This is the second post recounting discussion from our November Investment Forum, focusing on the new STAR initiative for platform to platform re-registration and featuring expert panelists Billy Burnside from Criterion, Douglas Boyce from Hubwise, and Peter O’Connell from Focus Solutions. This section focuses on how STAR has been developed and is intended to function, and what firms can do to prepare to meet its standards.
What will the policing process be like?
As long as the data is good, we expect the industry to police itself through competition.
I hate to quote our prime minister, but it needs to be driven by the science or driven by the data. As long as we have confidence around the integrity of the data that’s being submitted, we’re expecting the industry to police itself to a degree.
Now, at one level, I can understand a level of suspicion of that, but if you go back to the FCA’s challenge that I referenced at the start of the session around increasing competition to drive increased consumer choice, that goes to the heart of that accreditation process, which is you shine a spotlight on every organization that you’re measuring and that you’ve accredited. If you seek to raise the bar on a regular basis, there will be winners and losers. It’s part of that race as it’s there to encourage continual investment in systems and processes to improve those customer outcomes.
From the operational perspective, where are the place that it will be crucial to maintain consistency?
Receipt of transfer application is when the clock would start, but there’s a number of reasons why the clock would stop and there’s a level of granularity with the stepped process in what’s measured and what’s allowed to stop the clock. COVID has had an impact so with the FCAs agreement we’ve moved the goalposts and are hoping to start MI collection next year.
The process we’ve been through, for the first 10 months of STAR, was to map out a consistent processes across all the different products that I mentioned before. And step one in that process is receipt of a transfer application. So the clock starts then, so from an acquiring provider point of view, you start the clock there. This end to end measure is where this really comes into play, because if all you’re measuring is the ceding provider and the ceding providers, as Doug has said, don’t do anything for 30 days there’s no clock starting there, as the clock has already started.. So that’s key.
Now, there are a number of reasons why you can stop the clock. So for example, if you’ve got a platform to platform set transfer, and there’s commercial property involved, that’s an illiquid asset, so you’d need to stop the clock. So that everything’s being measured on a fair basis. There’s a level of granularity with all of these stepped processes and what’s measured and what’s allowed to stop the clock and restart the clock. That’s all been mapped out and agreed across all those different product sets. We’re now addressing the challenge of the industry working out how they’re going to collate this MI and report it to STAR.
I will say that COVID-19 has had an impact on that because we were hoping to have that all agreed and the first providers providing data by the end of this year. COVID 19 has impacted the operational teams of platforms and providers more than any other functions. So with the FCA’s agreement, we have shifted the goalposts to reflect that challenge, and we’re now hoping that we can start that MI collection next year, hopefully in the first half of next year, and look to start to accredit towards the end of next year. But, just going back to that particular challenge, the clock starts when the acquiring provider starts that process. There’s no hiding from a ceding provider point of view when the clock starts.
How accessible are the are the standards? What’s been the consultative process in terms of including advisers on that?
Advisers have not been included to date as they’re not being measured. The Star steering group is made up of 30 industry participants meeting on a monthly basis and the FCA are part of that.
So, advisers have not been included in that to date. And the reason for that being that this is a process that’s predominantly measured between acquiring provider, ceding provider, asset manager and transfer agent . These are the participants that are being measured here. The adviser and the advice process is not being measured. The requirements are going through final sign-off, with the Star steering group, which is made up of 30 of those industry participants which meet on a monthly basis.
The FCA are also part of that steering group and have visibility of this. Once those requirements are agreed, that will then become the industry recognized standards and the SLAs for each of those steps, will be reported against. Through the reporting advisers will see each of the participants performance against the SLAs. And remember that some organizations can be multiple parties in a transfer where they’re the acquiring provider, and an asset manager, for example. You’ll be able to measure each participant no matter what role they’re performing against those steps.
The key challenge from an adviser point of view, and I think from the customer point of view as well, is that this is quite complex, right? And it needs to be easily understood, particularly from a customer point of view. So the real benefit here is going to be the accreditation that Star will provide. So you will be able to look at any provider involved in Star, any platform, any asset manager, and you’ll see their accreditation rating, whether they’re involved in, ISA/GIA transfers, a pension transfer, et cetera. The accreditation is conducted on an annual basis.
