Financial advisers face increased pressure to streamline platform transfers under new Consumer Duty standards

Advisers and platforms are under mounting scrutiny to ensure faster, more transparent client transfers amid regulatory push for fair value and improved outcomes, signalled by initiatives like the Shared Transfer API (STAR).

Advisers in the financial services sector are increasingly under scrutiny to ensure that platform transfers—movements of clients’ investments between different platforms—are conducted swiftly, transparently, and fairly. This operational process...

has evolved into a significant Consumer Duty issue, reflecting broader regulatory expectations and the imperative to deliver better client outcomes.

According to insight from Darren Winfield at Defaqto, there is a considerable disparity in platform transfer times, ranging from as little as five days to as long as 110 days. Such variability raises concerns about consistency in client experience and the equitable provision of value across the market. Transfers, while often viewed as administrative, are pivotal to the Financial Conduct Authority’s (FCA) principle requiring firms to act honestly, fairly, and professionally in clients’ best interests. Advisers frequently recommend platform changes to improve value, functionality, or service, but protracted or poorly managed transfers can disrupt investment strategies and undermine client trust.

The FCA’s Consumer Duty, which came into effect for new and existing products open for sale or renewal in July 2023 and will extend to closed products by July 2024, strengthens requirements around timeliness, clarity, and accountability in transfers. Firms must consider the needs and characteristics of all customers, including vulnerable groups, throughout the customer journey, with a clear mandate to avoid foreseeable harm. Transfer efficiency has therefore become a critical indicator of whether firms are truly delivering fair value.

A glaring issue contributing to delays is the lack of transparency. The industry produces approximately 3.9 million Letters of Authority (LOAs) annually, costing around £442 million in administration. While some platforms provide clear performance data, many do not, leaving advisers and clients in the dark about expected timelines. This opacity contradicts the FCA’s push for data-led accountability. Defaqto and others advocate for transparent benchmarking, citing initiatives like the Shared Transfer API (STAR) that aim to standardise and raise industry standards for transfer times. The FCA has explicitly endorsed STAR, using it as a benchmark for reasonable industry transfer times and has warned firms lagging behind peers that they will face regulatory inquiries or actions unless improvements are made.

STAR, launched as a voluntary industry scheme and managed by independent organisations Criterion and TeX, has been accrediting platforms since 2022. It provides a framework against which firms can measure their transfer performance and is aligned with the principles set out in the FCA’s Consumer Duty. Recent communications from the FCA to CEOs underscore the importance of platform engagement with STAR, highlighting that firms not participating without justifiable reasons could face consequences. STAR’s accreditation process incentivises good performance and transparency, and this initiative is poised to become a cornerstone in enhancing consumer experience by driving down transfer times.

Practical approaches for advisers to meet these expectations include adopting rigorous due diligence on platform partners, leveraging data such as Defaqto Engage ratings to evidence fair value, and embedding internal tracking systems to monitor transfer durations and identify bottlenecks. Advisers are encouraged to work with platforms committed to published service standards and STAR or TISA accreditation to ensure accountability.

The LOA process remains a frequent bottleneck. Errors and incomplete or unclear documentation are common causes of delays and repeated submission, adding unnecessary days to the transfer timeline. Advisers are urged to ensure that LOAs are accurate, clear, and submitted digitally where possible. Digital submission and validation tools can reduce manual errors and enhance processing speed, aligning with FCA expectations that firms consider whether outdated manual processes could cause foreseeable harm by delaying transfers.

Incorporation of FCA-recommended templates such as the Investment Advice Assessment Tool (IAAT), Retirement Income Advice Assessment Tool (RIAAT), and Defined Benefit Advice Assessment Tool (DBAAT) also supports smoother transfers, reducing rejections and improving auditability.

The contrast between digital and manual transfers is pronounced. Digital solutions allow for secure submissions, real-time tracking, and automated updates, which collectively improve transparency and client confidence. The FCA’s Consumer Duty framework implicitly challenges firms still reliant on manual methods to modernise or risk regulatory scrutiny.

Firms are also expected to provide robust annual board-level oversight of their consumer outcomes, including transfer performance, as part of ongoing compliance with the Duty. They must continuously monitor, assess, and act on any indicators of poor outcomes, making the Duty not a “once and done” exercise but an ongoing commitment to service quality.

Ultimately, efficient platform transfers represent a tangible demonstration of Consumer Duty in action. They underscore a firm’s dedication to transparency, fairness, and delivering timely client outcomes, moving beyond regulatory compliance towards genuine service excellence. As such, advisers who can organise swift, clear transfers between platforms reinforce trust, improve client satisfaction, and shield themselves from potential regulatory issues.

Darren Winfield, insight consultant at Defaqto, summarises that embedding measurable transfer performance, embracing digital tools, and partnering with transparent, data-driven platforms transform what was once a cumbersome administrative task into a clear marker of client-centric financial advice. The FCA’s backing of initiatives like STAR and its firm stance on transfer times suggest that the industry must collectively upgrade systems and processes or face enhanced regulatory scrutiny.

In this climate, advisers and platforms alike are reminded that efficient transfer management is not just operational efficiency—it is integral to safeguarding client interests and honouring the spirit and letter of the FCA’s new Consumer Duty.

Source: Noah Wire Services