Investments 

Platforms charging orphaned clients more revealed

Platforms charging orphaned clients more revealed

Platforms that charge clients extra if they have been abandoned by their adviser have defended their policies despite the regulator saying it has concerns about these practices.

Aegon, Aviva, AJ Bell and Transact are among the platforms charging an additional fee to so-called orphaned clients after their adviser has terminated their relationship.

The platforms defended the charges, saying they were needed to cover regulatory costs and extra administrative work.

Orphaned clients are those who have accounts on adviser platforms, but no longer have a relationship with the adviser who placed them on the platform.

FTAdviser asked some of the largest platforms - Aegon, Aviva, Standard Life, Quilter, Ascentric, Seven Investment Management, Fundsnetwork, AJ Bell and Transact - about their approach to such clients.

Of those firms, Aegon, Aviva, Transact and AJ Bell said they levy an extra charge, while Ascentric keeps the cost at the same level as for advised clients despite restricting the service available to orphaned ones.

An Ascentric spokesman said: "We restrict orphans to 'sell only'. This is because our platform is for advisers and has more complex investments on it, so we are protecting the client by not allowing them to buy new investments. They are able to sell to get their money off the platform. We do not let orphans go into drawdown, as this should be an advice event."

An AJ Bell spokesman said the platform charges an extra £50 a quarter to cover the additional administrative costs of there being no adviser and that it actively encourages clients to find a new adviser or move to a different platform.

Meanwhile, orphaned clients on Transact incur a 3 per cent charge on new investments while advised clients pay 0.05 per cent, and charges are 1 per cent a year for investments or pension pots worth up to £60,000, but 0.5 per cent for those who use an adviser.

A spokesman said: "This increase is charged to cover the additional servicing required from us. Adviser platforms tend to be cheaper than D2C platforms as advisers do lots of the work."

Aviva stated: "Charges vary depending on the individual circumstances of the client and their investments, but generally the platform charge is higher for DIY clients – this is because the DIY platform has to meet regulatory costs and overheads that are borne by advisers for advised clients. As these clients do not pay advice charges their overall cost is typically lower."

Meanwhile, Aegon stated: "As an intermediated platform that expects customers to have an active adviser we believe that it is appropriate for the platform to levy a charge for the additional administrative services that it has to take on board should the customer choose not to have an adviser."

A representative of Aegon said the policy was "under review" following the Financial Conduct Authority's interim platform market study published in July, which found some 10,000 orphaned clients were paying extra fees amounting to more than £1.2m every year.

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