Recent analysis conducted by Equisoft on electronic portfolio transfers backed by the TEX contract and processed using Equisoft/transfer in the past 12 months reveals that approximately 33% of information requests face rejection.
Are we okay with a transfer environment in which a third of all attempted transfers end up in initial rejection?
Is that meeting standards of customer-duty? Is it providing the enhanced client experience every company feels is critical?
The number of rejections seems especially problematic when we consider that process improvements and recent technology developments mean that we could fairly easily reduce the overall volume of rejections and resolve those that do occur more quickly and efficiently.
Let’s take a closer look at what’s going on and what can be done to improve matters.
Understanding the current transfer landscape #
Transfer rejections occur when an acquiring party submits an instruction that the ceding party deems invalid or incorrect. These rejections can significantly impact transfer times and the overall customer experience. Rejections occur across various financial products and all vendor systems, but portfolio transfers show the most room for improvement. While asset re-registrations typically follow best practices and usually only face rejection due to genuine keying errors, portfolio transfers face more complex challenges that require industry-wide attention. Generally speaking, the TeX legal framework, market practice and regulations could be stronger in explaining what reasonable steps providers should be taking to send valid instructions and appropriately validate those instructions.
Transfers market practice and regulatory framework
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The market practice establishes core requirements for both acquiring and ceding parties in the transfer process. Acquiring parties must take reasonable steps to validate information requests and transfer instructions, ensure appropriate authority for transfer, verify correct ceding party and account type, and validate account number format. Meanwhile, ceding parties are required to validate instructions thoroughly, ensure request validity for correct account and investor, provide clear rejection reasons when necessary, and include sufficient narrative in rejection descriptions.
Two key regulations significantly impact transfer processes. The first, Making Transfers Simpler, requires providers to offer in-specie transfers where possible and perform share class conversions when needed. The second, Consumer Duty, expects providers to improve transfer times and reduce barriers to exit. These regulations form the foundation for industry practices and improvement initiatives.
Given these consumer-oriented guidelines and effective digital solutions to facilitate transfers, why are so many transactions delayed or denied?
Why are so many transfers rejected? #
The key reasons for portfolio transfer rejection include:
- Unknown account details – Investors or advisors may provide incorrect account identifiers due to differences in provider terminology or outdated information.
- Preventable invalid requests – Errors such as requesting transfers for an account type not supported by the Ceding party.
- Automation issues – Some providers apply overly strict rejection logic, leading to unnecessary rejections.
- Poor use of rejection codes – Over 30% of rejections are categorized under "Other," making it difficult to track and resolve process inefficiencies.
- Inappropriate investor contact – Some providers attempt to retain customers after receiving valuation requests, creating unnecessary delays.
Matt Smith, Product Manager, Equisoft
Best practices for improving transfer rejections #
To improve transfer efficiency, acquiring and seeding parties must adopt better validation processes and industry-aligned best practices.
How acquiring parties can enhance their transfer process #
- Enhance Validation: Before submitting a transfer request, confirm that account details are accurate and in the correct format. Automated checks can prevent invalid requests from being sent.
- Set Clear Expectations with Clients: Educate investors and advisors about the importance of keeping their account details updated to avoid unnecessary rejections.
- Utilize Electronic Queries: The introduction of new tools has provided additional opportunities for improvement. Acquiring parties can now leverage E&I messages for additional information and follow up on unclear rejections systematically. Implementing automated validation where possible can also significantly reduce rejection rates.
- Improve Advisor Due Diligence: Advisors should be held accountable for ensuring the accuracy of the transfer details they submit, reducing rejections caused by incomplete or incorrect information.
How ceding parties can enhance their transfer process #
Ceding parties also play a crucial role in improving the transfer process. They should regularly review their rejection criteria, evaluating current validation rules and considering the implementation of fuzzy matching to balance risk management with customer service.
- Adopt a More Flexible Approach: Avoid automatic rejections for minor discrepancies, such as small variations in investor names, by implementing fuzzy matching logic.
- Use Clear and Specific Rejection Codes: Instead of defaulting to "Other," provide detailed reasons for rejections to help acquiring party to correct issues efficiently.
- Support Market Standards: Ensure compliance with industry regulations, such as Consumer Duty requirements, by facilitating transfers rather than creating barriers to exit.
- Provide Transparent Communication: If fees apply to an in-specie transfer, clearly communicate this to the acquiring party rather than rejecting the request outright.
Industry-wide improvements to the UK electronic transfer process #
Technology and automation play a vital role in improving transfer processes, but implementation must be thoughtful and balanced. Rejection logic should be carefully designed to maintain flexibility while reducing manual interventions. Integration enhancement efforts should focus on supporting market practice features electronically and implementing consistent validation mechanisms across platforms. These efforts include:
- Automate transfer journeys while carefully designing rejection logic.
- Apply pressure on market participants to adopt best practices and address problematic behaviors. If you know providers aren't supporting conversions electronically or they reject cash pension transfers, remind them that it's not in line with consumer duty.
- Review internal processes and procedures to identify areas for improvement.
Market collaboration has become increasingly important in addressing transfer rejections. Industry groups such as TeX and UKETRG provide forums for standardization efforts and best practice sharing.
The path forward for TeX #
Nigel Jacques-Pettinger, TeX Operations Manager
According to Nigel Jacques-Pettinger, TeX is leading several important efforts, including monthly MI capture for performance tracking and the standardization of rejection reasons. They are also introducing regular expression format for account numbers and developing API functionality for the TeX register. The enhancement of messaging facilities for quick resolution represents another important step forward in improving transfer efficiency.
Conclusion #
Reducing transfer rejections requires a coordinated effort across the industry, with success depending on organisations' commitment to reviewing their processes, implementing best practices, and actively participating in industry initiatives. Real transfer process improvement means maintaining a customer-first approach while improving operational efficiency.
The ultimate goal is clear: to minimize negative experiences, reduce transfer times, and ensure smooth operations across the financial services sector. If we’re going to reduce that 33% rejection rate, we’ll all need to commit and work together to evolve our market practices and regulatory requirements.
To learn more about the details of improving transfer rejections check out this Making Transfers Better: Reducing & Resolving Rejections webcast.
