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Pressure grows over exit fees after TD Direct pricing shift

Platforms are under growing pressure to ditch exit fees after TD Direct Investing removed the penalties as part of an overhaul of its pricing structure.

The execution-only broker previously charged investors £25 per holding to transfer out of stock, while Isa transfers incurred a £50 plus VAT penalty. In addition, Sipp transfers were subject to a £75 plus VAT charge and a £25 per holding fee.

All of these charges have now been removed.

TD Direct Investing boss John Tracey says lack of transparency, complexity, cumbersome transfer processes and high exit fees “erode people’s trust in DIY investing”.

He says exit fees are not a source of “significant revenue” for the firm and calls on others in the industry to follow suit.

A number of platforms, most notably Hargreaves Lansdown, continue to penalise clients when they leave.

Hargreaves Lansdown head of communications Danny Cox says: “We are committed to driving down the cost of investing. However, until the rest of the industry upgrades to electronic systems as we have done, conducting stock transfers is a little like trying to telephone someone who doesn’t own a handset. This means the majority of transactions still have to be performed manually, and this inevitably costs more money.”

The Platforum head of direct Jeremy Fawcett says: “Platforms argue that they incur material costs when clients exit but that is less the case now that electronic re-registration is more prevalent.

“We are probably approaching a tipping point in D2C where those who charge large exit fees begin to look out of step.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Why should HL be allowed to get away with charging exit fees when hardly any other investment providers do and the FCA has made plain that it disapproves of the practice?

  2. IMHO this is an interesting one… the term ‘penalty’ is a tad emotive as they’re essentially charging for their work… this therefore gives the option of choice for the consumer.

    I’m all for clean contracts and the ability to move where required, but I’m also for providers covering their costs and therefore if they don’t act transparently in meeting the cost of closing accounts, they’re essentially covering them out of ongoing fees and penalising those who remain – the only alternative is to have an initial charge which covers the exit charge too (given that the funds will eventually leave)?

    We need to move to a world where people understand that they are paying and why they pay it. In a world of unbundled charging, concealing the costs of a transaction is surely moving in the other direction?

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