Fund firms face ban on expensive exit fees

INVESTMENT firms face a ban on rip-off charges savers have to pay when they withdraw money.

The City watchdog is planning to axe or cap these so-called exit fees to cut costs for customers.

It is particularly taking aim at the online investment platforms where savers buy and sell shares.

These firms – such as Hargreaves Lansdown and AJ Bell – impose charges of as much as £25 per holding when investors sell.

This would mean an investor with a portfolio of 20 stocks could be stung with a £500 bill.

The Financial Conduct Authority has warned these fees are unfair and stifle competition by putting customers off switching to another platform with better services.

Regulators have launched a consultation with a view to banning the exit costs.

A ban would likely also apply to other parts of the industry – for example, wealth managers such as St James’s Place.

Christopher Woolard, competition director at the FCA, said they believed ‘it is right that we restrict exit fees, so people can move their money freely’.

Chris Hill, chief executive of FTSE-listed Hargreaves Lansdown, said: ‘We are pleased the FCA’s will look to apply restrictions to exit charges across the wider retail distribution market, as singling out platforms would distort the market in favour of insurance companies and other wealth management services.’

Although the watchdog is still consulting on its proposals, experts believe a ban is likely.

Alistair Wilson, of wealth firm Zurich, said: ‘This is the end of the road for exit fees. The FCA has been flagging its concern for some time and an outright ban is now the most likely outcome.’

‘Banning exit fees would remove one of the main barriers restricting consumers from switching platforms,’ he said.