One rule for us and another for the old school: non-FX firms getting away with 62 day withdrawal time
FX firms are expected by their customers and regulators to pay withdrawals quickly, otherwise their reputation is ruined, however under the same regulatory jurisdiction, large financial services firms in other sectors get away with taking up to six months to pay withdrawals!
Imagine the furore if a regulated FX or CFD brokerage, or indeed any electronic trading entity with a good quality license in a first tier jurisdiction for financial markets was to take 62 days to pay a withdrawal of client funds.
The retail electronic trading business has, ever since its dawn thirty years ago and rise to mass popularity during the 2000s, always had a massive emphasis placed on it by customers, regulators, the media and even discussion forums centering around the time it takes for a broker to process a withdrawal of client funds and for them to arrive in the client account.
Of course, there was a degree of odious behavior during the early days of the unlicensed, island-based MetaTrader brokers operated by Israeli and Middle Eastern affiliate marketing fraudsters who ran ‘bucket shops’ and never had any intention of paying client withdrawals, instead living from client deposits and fixing their trades to say that they had lost, however those days are long gone and regulated brokerages are now the absolute norm and have thankfully flourished.
However, the emphasis is still on withdrawals and in some cases, censuring has taken place when a broker even takes just over a week to pay a client, with many brokers actually advertising how quick their withdrawal time is on their websites just because this is such a big issue for clients that peace of mind on this subject is almost as important as that surrounding trade execution.
The attitude toward and from other regulated financial services markets, however, appears to be somewhat different and large insurance and pensions companies are getting away with paying clients very late indeed with absolutely no problem whatsoever.
A case of one rule for us and another for them, all by the same regulatory authority.
In fact, the only financial services regulator that gets this right is ASIC in Australia, which is very strict with pension firms just as it is with regulating capital markets companies, largely because of Australia’s highly developed superannuation business which is a massive part of society in the country.
In England, however things are a different matter. Pensions companies, often large ones that have been in business for decades, are paying their customers very late indeed and it is somehow accepted.
This week, analysis by consolidation service PensionBee of more than 50,000 transfers processed since 2016 showed huge variation between firms.
Aviva was the best performing, with an average transfer time of 12 days, while Mercer was the worst with 62 days taken to send client money to its customers.
Regulations require providers to complete transfers within six months. Six months! That’s astonishing. “Hello Sir, this is your FX brokerage, we have received your withdrawal application, you’ll get your money within six months.”
There would be outrage, and rightly so. However why this is allowed to prevail is something incomprehensible when FX brokers are expected to return client funds when a withdrawal is requested within 48 hours. It is a different industry sector, yes, but the principle is the same – these are client funds, and the regulatory remit in most nations applies to all companies with regard to the custody of client funds and how they are used and handled.
You can be sure that these firms are trading those funds, which is why they take so long. Look at the long list of regulations that prevent FX brokerages tampering with client funds or using them for any other purposes than custody for margin capital.
There were plenty of other big names in the bottom five pension providers too. Taking an average of 61 days was gigantic professional services firm Capita, an outrageous 42 days is Willis Towers Watson which is a City giant and highly well respected, It’s 36 days if you want your cash out ofSmart Pension. The average time across the 24 firms was 20 days.