Rip-off exit fees for investors switching between investment platforms could be here to stay, after the financial regulator ditched proposals to ban them.
Critics claim the fees put investors off switching because they know it could land them with a bill costing several hundred pounds.
But the Financial Conduct Authority has decided not to act ‘in light of the ongoing impact of coronavirus and economic conditions’. It also claims that since it started its investigation into the fees in 2018, two major platforms – Hargreaves Lansdown and Interactive Investor – have dropped them. It welcomes this ‘direction of travel’.
Rip-off: The Financial Conduct Authority has decided not to act ‘in light of the ongoing impact of coronavirus and economic conditions’
Not all experts are happy with the regulator’s backtracking.
Damien Fahy, founder of personal finance website MoneytotheMasses, says: ‘What about the other, admittedly few, platforms still charging exit fees? What incentive do they have to follow the industry direction of travel? I’d argue none.’ He adds: ‘Exit fees are a tool to increase customer inertia and boost platform profitability. The companies who argue otherwise are those that levy them.’
From the start of next year, platform AJ Bell will get rid of the £90 exit fee for transferring a self invested personal pension – a charge already dropped for transfers of Isas and investment accounts.
Also, it will reduce the additional charge it levies for the transfer of individual stocks held in a Sipp, Isa or investment account. These will fall from £25 per stock to £9.95. So a transfer of an Isa comprising five stocks will cost £49.75 instead of £125. On Friday, AJ Bell told The Mail on Sunday: ‘There is a cost to transferring stock to another platform and we remain of the view that it should be borne by transferring customers.’
The move will be of little comfort to customers in the process of transferring, or who have done so in recent weeks.
Selwyn Fearis, 66, from Essex, was recently charged £90 when he moved his Sipp from AJ Bell to Interactive Investor. ‘They ought to give me a refund,’ he says. Holly Mackay, of investment website BoringMoney, calls the regulator’s decision not to ban fund platform exit fees ‘disappointing’.
She says: ‘It could have been relatively straightforward to draw a line in the sand and say, ‘We don’t think exit fees promote a well-functioning, competitive market’.’ She added: ‘They are poorly understood and hard to find out about.’
Charles Stanley Direct and EQi are among the platforms that still charge exit fees.