The City-watchdog’s consultation on its plans to ban exit fees charged by platforms has been delayed until 2021 as the coronavirus crisis continues to stall the Financial Conduct Authority’s plans.
An updated list on the FCA’s website states the consultation on an ‘investment platforms exit fees remedy’ has been postponed until 2021, having initially been expected in December 2019.
According to Mike Barrett, a consultant at the Lang Cat, the delay meant the industry was unlikely to see a ban on platforms charging investors for leaving for another two years.
He said: “This means, realistically, it will be at least 2022 until any ban is implemented by the time we have a consultation, final policy statement and then an implementation period.”
The regulator first announced its move to ban exit fees charged by platforms 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 in December the FCA confirmed it would now consult separately on the proposals in Q1 2020, with commentators complaining the process was “dragging on”.
A series of publications expected from the regulator were postponed or put on hold in light of the coronavirus crisis but no date was given to the exit fee ban when the FCA announced its regulatory shakeup amid the pandemic earlier this year.
It has now been given the broad timeline of 2021, while other consultations such as fees charged by claims management companies and competition in non-workplace pensions have been given the green light for the latter half of 2020.
The controversial exit fees charged by platforms have hit the headlines since the FCA first announced it was looking into the issue. A number of platforms, such as Hargreaves Lansdown and Interactive Investor, have scrapped their exit fees in the aftermath.
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.
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