More than half (53%) of IFAs plan to migrate more than 70% of clients’ assets onto wrap platforms, according to a survey conducted in July 2013 by Legacy Asset Systems (LAS), as the legacy asset (onto platform) migration boom gets underway.
LAS provides comprehensive and industrial-strength asset migration services to a growing number of IFAs, nationals and platforms.
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Key concerns around asset migration for IFAs are linked to transferring the assets in a compliant manner and coping with the associated administrative workload.
The largest concern when migrating assets onto platform is ‘running accurate and compliant cost comparisons between old and new policies’ for 21% of IFAs.
Over two-thirds of IFAs believe that an acceptable increase in ‘old for new’ Reduction in Yield (RIY) when migrating assets onto platform is 0.5% or less, in line with FSA Finalised guidance published in July 2012.
However a sizeable minority (12%) think that old for new RIY cost increase could be acceptable at over 1%. If clients being migrated look like losing out by more than 1% then, if the FCA undertake an arrow visit to the firm, the regulator is likely to require an onerous past business review to investigate potential client detriment.
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By GlobalDataLinked to this finding, over three-quarters (78%) of IFAs think that the FCA will get tougher on compliance issues associated with legacy asset migration onto platforms post-RDR.
Managing the administrative workload associated with transferring assets onto platform is the largest concern for nearly one in five IFAs (19.2%). This process includes provision of client signatures and processing of discharge, consent and application forms as well as drawing up and issuing Key Features Illustrations.
Despite these concerns, less than 4% of IFAs ruled out asset migration onto wrap platforms altogether; while 2.83% still need to complete client segmentation work before defining their migration plans.
The survey also reveals that nearly half of IFAs (46%) anticipate moving up to 10% of client assets onto Direct to Consumer (D2C) platforms when their asset migration processes are complete. One in 10 IFAs expect more than 70% of their clients’ assets to be migrated onto D2C platforms at migration completion.
Responses to a separate question reveal that 16.1% of total adviser-controlled assets today are predicted to migrate onto D2C platforms when the respondents’ legacy asset migration activities are completed.
The LAS survey also reveals that asset migration activity has a long way to go: one in six IFAs (17%) has moved less than 10% of assets onto platform so far. In addition, less than 1% has completed all asset migration activity and only 5% are nearly there with over 91% of all client assets migrated to wraps.
Nearly 42% expect the migration process to take more than 18 months, taking it to at least the end of 2014 and 16% expect it will take more than two years to complete the work.
One in every six (16%) IFAs will move as many of their customers as possible to a single pre-selected wrap platform; while over a third (39%) are moving most of their customers to a small number of pre-selected wrap platforms. Some 16% of IFAs are migrating a minority of clients to a wide range of platforms on a case-by-case basis.
Well over half (57%) of IFAs stated that platforms offer a more efficient and professional way of managing their clients’ investments. Nearly one sixth (14%) went further to say that platforms are ‘the only way to operate profitably post-RDR’.
When asked about the optimum number of clients IFAs’ would like to migrate onto platform each month, again this audience splits with the vast majority (60%) planning to migrate up to 10 per month but a significant minority (8%) hoping to move more than 40 per month.
IFAs were also asked where the asset share is likely to settle once the initial wave of migration is complete. IFAs anticipated 43% of assets would be held within adviser-led retail platforms, while nearly as many (40%) will sit inside provider-led wraps. Some 6% will be held in corporate platforms.
A further 4% will be in specialist asset or tax wrapper-specific platforms and 16% inside D2C platforms.
Bryan Beeston, chief executive of LAS, said: "Our survey shows that legacy asset migration is well underway and will gather further momentum over the next 18 months. We are seeing increased demand for compliant asset migration onto platforms post-RDR from IFA firms of all sizes now as well as the platforms and nationals themselves. Moving assets in a controlled, timely and cost effective manner is now mission critical for the majority of IFAs as is evidenced in our findings. These findings also show that there are some real risks associated with migration which some IFAs are already exposing themselves to."
