Interactive Investor has scrapped exit fees for The Share Centre customers after its acquisition of the rival platform completed earlier this week.
The direct to consumer platform announced yesterday (July 7) it had ditched the controversial 'charge for leaving' for the platform with immediate effect, bringing investors on The Share Centre platform into line with its own charging structure.
Richard Wilson, chief executive at Interactive Investor, said: “I have said time and again that exit fees are a recipe for rip offs. With Hargreaves Lansdown having scrapped exit fees last September, those still charging exit fees are looking increasingly out of step.”
Interactive Investor, which does not itself charge exit fees, did the same for Alliance Trust Savings customers last year ahead of their migration onto the Interactive Investor platform.
The platform's £61.9m acquisition of The Share Centre, which completed yesterday, would also “strengthen the voice” for flat fees, according to Mr Wilson.
Originally announced in February, the buyout has created an enlarged business with assets under administration of £36bn, second only to Hargreaves Lansdown in the direct to consumer platform space.
Controversial charging
Exit fees have hit the headlines since the Financial Conduct Authority first announced its move to ban the charges in an interim study published in March 2019, when it found the market was generally "working well" but switching platforms was complex, expensive and took too long.
At the time the watchdog said the next step in its discussion on exit fees would be a possible formal consultation in "late 2019".
But this has since been delayed to 2021 after the regulator initially pushed the work back to Q1 2020 and then again, due to coronavirus, until next year.
Mr Wilson added: “We look forward to scrutiny on exit fees being extended to personal pension operators, asset and wealth managers, life insurers and beyond.
“Many of these companies have grown far too complacent, relying on customer inertia and hefty penalties.”
Some in the industry have warned platforms could still introduce such fees “by stealth” even if they were formally banned by finding loopholes in the system, while others are concerned the watchdog’s ruling would not cover all firms.
In particular, commentators are concerned the proposed ban on exit fees would not reach as far as to cover market value reductions in with-profits policies, as often found with Phoenix Life, or deferred advice fees, as charged by St. James’s Place Wealth Management.
Whether SJP will be included in the ban is a nuance in the policy the industry will have its eyes on after charges at SJP were hotly debated last year.
imogen.tew@ft.com
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