- Many investors stuck for months in lengthy platform transfers
- Pressure may be needed from the regulator to fix the issues
When I wrote about Hargreaves Lansdown a few weeks ago, and said that its 93 per cent client retention rate suggested its customers were happy, someone wrote to me offering an alternative explanation: “Basically they are so obstructive that it is very hard to get out.”
Having pursued the matter, he might have a point. Except this is not just a problem with Hargreaves. The transfer process across a number of platforms is too often far below any reasonable expectation, and that's before the additional strain of remote working over the past year.
This particular investor said he tried last October to move one of his portfolios to Killik & Co, and wanted an in specie transfer (transferring securities not cash) to avoid being out of the market. It took three months in a queue for the transfer to get started and, in the end, fearing the transfer could take six months, he pulled the plug and cancelled the transfer request in late January, releasing the holdings for trading.
His expectation for the transfer time may have been correct. Another investor, who had been a customer of Hargreaves for about six years, transferred his stocks-and-shares individual savings account (Isa) to iWeb last summer in pursuit of lower fees. iWeb emailed Hargreaves the transfer-out request on 22 June and it finally completed on 20 January – six months later, as confirmed by documentation seen by Investors’ Chronicle.
The investor now has a complaint with the Financial Ombudsman. Hargreaves initially took two months to supply iWeb with the valuation, and when it did a password was wrong. The valuation was finally received two months later on 9 November (iWeb had cancelled the request in the meantime). iWeb told him that Hargreaves had shut its dedicated transfer line, which Hargreaves confirmed happened last March to help the transition to remote working, but it has since been reinstated.
“I really think the regulator needs to start giving firmer guidelines for deadlines for account transfers,” the customer said. “It has taken many hours of my time to sort this, which culminated most frustratingly in having to request a formal log of communication from iWeb to even get HL to admit to the scale of the delay.”
Another person, who had been with Hargreaves for 20 years and accumulated a seven-figure balance, last year moved his Isa and Sipp to interactive investor to cut his costs. Of the process, he said: “It was very painful and took the thick end of six months, but we’re there now and I’m happy I did it.”
Another investor, from West Yorkshire, moving a Sipp in cash from Hargreaves to Hubwise Hartley Sipp platform last year, told us it took about two months to complete. He says he called Hargreaves two weeks after the transfer request had been issued (as it had not acknowledged the request), and again four weeks after, and both times was told it would be completed “within the next few days”.
He said: “I feel there is a huge problem with brokers dragging their heels in effecting transfers and it seems the FCA is powerless to do anything. I don't know what the answer is, other than having regulations to enforce this.”
It’s not just transferring out that has been a problem. Another investor notified us of his experience trying to transfer to Hargreaves. “I requested the transfer of my Isa from Brewin Dolphin to Hargreaves Lansdown a month ago but nothing has happened except a posted validation code for my nominated bank account arriving,” he said.
“The website won’t allow me to use this as the HL account has not yet been set up. Along with a single outside investment I have also asked to be transferred, this is worth over £500,000 so I am disappointed and wondering if I should cancel and go to another platform instead.”
In response to these cases, Alex Lambert, external relations manager at Hargreaves Lansdown, said: “Lockdowns have led to a significant spike in client engagement and activity and our people are working exceptionally hard to reduce response times under extraordinary circumstances. We apologise to those clients that have experienced a delay.”
Barriers remain despite FCA review
The difficulty of platform transfers has been an ongoing battle. In 2019, the Financial Conduct Authority published its Investment Platforms Market Study, which said: “Consumers can find it difficult to switch due to the time, complexity and cost involved,” and suggested a number of remedies to solve the issues. While many platforms have removed their exit fees, the other barriers appear to remain in place.
One experienced investor who says he has made several transfers in the past, none of which completed in under three months, is still trying to get one completed that he initiated on 12 January this year.
This is a Sipp transfer from Curtis Banks to AJ Bell Youinvest containing cash and UK-listed Crest shares, no funds or other problematic assets, so the transfer should have been straightforward, yet still required paper forms and an expected 12 weeks to complete. He passed the age of 75 in the middle of the transaction, and both platforms required him to complete the Lifetime Allowance test, which has slowed the process down.
