Which Financial Products Are Portable?
As a Financial Advisor or Wealth Manager, one of your most important task is to look after your clients’ assets.
This means you will always be constantly looking for the optimal financial firms to work in or the platforms to use to manage their assets.
When you ultimately decide to move to another firm or platform, you will have to get your clients to agree to do the switch with you to your new firm. Will they do the switch, will they go with you?
- What Should You Do Before You Switch to a New Financial Advisory Firm?
- Where Should You Practice as a Wealth Manager?
- 5 Types of Financial Institutions to Join as a Wealth Manager
- 15 Popular Sectors for Wealth and Investment Professionals
But what about their assets, and their investments? Can their assets and investments be shifted to the new firm or platform? How long would the asset transfer take?
Portability
The ease of transferring financial product / instrument from one firm to another. For example, deposits are highly portable. Most banks accept deposit transfers. However, if you are transferring Renminbi (CNY), many banks will not be able to accept the transfer.
Here we look at the portability of their investments and assets:
#1 Deposits
Deposits can be easily transferred anytime. If the funds are in fixed deposits, there might be early penalties or loss of interest earned. Regardless, deposits can be quickly transferred within a day or a few days to almost anywhere in the world.
- Portability: High
- Deposits Timeline: 1 – 3 days
However, if the currency is denominated in controlled currencies such as CNY, MYR, IDR, INR, the transfer might require a change in currency denomination.
#2 Loans
Loans (collateral-backed loans such as properties and investments) are highly portable. These can be quickly transferred in 1 – 3 days.
Unfortunately, the administration process is long and tedious prior to the transfer. You will have to get around issues such as getting a pre-approved loan facility in the new firm, finalising the outstanding amount and identifying the date of transfer. Legal service might also be required depending on the collateral and the facility setup.
- Portability: High
- Loans Timeline: 1 – 3 days (Pre-agreed)
#3 Listed Securities
Listed Securities (stocks, bonds, exchange traded-funds) are perhaps the most portable investment instruments (aside deposits).
Almost any financial firms that have a specialisation in investments use a custodian service (in-house / external provider) to hold the listed securities. The portability for listed securities is extremely high.
- Portability: High
- Listed Securities Timeline: As fast as a few days
Listed derivatives are also portable, like most listed securities. Although this may also depend on the custodian service.
#4 Unit Trust
The next most portable investment is Unit Trust. Unit Trust are professional managed funds and most large fund managers have distribution agreements with many financial institutions.
However, some financial institutions do not have agreements in place due to business reasons such as no prior relationship, lack of volume, time required to maintain the agreement or having too many similarly styled-fund managers.
- Portability: High
- Unit Trust Timeline: Weeks to at most a few months (due to distribution agreement setup)
Tip: Check if majority of the funds (Unit Trust) can be transferred quickly. Some funds can never be transferred due to business reasons. The only resolution is to liquidate the funds, and to switch into similar fund for ease of portfolio management.
#5 OTC Bonds, OTC Securities
If you are offering financial advice to accredited or sophisticated investors, you would likely have clients holding OTC bonds or OTC Securities. They are likely to be listed on platforms such as Bloomberg, identified by an ISIN number.
The transfer process varies, and is dependent on the custodian services used.
- Portability: High
- OTC Transfer Timeline: Weeks to Months, depending on custodian services acceptance.
OTC – Over-the-Counter
#6 Structured Notes
Structured Notes portability is highly dependent on the underlying terms and conditions, the sophistication of the receiving platform, and if they have any existing business relationships with the underlying issuer.
If the structured notes are highly standardised and distributed, the process might be swift – especially if it is also listed on platforms such as Bloomberg, with an ISIN number.
- Portability: Depends
- Structured Notes Timeline: Weeks to Months
#7 Options, Futures, Swaps
Theoretically, if you are joining a platform that have access to options, futures and swaps (derivatives), all positions can be transferred within 1 – 3 days, if both parties are agreeable.
However, most financial institutions do not do it for commercial reasons such as the infrastructure setup or the complexity of the manual transactions-matching. Exceptions might be made if the positions are large (eg. hundreds of millions to billions).
Thus, most of the transfers are done done by back-to-back transactions. This means closing out a position in one firm, and at the same-time, opening up the position in another firm.
- Portability: Depends
- Options, Futures, Swaps Timeline: Weeks to Months
#8 Insurance Products
Insurance products are not designed to be managed externally, thus insurance products are generally not portable.
However, there are some insurance products that are highly customised to manage the risks of assets, people or companies. The setup might include multiple financial services with the insurance policy values to be very high. Such insurance products might be portable.
- Portability: Low
- Insurance Products Timeline: Low, Depends
Portability of Financial Products:
| Financial Products | Portability |
| Stocks, Bonds, Unit Trust, Exchange Traded Funds, Loans | High |
| Structured Notes, Options, Futures, Swaps | Maybe |
| Insurance Products | Low |
Are your clients holding all these financial products? Do you have any experience transferring financial products? What were the problems you face? Would you be doing a switch soon?
- What Should You Do Before You Switch to a New Financial Advisory Firm?
- Where Should You Practice as a Wealth Manager?
- 5 Types of Financial Institutions to Join as a Wealth Manager
- 15 Popular Sectors for Wealth and Investment Professionals
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