Investors hit with massive fees to transfer their portfolios

Investors are being stung with eye-watering charges of up to £1,000 in some cases simply for choosing to move their portfolio to another platform, a new online tool reveals.

Comparefundplatforms.com, a fund platform comparison website, has launched an exit fee calculator that compares 11 platforms and shows investors what sort of charges they would have to pay if they transferred their portfolio.

When transferring a portfolio, investors choose between liquidating it into cash and then buying their holdings again on the new platform (known as a ‘cash transfer’) or transfering their portfolio as it is (an ‘in-specie transfer’).

A cash transfer is the cheaper of the two, in terms of exit fees levied, but it means the investor will have their money out of the market for several days and they will have to repurchase their holdings, which could incur charges, on the new platform.

Cash transfers are often free for a portfolio with a couple of holdings, but fees can ramp up to £300 or more for more diversified portfolios.

For example, the calculator shows that the lowest cash transfer charge for an Isa containing 12 funds and 12 different shares comes from Clubfinance, at £6. But at Alliance Trust Savings the same transfer would set an investor back a cool £360.

However, it’s the in-specie transfers where platforms really hike the fees for customers.

For that same Isa portfolio of 12 funds and 12 shares the online tool shows that many platforms charge more than £450, with Hargreaves Lansdown and Barclays Stockbrokers charging a staggering £720 and £780 respectively.

Over at TD Direct Investing, exit fees for an Isa are a straight £50, regardless of the number of holdings. However, funds and shares held outside an Isa, in a TD Trading Account, cost £35 per holding to be transferred in-specie. A spokeswoman tells Money Observer that transfer fees are now capped at £500, so if a client was transferring a lot of holdings in a trading account the maximum charge would be £500.

Stuart Welch, chief executive of TD Direct Investing, comments: 'The reason the industry has exit charges is because there is quite a bit of work involved in the movement of securities, it's not the push of a button. And I think people get that. 

'As long as these costs are made clear from the outset they can make their own informed decision about which service they use. That is what giving choice is all about.'

An interesting quirk that the online tool throws up is that JPMorgan WealthManager+ does not charge any exit fees, so an in-specie transfer of a large portfolio of many shares and funds will not cost the investor a penny. However, the platform does charge £10 for a share to be sold prior to the client doing a cash transfer, so a cash transfer of 12 funds and 12 shares costs £120.

A spokeswoman for the platform says the absence of any explicit exit fees ‘puts us in an excellent position from a “treating customers fairly” perspective’.

She cites one of the main points of the treating customers fairly regulation that financial services companies must adhere to: ‘Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.’

She adds: ‘We believe [our simple charging structure] also makes us very competitive.’

Justin Modray, founder of comparefundplatforms.com, says that with new low-cost platforms launching and some platforms changing their pricing, many investors may want to switch to a different platform that has cheaper fees.

‘The cost of moving across will become an increasingly pertinent issue,’ he says. ‘Since transfer charges can sometimes run into hundreds of pounds, it's a potential cost investors should not overlook. The variance of charges also raises a question mark over whether some platforms are using high exit charges to discourage customers from leaving, instead of simply covering the cost of the work involved.’

Martin Tilley, director of technical services at Dentons Pensions, says the problem of high, and often unjustifiable, exit charges also exists among self-invested personal pension providers. ‘Is it that expensive and difficult for a provider to do a transfer? Or are the high fees there to dissuade customers from leaving?’ he asks.

Tilley says customers must read all the small print carefully before signing up to a platform or a Sipp provider. ‘Customers need to look at everything – the headline fees, the exit fees and the terms saying the company can increase its fees; some companies can increase the fees just by giving one month’s notice.’ Dentons Pensions gives clients six months’ notice for any changes to fees, and it is part of the firm’s terms and conditions that fees can be raised each year in line with inflation.

To use the exit fee calculator, click here.

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