A surge in electronic transfers between direct to consumer platforms is making the high exit fees some charge “untenable”, according to Altus Business Systems.
The consultancy’s latest independent electronic transfer and re-registration market data showed strong market growth and improvements in the use of electronic transfers and re-registrations compared with the same time last year; especially among D2C platforms.
Consequently, Altus argued that charging excessive exit fees is now becoming inexcusable, as the majority of transfers are now becoming automated.
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.
Tom Hawkins, proposition manager at Old Mutual Wealth, stated that they do not charge an exit fee on their UK platform. “We were one of the first platforms to launch electronic re-registration and the technology enables us to keep costs down for the benefit of advisers and their clients.”
Pippa Russell, head of corporate communications at Novia, responded that they already have automated electronic transfers and have recently signed up to Orgio’s Options to provide further efficiencies.
“The levying of these exit fees is a barrier to competition and a retrograde step which loses the trust of the client and could damage the reputation of the industry and platforms more specifically.
“We have a no exit fee policy and experience shows this forms an important part of advisers due diligence process.”
According to Altus’ first quarter data, 14 of the top 20 adviser platforms are live with electronic transfers, representing over 80 per cent of assets under administration.
The top eight D2C platforms are now executing live electronic transfers, covering an estimated 67 per cent of assets under administration on D2C platforms, with approximately 70 per cent of assets on these platforms now being transferred electronically.
The increase in platforms automating their transfer solutions has caused volumes of electronic transfer rejections to dramatically reduce, when compared with the previous two quarters, with over 80 per cent of account/portfolio transfers now completing within the Tex [Tisa Exchange] requirement of six days.
Howard Finnegan, head of sales and marketing at Altus, suggested that the number of D2C platforms supporting electronic transfers will sharply rise by the end of the year, meaning end investors will be able to move their investment portfolios as quickly and easily as a bank account.
“This means that the argument for charging excessive exit fees when the vast majority of transfers are automated is becoming increasingly difficult to defend,” he commented.
Around this time last year the Financial Conduct Authority’s review on implementation of platform rules demanded progress on areas such as disproportionate exit fees that act as a barrier to transfers.
peter.walker@ft.com
