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D2C platforms attacked over exit fees

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Three leading direct-to-consumer platforms that charge exit fees have been accused of making customers pay for their own failure to bring down the costs of transferring assets.

Last week, Axa announced customers on its Self Investor platform would be given up to £750 towards the cost of paying exit fees levied by ceding providers. Axa will not charge investors to leave the platform, with Axa Self Investor director David Brooks branding exit fees “old fashioned and unnecessarily punitive”.

He says: “In this day and age people should not be penalised for exercising their choice to seek out more appropriate products or services.”

AJ Bell YouInvest, Barclays Stockbrokers and Tilney Bestinvest all help transferring customers meet the cost of other firms’ exit fees, but also charge customers who transfer out.

All three pay up to £500 towards exit fee costs. But AJ Bell charge £25 per line of stock in exit fees as does Bestinvest, while Barclays charges exiting customers £30 a line.

The Lang Cat founder Mark Polson says: “I dream of a world where nobody needs to charge exit fees. If there is a cost to transferring out and it needs to be covered that’s fine but we have electronic re-registration now. If a company has not bothered to implement that technology I fail to see why that’s investors’ fault. If you put the technology in it will cost platforms pennies to transfer people.

“The platforms do have a point when they say some fund managers are problematic when it comes to re-registration, they need to pressure managers to get this sorted out. I think that exit fees at £20 or £30 per line of stock are iniquitous. If you must charge at least have a ceiling. I don’t know if investors would be disincentivised but you may not want to be invested in lots of lines and be diversified because in the event you might need to move you’d get completely stuffed.”

A Barclays Stockbrokers spokesperson says: “To transfer out of Barclays Stockbrokers in cash, there is no charge. To transfer out still invested there is a charge of £30 per holding. There is cost incurred in processing these transfers out and the charge is in place for that reason. We are continuing our work to ensure that the Barclays Stockbrokers pricing model is clear, fair and transparent and offers good, competitive value to our customers across the services we provide.”

Tilney Bestinvest managing director of business development and communications Jason Hollands says: “These charges reflect a cost levied by the custodians as expediting the transfer of stock involves additional work load at their end.”

He adds: “Numbers of holdings vary from client to client and we don’t experience a lot of transfers away from our platform. At £25 per line of stock, that’s a cost of £250 for someone with 10 holdings.”

AJ Bell technical resources manager Gareth James says: “The transfer out process is still unfortunately largely a manual process, it’s a labour intensive process and that’s why the exit charges are made. We have done an analysis of the time it takes to do the transfers and we think the charge is reasonable based on that.”

In a 2014 review of new platform rules the FCA said exit charges should not be a barrier to moving platform.

Adviser views

Evolve Financial Planning senior director Jason Witcombe

I’m not too fussed about modest exit fees that are akin to small dealing charges as long as it’s fair and reasonable. That’s subjective of course, but say £100 to close a £100,000 portfolio and sell lots of stock seems OK to me. As long as the penalty is an administration charge and not creating a barrier to people moving that seems fine.

Basi & Basi Financial Planning managing director Michael Basi

I struggle to see how exit fees can be justified, particularly in the era of treating customers fairly and that being integrated into every adviser’s business plan. If a customer’s not happy, to charge them to leave and choose someone else seems to contravene a number of those principles in my view. It’s an interesting anachronism that I suspect and hope will die a death.

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Comments

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  1. peter mulholland 19th May 2015 at 3:36 am

    Agree it’s like the old days of ‘fund value’ hahaha . My old manager used to say “keep um on capital units” which is insurance cynicism for ‘no value units’ .Funnily enough those same companies exported that crap into all the expat and local retail emerging markets.

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