Financial Conduct Authority  

FCA delays decision on platform exit fees

FCA delays decision on platform exit fees

The Financial Conduct Authority has delayed a consultation on its plans to ban exit fees charged by platforms, with plans to now address the issue next year.  

The regulator published a policy statement today (December 13) in which it confirmed a number of rule changes which it hopes will make it easier for consumers to transfer their assets from one platform to another. 

The FCA first announced its move to ban exit fees charged by platforms in an interim study published in March, in which it found the market was generally "working well" but switching took time, was complex, and expensive.

At the time watchdog said the next step in its discussion on exit fees would be a possible formal consultation in "late 2019". 

But in today's statement the FCA confirmed it would now consult separately on the proposals in Q1 2020 - a move which has been met with frustration by some.

Mike Barrett, a consultant at the Lang Cat, said it was "very disappointing" the watchdog was still no further with addressing the issue of exit fees.

Mr Barrett said: "It’s right that this needs consultation, but the process is dragging on, and the promise of a consultation before the end of 2019 has been broken.

"With the next step being a consultation paper, now due [in] 'Q1 2020' realistically it will be well into 2021 at the earliest before any ban or cap on exit fees will be implemented." 

However, today's policy statement saw the regulator implement in full its rules designed to allow consumers to switch their investments between platforms more easily, which are due to come into force on July 31, 2020. 

Under the new rules platforms must offer consumers the choice to transfer investments that are common to two platforms via an in-specie transfer - where the investments are transferred with the customer remaining invested throughout. 

Platforms are also now required to request a conversion of unit classes, if necessary for the transfer to take place, and ensure consumers moving onto a new platform are given an option to convert to discounted units, where these are available for them to invest in.

Mr Barrett said: "The rules within today’s policy statement are a positive step, and should help reduce complexity for consumers who are transferring.

"I’m pleased these rules are going to be implemented relatively quickly, in July 2020. We had heard some talk of providers asking for an additional 12 months to make the changes, and it’s good to see the FCA have ignored any such requests."

The FCA said its proposals would make it easier for advisers to switch platforms on behalf of clients, but earlier this year the plans were met with industry concern from platform giants warning they could have unintended consequences.  

These included "significant" initial and ongoing costs and potential delays as a result of potentially "thousands" of extra share classes having to be added to platforms.