Watchdog mulls banning investment platforms from charging exit fees
0 ‘Right to restrict exit fees’ – FCA’S Christopher Woolard The UK’S financial watchdog yesterday set out proposals to ban or cap exit fees charged by investment platforms following a review into competition in the sector.
The Financial Conduct Authority (FCA) said that although it believed the market – where major players include AJ Bell, Hargreaves Lansdown and Interactive Investor – was generally working well for consumers, it wants to make it less expensive and easier for investors to shop around and move platforms.
Christopher Woolard, executive director of strategy and competition at the FCA, said: “Consumers can find it difficult to switch due to the time, complexity and cost involved – driven in part by the exit charges they incur and difficulties switching between unit classes. We believe it is right that we restrict exit fees, so people can move their money freely.”
To address the issues uncovered, the FCA is consulting on rules to allow consumers to switch platforms and remain in the same fund without having to sell their investments, and is proposing to ban or cap exit fees.
The FCA is now seeking views from the wider market about how a restriction could work, before consulting on any final rules.
David Ferguson, chief executive at Edinburgh-based Nucleus Financial Group that is behind a platform used by financial advisors, said he welcomed the FCA’S final report on the platform market.
“We agree with its reiteration that the platform market is generally competitive. We’re in full support of the proposed ban on exit charges, which can mask the true cost of investing by promoting lower initial and upfront charges while penalising people who choose to exercise their right to invest elsewhere.”