the same level of resources to help customers leave as they are allocating towards bringing in new ones."

A mystery shopping exercise done by the independent broker analyst, The Platforum, and seen by Investors Chronicle, conduced an in-specie transfer and found the process took exactly three months. Jeremy Fawcett, head of direct at The Platforum, said: "Three months is a long time to be in limbo and it’s surprising what crops up in that time, even for the average investor. The Royal Mail IPO and the Barclays rights issue both happened during our transfer and while it wasn’t a problem it did result in extra calls to customer service to figure out how to participate in them.

"Aside from the cost and effort, the uncertainty of what will happen while you’re in transit is yet another barrier to moving your money. The pain of transferring combined with the exit fees make it pretty important for investors to make sure they pick the right platform for them, looking beyond short-term deals or sweeteners."

New, faster transfers are coming

Online brokers have been signing up to a new electronic transfer standard which promises to move customers’ money within six days. The standard, which is designed to speed to the process by ironing out the legal problems usually associated with transfers, is being led by the Tax Incentivised Savings Association (Tisa).

According to TISA Exchange, 91 per cent of platforms have adopted the electronic facilities necessary to perform the transfers, however a number have not yet signed up to the standard which would ensure customers wouldn’t be stuck in limbo for weeks on end. And another problem lies in the fact that not all brokers' systems are fully compatible with each other yet, meaning not everyone can have all their investments electronically transferred.

Adrian Lowcock, head of investment research at Hargreaves Lansdown, said: “We are transferring electronically to anyone who requests it. Electronic transfer currently works very well for simple portfolios. However it is not as effective on more complex portfolios such as those including individual equities. Not all platforms can accept the breadth of investments clients are able to hold on the HL Vantage platform and this can cause delays. At this point the electronic transfer can get rejected and switch over to manual process which inevitably takes more time.”

A Fidelity spokesperson said: “We have made improvements to enhance the automation of transfers. Pension transfers require the co-operation of providers and fund platforms, and this can cause administrative challenges from time to time. We are dedicated to improving the customer experience.”

What to do if you’re stuck in investment limbo waiting for a transfer

The first thing to do is to tell the broker you’re trying to leave that you’re not happy. Our sources say that when there’s a delay the broker you’re moving your money to is likely to be making calls to chase it up on your behalf, but too often, they don’t get very far. Companies care more if you complain, so if you are unhappy or worried, you should. Mr Vashisht recommends escalating your complaint to a manager and then making a record of their name, so you can ask to speak to the same person every time. It’s also a good idea to make your complaint in writing and keep a copy of it.

Another option is to specifically request a fast electronic transfer. Brokers won’t advertise this to you, because they are not always possible as both companies you are dealing with have to have compatible software. But with this in mind, you should ask to see if you could be eligible. Here is a list of all the brokers that have the software needed to complete an electronic transfer.

Platform charges for in specie transfers out

Fund platformCharge for in specie transfers out of stocks and funds
Hargreaves Lansdown £25 per holding
Barclays Stockbrokers£30 per holding
Fidelity£0
TD Direct Investing£25 per holding
Alliance Trust Savings£100 + VAT
Bestinvest£25 per holding + £60 account closure fees
Sippdeal Youinvest£25 per holding