Fund supermarket moots end of exit fee as FCA proposes ban on unfair charges
Interactive investor has indicated it may permanently scrap exit fees for customers moving their money elsewhere.
The fund supermarket, sister publication of Money Observer, temporarily removed exit fees in December 2017 as it prepared to merge with TD Direct. But the group is yet to reinstate the charges.
The Financial Conduct Authority has already proposed banning exit fees, which can often amount to hundreds of pounds. The regulator says the charges discourage customers from moving their money to a different provider and are effectively a barrier to competition.
But some fund supermarkets have argued that exit fees are a legitimate way to cover the cost of moving a customer’s money. Imposing the charge may help them keep fees lower for other customers.
AJ Bell told the Financial Times that remaining customers would be subsidising leaving customers if the fees were abolished, but added that putting a spotlight on exit fees is a good thing.
The Share Centre, which charges £25 per account to leave, is also resisting the ban. It told the FT that exit fees are reasonable as long as they are ‘modest and transparent, reflecting the costs of the work involved, and are not pitched at a level that would be a barrier to exit’.
Other fund supermarkets administer a charge for each investment holding you have in your portfolio. That means a portfolio of 15 investment funds and trusts, with an exit fee of £25 per line, could cost £375 to move.
A survey of 800 customers by the regulator revealed that 26 per cent found exit fees difficult or quite difficult to understand, with 28 per cent of people saying the charges were stopping them from moving providers.
Interactive investor says it supports the FCA’s proposed ban of exit fees. Previously it charged departing customers £10 per holding, capped at £250, but removed the fee as a temporary measure, offering a one-year grace period while it completed its merger with TD Direct, which did not levy exit charges. Interactive investor says this was to ensure a smooth transition period and to be fair to TD customers.
Richard Wilson, chief executive of interactive investor, says: ‘We have not charged an exit fee since 2017, we don’t believe in them, and we are reviewing our formal terms around them.’
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the current no fee stance makes broker more appealing to a new investor they expect a fee as a result.of purchasing but feel a bit trapped by exit fees and more inclined to spread money around others. I.I.s low monthly fee means the more active paymore onactivity , seems fairr gm