The pandemic has caused serious delays for some savers wanting to transfer portfolios from one investment house to another.
One FT reader instructed his platform to transfer part of his £100,000 portfolio in July 2021. It took until December for the transfer to be carried out.
A few weeks into the process of moving part of an Isa investment account to iWeb Share Dealing from Hargreaves Lansdown, he checked his accounts with both companies and was shocked to find them empty.
“They were registering a zero balance,” he said. “It was a panic-inducing cause for concern.” He contacted both groups to be told: “Your shares are safe, but we don’t know where they are.” He was also told by each that the other company was at fault.
This Money reader was not alone in waiting for transfers. Others suffered long delays and could get no information when transferring assets including discretionary trusts, Self-Invested Personal Pensions, stocks and shares Isas, the shareholdings of deceased family members and elderly relatives.
Money readers were prompted to write after Money Mentor highlighted transfer problems faced by investors in Neil Woodford’s ill-fated Equity Income which was frozen in June 2019.
The huge technology investments made by the industry to move from paper trails to digital processes have brought benefits to customers. But our readers’ problems show there is still some way to go.
Pandemic lockdowns led to a significant spike in client activity at the time when companies were having to adjust to hybrid working putting pressure on service standards.
The Investment Association says: “While the Covid crisis has created some operational challenges for the fund management industry, there is a strong impetus to ensure that consumers can switch easily and quickly to alternative products where they wish to.
“A range of actions are now being undertaken, including principles to measure the efficiency of transfers, common share class data to help with processing fund conversions and implementing electronic messaging where this is available.”
Switching a bank account usually takes seven days, including moving all regular payments. So readers question why it can take months to transfer share portfolios between investment firms.
Banks operate under an agreed timeframe. But for investment houses there is no such accord and some might hold on to portfolios to keep earning fees. FT readers wanting to move their investments often hope to save money on charges.
The delayed transfers aren’t necessarily complex. The Hargreaves Lansdown client switch shares to iWeb wished to transfer 762 of 2,800 AMC shares held in an Isa account and worth £100,000, his whole life savings.
He wished to move a chunk of his shares “to mitigate any risk of having all my eggs in one broker’s basket”, he said. “I was told it would take a few weeks within the 30-day limit for Isas.”
Hargreaves Lansdown says its transfers to other providers took 34 days on average to complete in the first quarter of 2021, but by the end of the year this was down to 18 days, and in January 2022 the average was 15 working days.
Hargreaves said: “We’ve invested in our transfer service by bringing in new colleagues and enhancing our processes, and we apologise to the investor that his transfer fell outside of the improved transfer times that we now would expect.”
iWeb said it would normally expect a transfer to complete in six to eight weeks. It said it paid the client £300 for the inconvenience while HL has paid him £150 as an apology for falling short of its service standards.
Both companies have reminded the client that he can still go to the Financial Ombudsman Service. The FOS says: “If someone has been unable to access their shares or investment portfolio for several months, this strikes me as being a customer service issue that we could potentially look into.”
Interactive Investor, a platform, says transfers are a two-way process requiring both platforms to play their part. It adds that during 2021, average times for Isas were 16 days for transfers out and 31 days for transfers in.
During lockdowns, share trading boomed, including intraday dealings. Volumes have fallen since but are still double pre-pandemic levels, say investment firms.
Some investors were furloughed and had more time to trade. Wealthier people made big savings by not commuting, eating out or taking holidays and some wanted to invest part of the surplus.
With markets volatile, FT readers shared concerns that delays in their transfers could leave them exposed to falling share prices or missing opportunities to buy stocks at good prices.
Another reader who wanted to transfer a £260,000 discretionary trust for his grandchildren from one platform to another was held up because he was told by his original firm that the shares had to be transferred in specie, without selling the stock. He said: “In all it took about six months. There ought to be a mandatory timeframe.”
Investment houses have different rules on whether transfers need to be in cash or in specie. Firms with lower charges tend to want cash transfers. Clients need to establish the terms and conditions in advance.
Another reader transferring a £200,000 Self Invested Personal Pension (Sipp) said they received conflicting messages within hours. Their existing investment company said the transfer could not take place because the new provider could not accept the portfolio.
The receiving company said it had accepted some of the assets. But because two small illiquid stocks were part of the pension the whole portfolio could not be transferred. In the end, these unlisted property company shares were valued on a matched bargain basis and transferred.
To help speed transfers, investors need to consider several points:
Illiquid and other hard-to-value shares complicate transfers.
In general, in-specie transfers take twice as long as cash transfers.
Assets that can be transferred electronically are quicker to move than those needing manual registration.
Funds can normally be transferred in the same way as equities. But some fund management groups require transfers to be confirmed by an old-fashioned signature on paper sent in the post.
Client details provided to the two providers must match.
Lindsay Cook is co-author of “Money Fight Club: Saving Money One Punch at a Time”, published by Harriman House. If you have a problem for the Money Mentor, email email@example.com