Do you have a communications budget for making the industry fully aware of what’s happening?
Currently the focus is on engagement but next year we’ll switch to focusing more on communication. Getting small asset managers on board is our challenge at the moment.
To be honest, the focus so far has been on engagement and getting organizations to join STAR and participate in it to get us to the point where we have the processes mapped out and our SLAs mapped out. As we go into the accreditation phase of this next year, you’ll see a change in emphasis from a communication point of view, to switch from gathering that support to communicating the outputs from STAR and the benefits to advisers and customers.
And I think Doug’s point around 150 different participants is relevant. We are sitting at just over 70 organizations committed. They are the larger organizations, as you would guess, larger platforms, larger product, larger fund managers, et cetera. We still have a challenge to get the smaller asset managers, some of the offshore asset managers to join, for example.
So there’s still a challenge there, but we’re pretty confident we’ll get there. We have the support of not just the FCA, but the other regulators in this space as well in the DWP and the TPR, they’re all part of that steering group – that is an important point. So the communication, I think, will switch and become more externally orientated once we’ve got some MI to share and to report against. I think it will focus increasingly on the benefits of the STAR accreditation process from an adviser point of view, and ultimately from a customer point of view as well.
Improving customer communications and expectations is a key outcome of STAR.
One of the other things that I can chip in is we have a tendency to focus a lot on, mapping the processes, the SLAs, and MI requirements. One of the key outcomes from STAR will also be this desire to improve customer communications and setting better customer expectations. What’s been agreed as part of the STAR delivery and organizations, as part of their submission, will need to confirm, they have completed these steps around customer communication.
So upfront, at the point where the transfer is triggered clear instruction to the customers are issued around contact details, the details of the transfer that’s been affected, but also letting them know if there are any circumstances which would delay the transfer. So for example, I referenced ‘stopping the clock’, effectively, where you’ve got things like illiquid assets as part of the transfer, or in-flight transactions. Another example is where you’ve got corporate actions happening behind the scenes that can delay the transfer as well.
Communication at this stage will improve setting of expectations, both with the adviser and with the customer as well. There can sometimes be good reasons why transfers are delayed, because of those various activities. That also links into the more technology driven processes rather than manual driven processes.
Our experience with transfers in most cases is longer than those discussed, and any improvement in that area would be greatly appreciated.
The experience for us in most cases is significantly longer than those discussed. As an example, which is an extreme one, we’ve got one SIPP, which is now 16 months into a transfer. The property was sold, a month in, from the 16 month start time and there’s still no sign of it being released despite the client going nuts with everybody, including the CEO of the SIPP provider.
However, on a normal experience basis, it’s still mixed. And there’s a small number of providers that are very quick and that’s in days, but the majority are weeks and occasionally run into the months. And in reality, any improvement that we receive is going to be appreciated, not just by us as advisers, but significantly by clients, which is what I just mentioned before as well. So, any help in improvement in that will just be greatly appreciated.
How do we make sure that transfers out are addressed as properly as transfers in?
Once we have enough traction it will be quite clear who performs better, and those who aren’t participating might raise some questions.
Within STAR it’s less checks and balances and more a case of we measure acquiring provider, ceding provider, and the asset manager. Fundamentally those steps and those measures don’t cut any slack for any ceding provider that wants to take their time on it– the SLA will be the SLA, so they’ll be measured against that. And I think this is where we have both an opportunity and a challenge.
If we get the traction and the support and we get the organizations submitting their MI, it will become very obvious who performs better as a ceding provider across the different product categories. But there’ll need to be an element of carrot and stick to make sure that those organizations sign up to STAR and are supported properly.
So I guess that’s where one of the areas, and I don’t want to talk for the FCA, but one of the areas I’m expecting them to take a particular interest, which is organizations that don’t sign up to STAR where the majority of the industry have, and that might raise some questions with them as to why that would be, and I’ll leave it there.
What are the major hurdles coming? What are the FCA already committed to? What are they requiring people to do early next year and following on after that?
COVID has pushed the timeline back, but we’re expecting to produce some interim MI to give the industry a feel for the experience and something for us to measure against. By the middle of next year we should see some organizations report against the full MI.
