More than half of fund transfers within Europe and the UK still take up to three weeks or more despite the majority of fund industry participants being geared to receive automated transfer messages.
The industry needs to ask itself why the fund transfer process continues to incur such delay and risk. Moreover, the FCA’s Making Transfers Simpler regulations, which came into effect in February 2021, notes the need for the industry to increase process efficiency and improve the consumer experience.
A UK and Europe-wide survey of fund transfer practices conducted by Calastone sees the UK stand out as a relative beacon of efficiency. Only Luxembourg firms enjoy similar levels of automation.
But the survey also shows room for improvement.
The purpose of the survey was to quantify the extent to which fund transfers – between different platforms or managers – are still being delayed by the need for manual processing. Some 32 fund managers, distributors and platforms took part. Not one had managed to eliminate manual intervention from their fund transfer operation.
A mountain of paperwork remains
Across Continental Europe, only one in six firms was sending/receiving automated transfers and these accounted for no more than 2% of their overall transfer volumes. Most were still battling a mountain of paperwork – with predictable consequences for the amount of time taken to complete the transfer process.
More than half of all firms surveyed (57%) said fund transfers usually took six or more days to complete. One in five said they took more than three weeks.
By contrast, in the UK three-quarters of respondents were set up to send and receive automated transfers with or from their domestic counterparts. Those with the highest percentage of automated transfers completed them on average within five days and employed no more than three people in transfer processing and servicing.
However, more than two in five firms (42%) were still processing 100 or more transfers manually each week. A similar proportion said cross-border transfers remained problematic. All agreed the issue was a headache.
An industry-wide effort made a difference in the UK
The UK’s relatively good showing in the survey says much for the industry-wide effort made to speed up the transfer process in recent years, though it also suggests lingering issues.
An industry framework for improving transfers and re-registrations was agreed in 2018 after ten or so industry bodies had got together to tackle the issue. As a result, a wide range of UK firms committed to adopt the framework standards. Most invested anew in automation – though not all to the same degree.
However, the survey data show this investment is still failing to cut down effectively on manual intervention – and transfers are still taking longer than they should. Only a quarter of UK firms were handling 85% or more of their fund transfer flows on an automated basis.
UK firms may have come out relatively well from the survey – but it’s still no cigar.
All players, big and small, are still plagued by a flow of paper. The top six firms across the UK and Europe by fund transfer volumes said they were all still sending 250 or more manual transfers a week.
Five of those firms were set up to receive automated transfers and all but one of those took no more than five days to complete transfers. The sixth, still relying on manual processing, needed three weeks or more on average.
Benefits of automation are there to be had
On one point, all respondents to the survey were in complete agreement: automation could bring benefits to their business. There is clear demand for an easy-to-deploy, proven system that can deal with the perceived cross-border issues and bring transfer times down from weeks to a day or so. The irony is that such solutions already exist and a number of firms are using them.
So why are so many transfers still being done manually? Two key problems are highlighted by respondents. One is a lack of standardisation, particularly for cross-border transfers.
The other is that, until everyone is automated, there will continue to be gaps in coverage for those that are automated. Connectivity remains an issue for some with more than a fifth of firms saying their IT did not easily integrate with a counterparty’s systems.
Clearly, harmonising different formats and getting different solutions to talk to each another more easily is the key to progress. Moreover, the ability to connect across borders is increasingly important for a number of firms so a simple way to achieve such goals is a must
The thing to remember is that all of this matters. It is end-investors that stand to suffer. Transfer delays restrict their ability to trade while the funds are ‘in transit’. The industry has a responsibility to minimise any impact on portfolios. UK firms have made progress in recent years – but there is further to go.
Calastone has always been at the forefront of the industry when it comes to fund transfers. By challenging the established processes, we have accelerated the transfer process across the globe, reducing the time frame from weeks to hours. This minimises time out of the market for the investor and helps firms make an instant impression on new clients with the quality of their service.
