Earlier this week, Axa Self Investor called on providers who levy exit fees to remove them for those who inherited their Isa investments, branding it an unfair charge.
Adrian Lowcock, head of investing at Axa Self Investor, argued that given advances in technology, there is no longer a strong argument for levying exit penalties, as the administration required is minimal.
He said his firm only charges a platform fee.
Market data provided by consultancy the Lang Cat showed that several firms still charge Isa customers to switch out of their products, with Alliance Trust Savings charging £100 plus VAT, Hargreaves Lansdown levying £25 plus VAT, Tilney Bestinvest with £50 plus VAT and James Hay’s Modular iPlan also on £50 plus VAT; among several others.
Damian Smyth, head of intermediary sales at Alliance Trust Savings, told FTAdviser that this is an issue that comes up quite regularly from certain competitors.
He said: “It is not really fair of Axa to lump flat fee services - who by definition are ‘pay as you go’ - and ad valorem providers who also charge an exit fee, into one group and claim they are acting the same.”
He explained that Alliance Trust Savings applies an exit fee at account level rather than stock level to cover costs, as and when they occur for the client.
“We only charge this on a stock transfer of assets to another platform, it does not apply to cash transfers, exits, or inter-person transfers. If the Isa portfolio was moving to the spouse on our platform as described then this fee would not apply.”
Mr Smyth continued that exit fees are a known and unavoidable factor on a fixed-fee platform, with their opinion being that this is the only fair way to apply the costs.
“The alternative (adopted by others) is to blend the annual costs of all exits, across all clients, regardless of their activity on the platform; we do not believe this is the fairest model.”
A spokeswoman for James Hay pointed out that customers on the MiPlan are charged a transfer- out fee for Isas of £50 plus VAT, based on the ‘pay for what you use’ model, which reflects the administration involved in transferring to another provider and dealing with the assets.
“This is clearly disclosed to clients prior to them applying for the product and therefore they are aware of this charge before taking the product out,” she noted.
“While the client is invested in the Isa the charges are very competitive, by charging for individual transactions separately (e.g. the transfer out charge) we can offer competitive annual charges on Isas, for example our annual charges to a client invested in collectives on the Investment Centre would be 0.18 per cent per annum up to first £500,000 then 0.15 per cent a year for the next £500,000 and 0.05 per cent a year on the rest.”
A spokesman for James Hay added that where a surviving spouse becomes entitled to make an additional permitted subscription into an Isa or inherits the Isa assets from their deceased spouse, where they want to use their additional permitted subscription allowance to another Isa manager, this would be treated as dealing with death benefits and there would be no charge to the surviving spouse to transfer.
A spokeswoman from Tilney Bestinvest also defended their exit fee.
She said: “The exit fee is a cost from our custodians which we pass onto clients, and is not a source of revenue for us. Where clients move to us we help them with costs such as this up to a value of £500; many of our competitors do not do this.”
Danny Cox, head of communications at Hargreaves Lansdown, responded to the specific criticism over inheritance Isa rules, changes to which were announced during the chancellor’s Autumn statement late last year.
“Under the inheritance Isa rules, you can only do an inspecie transfer of assets from the deceased’s Isa account to the surviving spouse’s Isa with the same manager. You can’t do inspecie transfers between managers under the inheritable Isa rules,” he explained.
“As a significant net importer of transfers, Hargreaves Lansdown was one of the first to invest heavily in the infrastructure needed to be able to conduct electronic transfers.
“Unfortunately, electronic transfers take more than two to tango: it’s not just the platforms, but also the fund groups and registrars of all the clients holdings to have invested in the technology for the transfer to complete without manual intervention.”
peter.walker@ft.com
