FCA considers ban of exit charges on consumer platforms
INVESTORS were dealt good news this week when the City watchdog proposed to ban platform exit fees. The charges — that can be as high as £150 — can serve as an unwelcome obstacle when investors — both DIY and advised — want to switch to a better value platform. The Financial Conduct Authority (FCA) has been looking into platforms and found that 7% of all consumers wanted to switch but were put off from doing so, with many citing exit fees as a significant hurdle.
Another problem is that many investors might not be aware of exit penalties when they join a platform. Yet penalties range from £10 to an eye-watering £150. Not all platforms charge exit fees though; there are a number of platforms that allow customers to leave without penalty including Fidelity, Interactive investor, Willis Owen and Chelsea Financial on the DIY investor side.
Richard Wilson, chief executive of Interactive Investor says, “Exit fees inhibit freedom of choice and transparency. Other firms are charging excessive exit fees. Nearly all consumers are not aware they will be charged to exit at the point when they sign up.”
Adrian Lowcock, head of personal investing at Willis Owen said: “We have long been a supporter of no exit fees and greater transparency. However, while this is a positive move in the right direction, a ban is only the first step. More work needs to be done to remove the confusing jargon and different terminology for fees and charges across the industry.”
No sell and buy
The FCA also won praise for deciding against the half-hearted measure of introducing a cap to exit fees and has proposed that an outright ban will be more effective. There’s more positive work being done on platform switching behind the scenes. The FCA is also looking at new rules to allow consumers to switch platforms and remain in the same fund without having to sell their investments.
Also, through a working group of ten trade bodies representing the whole financial services sector, a set of common standards to deliver faster transfers and better customer communication is being created. Known as the STAR project, it is recruiting platforms to sign up. Hargreaves Lansdown, along with a growing number of other leading platforms and product providers has already committed to this framework.
The FCA has asked the industry for their views on how an exit fee should be defined plus whether there should be a ban or a cap on such fees. The deadline for responses is 14th June 2019.
Holding money with the best value platform means less of your money goes towards charges and more towards growing your wealth. Until the ban on exit fees comes into force, you can check how much it will cost to move here.
About the Author: Holly Thomas
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