Advisers have signalled they are more prepared than ever to take a stand over controversial platform exit fees, with four out of five of close to a thousand intermediaries stating they would refuse to recommend a provider that charges to transfer assets out.
A Skandia survey of 963 advisers conducted in June found 79 per cent said exit fees would stop them recommending a platform to clients.
Platforms that levy exit fees have argued that they are a transparent way to cover costs, but there have been growing calls for them to be scrapped. Not all providers charge to exit, but 16 platforms including Alliance Trust, Hargreaves Lansdown and AJ Bell do levy a fee to re-register assets to another service.
Steven Nelson, research manager at The Lang Cat, told FTAdviser it is not unusual to see a customer being faced with between a £15 to £30 charge per fund to move their investments. There have been claims of some legacy contracts involving exit fees of as high as 10 per cent.
The Financial Conduct Authority raised concerns about re-registration exit fees following its recent thematic review, with head of long-term savings Nick Poyntz-Wright stating it “wouldn’t want exit charges be at a level where it would create a barrier to exit for customers and inhibit competition.”
Danny Cox, head of financial planning at Hargreaves Lansdown, told FTAdviser that “re-registration currently involves a considerable amount of manual work on a per line of stock basis, hence the charge per holding.
“The industry is working to automate these systems and as these improve the costs will come down.”
Companies that do not carry exit fees and use the automated standards put in place under the Tax Incentivised Savings Association take roughly eight days to complete a transfer. For those that charge exit fees but are still automated that process can take 15 days, but for those that charge exit fees and have not adopted automation it can take 32 days.
Mr Nelson said: “Interestingly we find more evidence of [exit fees] in the D2C market than the advised. We’re not against platforms charging appropriate admin fees to cover costs, but some of these charges feel excessive, and against the spirit of recent regulatory reform.
“Platforms should be a hotel for customer money, not a prison.”
Mike Barrett, Skandia’s platform marketing manager, told FTAdviser that the transparency of pricing and charging mandated by the Retail Distribution Review has increased the understanding of the costs and value of an advised investment.
He added: “However, it is important that the headline figure does not paint a false reality of what the customer actually pays... The verdict from advisers is clear; exit fees are barrier to recommending a platform.”
Jon Everill, head of advisory services at FundsNetwork, called for an outright ban on exit charges, stating that it would improve competition within the market place and provide clients with better choices.”
