THE TRANSFER process for peer-to-peer investors wanting to move funds out of Innovative Finance ISAs (IFISAs) to other ISA wrappers has been labelled as “frustrating” and “inefficient” by industry insiders.
Peer2Peer Finance News has previously reported that some building societies and smaller banks do not allow IFISA transfers to cash ISAs, but it has now emerged that there are also issues transferring IFISA holdings to stocks and shares ISAs.
In contrast, the process of transferring money between cash and stocks and shares ISAs has been automated by most providers.
It is facilitated by providers signing up to Bacs for cash transfers and an exchange run by the Tax Incentivised Tax Association (Tisa) called TEX for stocks and shares providers.
IFISA providers can sign up to these but there is no automatic category in either system.
Read more: IFISA market breaks £1bn barrier after Funding Circle confirms intake
Michal Brzozowski, head of operations for Goji – which helps P2P lending platforms with IFISA administration – says this means they either have to list as cash ISA providers, which creates confusion, or the fund platform receiving the money will ask for the transfer to be done manually by post using a paper form and wet signature.
“It is a point of frustration,” Brzozowski said.
“It may make investors reconsider investing in an IFISA in the future given the resistance when they want to transfer out.”
Furthermore, some fund platforms say they are open to transfers but only mention cash and stocks and shares on their website, with no reference to IFISAs.
Fund platforms Hargreaves Lansdown and Fidelity said there has been little demand for IFISA transfers and they would need to be completed manually.
Similarly, AJ Bell said IFISA transfer applications would have to come by post and customers would have to verify that they understand they are investing in a different asset.
Read more: One quarter of authorised managers are yet to launch an IFISA
However, Interactive Investor said it could deal with IFISA transfers online.
David Bradley-Ward, chief executive of P2P lender Ablrate, described the IFISA transfer system as a “relatively simple process to set up, but not efficient.”
“It all comes back to the liquidity of the platform,” he said.
“If you are in a loan and can’t get out then the likelihood is you will not be able to efficiently manage your IFISA in line with your tolerance to risk in a timely manner.
“Add this to the latency that is within the legacy systems and procedures and you have a problem for customers that does need solving.”
Neil Faulkner, of P2P ratings and research firm 4th Way, said the whole ISA transfer system needs reform. “The entire process for transferring ISAs is outdated and slow by modern standards, regardless of the type of ISA in question,” he said.
“Fees charged to transfer out from stocks and shares ISAs into other sorts of ISAs compound this.
“There is no technological platform that connects ISA providers, which means that providers offering stocks and shares ISAs will not immediately know how to process applications to or from IFISA providers.
“The whole system could use an overhaul to bring it into the modern age, because it surely puts some people off from transferring to or from other ISAs, even when it is in their best interests.”
This article featured in the September issue of Peer2Peer Finance News, now available to read online.
Industry blasts “inefficient” IFISA transfer-out process
THE TRANSFER process for peer-to-peer investors wanting to move funds out of Innovative Finance ISAs (IFISAs) to other ISA wrappers has been labelled as “frustrating” and “inefficient” by industry insiders.
Peer2Peer Finance News has previously reported that some building societies and smaller banks do not allow IFISA transfers to cash ISAs, but it has now emerged that there are also issues transferring IFISA holdings to stocks and shares ISAs.
In contrast, the process of transferring money between cash and stocks and shares ISAs has been automated by most providers.
It is facilitated by providers signing up to Bacs for cash transfers and an exchange run by the Tax Incentivised Tax Association (Tisa) called TEX for stocks and shares providers.
IFISA providers can sign up to these but there is no automatic category in either system.
Read more: IFISA market breaks £1bn barrier after Funding Circle confirms intake
Michal Brzozowski, head of operations for Goji – which helps P2P lending platforms with IFISA administration – says this means they either have to list as cash ISA providers, which creates confusion, or the fund platform receiving the money will ask for the transfer to be done manually by post using a paper form and wet signature.
“It is a point of frustration,” Brzozowski said.
“It may make investors reconsider investing in an IFISA in the future given the resistance when they want to transfer out.”
Furthermore, some fund platforms say they are open to transfers but only mention cash and stocks and shares on their website, with no reference to IFISAs.
Fund platforms Hargreaves Lansdown and Fidelity said there has been little demand for IFISA transfers and they would need to be completed manually.
Similarly, AJ Bell said IFISA transfer applications would have to come by post and customers would have to verify that they understand they are investing in a different asset.
Read more: One quarter of authorised managers are yet to launch an IFISA
However, Interactive Investor said it could deal with IFISA transfers online.
David Bradley-Ward, chief executive of P2P lender Ablrate, described the IFISA transfer system as a “relatively simple process to set up, but not efficient.”
“It all comes back to the liquidity of the platform,” he said.
“If you are in a loan and can’t get out then the likelihood is you will not be able to efficiently manage your IFISA in line with your tolerance to risk in a timely manner.
“Add this to the latency that is within the legacy systems and procedures and you have a problem for customers that does need solving.”
Neil Faulkner, of P2P ratings and research firm 4th Way, said the whole ISA transfer system needs reform. “The entire process for transferring ISAs is outdated and slow by modern standards, regardless of the type of ISA in question,” he said.
“Fees charged to transfer out from stocks and shares ISAs into other sorts of ISAs compound this.
“There is no technological platform that connects ISA providers, which means that providers offering stocks and shares ISAs will not immediately know how to process applications to or from IFISA providers.
“The whole system could use an overhaul to bring it into the modern age, because it surely puts some people off from transferring to or from other ISAs, even when it is in their best interests.”
This article featured in the September issue of Peer2Peer Finance News, now available to read online.
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4th Way Ablrate David Bradley-Ward Goji Michal Brzozowski Neil Faulkner Tax Incentivised Tax AssociationClick here if you'd like to subscribe to our weekday e-newsletters, for all the latest P2P news by 7am. If you're interested in receiving a free copy of our monthly print edition, complete with exclusive content, please email us at info@p2pfinancenews.co.uk with your address.