“What is really annoying is that both platforms seem to be understaffed to handle transfers, and seem to expect me to do all the chasing required to get the transfers completed,” he said. “As I have pointed out to them, the FCA Handbook says the brokers 'must execute the client's request within a reasonable time and in an efficient manner'. They are clearly in breach of that rule.”
Some former customers of The Share Centre have also had issues, having decided to move following the announcement of its acquisition by interactive investor. One customer tried to transfer his funds to Bestinvest last September, because he already had an account with interactive investor and he wanted to spread broker risk. The process was initiated on 24 September, and by January only one holding in the Isa out of 20 had been successfully transferred. In the end, he cancelled the transfer of the remaining funds and let them go to interactive investor after all.
Another Share Centre investor, from Hampshire, told us that he tried to move two trust accounts to Fidelity Personal Investing following the announcement of the takeover. He says he instructed the transfer on 20 November 2020. On 19 January 2021, he was informed by The Share Centre that one of his trust accounts had been transferred to Fidelity, but the other one ended up overlooked, he says, and migrated to interactive investor on 8 February. Of the four funds in the trust account moving to Fidelity, only three had successfully transferred by 5 April.
He has spent hours on the phone chasing the transfer, which has been “demoralising, worrying and infuriating”. He added: “I think it is high time for the transfer process to be regulated with specific time targets and penalties for all participants in the process.”
“Reducing transfer times is a hugely important consumer issue,” said Jemma Jackson at interactive investor. “Interactive investor does not prioritise incoming transfers coming to ii over outgoing transfers and the majority of transfers out from ii are completed in a month, but we do appreciate how frustrating it can be when things take longer. Platform transfers are a two-way process and a smooth transfer of assets requires both platforms to play their part. There will always be some transfers that are more involved than others, too.”
Workplace pension transfers have not been exempt from problems either. A former L&G customer, through his workplace pension scheme, shared his correspondence with the Financial Ombudsman with Investors’ Chronicle. After leaving his job, he requested that his funds be transferred out of his L&G account at the start of the pandemic into his AJ Bell Sipp.
The transfer process began on 12 March 2020, and he was told the process had a hard deadline for the transfer, to be made in cash, of 30 March 2020. The cash transfer was completed on 12 June 2020. “The end result was that I was left out of pocket by over £15k in lost capital gains over the delayed transfer period,” he said. He rejected an offer of compensation of £100, increased to £575, from L&G. L&G says it has doubled the number of people working in its pension transfers area over the past year to cope with a surge in demand.
Fortunately, it’s not all bad. One person said they had transferred their Sipp from Hargreaves to interactive investor earlier this year and it completed within the estimated time of three weeks. But there are enough complications for people to be put off transferring.
A Fidelity Personal Investing customer is looking to open his Isa this tax year at interactive investor because he prefers the fee structure. However, he is "really worried about transferring my existing Sipp and Isa from Fidelity because of the horror stories I have heard on delays and admin processes which work against do-it-yourself investors”.
The FCA’s report in March 2019 said the regulator would review the industry’s progress in making the switching process more efficient. In December 2019, the regulator proposed it did not need to take further action “given the continued industry progress since [its] Final Report”.
An industry body called STAR has been set up to help the process. Its website says it is “delivering a cross-industry framework of good practice for improving consumer experience in moving their money from one financial institution to another.”
As we highlighted in How to smooth the platform switching process, a problem with transfers is that there can be many parties involved, and the transfer is only as strong as the weakest link in the chain. Some brokers and funds do not support electronic transfers, for example, which slows the process down.
The FCA has said it will carry out a review of progress in 2022. While allowances should be made for the strain the pandemic put on platforms' operations, it appears there is a systemic problem and more investment is needed by platforms, and other parties involved, to ensure they can facilitate transfers.
As someone who wrote to us put it: “It is simply unacceptable for transfers to take months. The FCA cannot fix this problem by exhortation. It needs to look at the wider issue of poor systems and under-resourcing of transfers. And it needs to get a lot tougher with the platform industry.”
If you would like to share your experience of transferring platforms, please feel free to email firstname.lastname@example.org. I'll show the regulator all responses ahead of its next review.