In our conversation earlier, I referenced the impact of COVID-19 and the conversations we’re having with all the regulators in particular, the FCA. So, their understanding of that impact, I think a lot of their planned initiatives have shifted into next year or further, and STAR is no different, although it’s obviously not in their mandatory regulatory box, it is something that the FCA are supportive of the industry adopting and so supporting it.
We’re expecting to actually produce some interim MI, which will give you a very high level view of transfer summary registrations across GIA ISA and individual pensions in the next few months that we’ll look back over the course of 2020, that won’t be the complete user base of STAR, if you want to call them that, it’ll be a subset of that, but it’s to start to give the industry a feel for what that experience is like currently. And it gives us something to measure against once we get into full MI reporting and accreditation next year, and then to 2021, we need to allow enough time for platforms and providers to amend either systems or their MI reporting to capture the right MI, so they can report it to us. But we also need to allow the key technology players in the market, the reference office and Origo and Callisto, they’ve also been part of STAR, and they need to amend our systems as well.
So that all needs to be factored in, the expectation is that from the middle of next year, we should start to see some organizations report against the full MI. And by the end of the year, pretty much have more corporations who are part of STAR being able to do that. And that will then allow us to provide accreditation across all of those different products across those organizations that are supporting Star at that time. And it’s the accreditation that the FCA are particularly focused on, because I think as we’ve said a couple of times on this call, that’s where they feel the pressure will build on organizations that aren’t performing to those standards to invest in their systems adopt, as Douglas said, some of the technology trading platforms like Origo and Altice, and to adopt some of the standards that the exist in this space as well.
So they see that as the key driver of change in the industry and on an ongoing basis into 2022, when they look back and review the impact of Star, where we go next with it, there’s a logical route through that, which is you raise the bar on a regular basis as the industry improves, but there may be other areas and aspects of the transfer re-registration process that we want the industry to look at and go “well, you need to reach these standards because measuring we’re everything at this point”. But I think as we go through the next 12, 18 months, you could see Star’s scope, expanding into areas where they have identified particular problems.
What do firms (both platforms and adviser firms) need to do to be able to take advantage of this as soon as possible?
Any changes they need to make need to be prioritized and get them into their change plans over the next year. There’s definitely more work to be done around educating the industry about what STAR is.
I’m happy to cover off the organizations who are engaged with STAR at the moment. Like I said, any system or MI reporting processes they need to make, they need to prioritize those and get them into their change plans, over the next sort of six to twelve months. There’s quite a bit of work for the industry to do with education around what is STAR, what does it actually mean when you see this and yes, the accreditation is relatively simple to understand at a high level, but how do we incorporate that into advisers’ processes where they’re doing due diligence on platforms or other organizations? There’s a whole piece around that, I think, that that could bring STAR and what it means more into becoming more than just an arm’s length industry initiative to being part of the industry and an important part, at that.
A lot of firms aren’t aware of STAR and it’s important to get the word out because it’s a great initiative.
I think it comes back to a point around communication. I’ve got to admit that there’s a few firms I’ve spoken to who actually aren’t aware of STAR. So I spoke to one adviser firm yesterday, and they didn’t know wat STAR was. I think there’s a kind of a first step really in creating that broader awareness and I have to say I thought Billy’s comments about the kind of the carrot and the stick were really interesting.
So I think the STAR initiative is fantastic. I’m horrified at some of the anecdotes I’ve heard from the guys today. I think better awareness, is probably a first point. And then companies like ourselves with the attendees here, we can help create while we’re in this just by word of mouth.
We’re very focused on getting more medium-small firms involved because they outsource to transfer agents but it’s their brand and their accreditation.
We have over 70 firms, and our objective is to have 80 by the end of this year and somewhere between 120, 150 next year. And the real focus at the moment is less so the platforms because most of the platforms, certainly advice platforms, have joined the initiative, the larger life and pension providers have joined the initiative. We’re really focusing at the moment on trying to get some of those sort of medium to smaller asset managers engaged in the process as well. So, we have the big asset managers engaged. It’s always been a challenge in the industry to get the smaller asset managers engaged in this. And part of the reason for that is that many of them are outsourced to transfer agents, any engagement with the customer at all so they feel at arms-length from this, but at the end of the day, it is their brand. That is their name. That’s going to get accredited as part of Star, not the transfer agent. So that’s the message to them.