The FCA is considering banning exit fees for switching platforms.
In its platform market study, released this morning, the FCA says it may also issue further guidance on how advisers should charge for platform switches after finding that the process and the costs involved can often be lengthy, preventing clients from getting the best deal available.
The regulator finds switching times vary from weeks to months, adding an additional burden for financial planners, and exit fees – which are charged by half of the largest platforms – are rarely understood by consumers.
The FCA writes: “Many advisers told us that they charge additional advice fees for switching platform because it is a full advice event which requires them to produce a suitability report. We recognise advisers need to be fairly paid for their work. But it is not clear to us why meeting suitability requirements to switch platforms should outweigh the benefits of switching platform.”
Even though receiving platforms can sometimes cover exit fees, they can lead to additional switching delays, the regulator notes.
The FCA says: “Advisers update their platform lists for new investments over time, but not many advisers switch existing investments as the process is complicated. This means that even if there are better options, which advisers use for new clients, they rarely switch existing investments across platforms. Many advisers in our sample charge an extra fee for switching on top of their ongoing advice fee, which can cancel out the potential benefit of lower platform fees and act as an additional barrier.”
The FCA will look to target the platforms themselves, with measures aimed at “improving switching between share classes, for example by requiring the ceding platform to switch consumers to the receiving platform’s share class before a switch takes place”.
It will also conduct further work with the Transfers and Re-registration Industry Group set up by the sector in 2016.