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DIY investors still facing ‘excessive’ exit fees

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10/04/2013
Investment platforms are still slapping customers with excessive penalties in an attempt to discourage them from leaving.

Despite DIY investors finally seeing more robust competition between providers, some platforms are still inflicting high exit charges in a bid to keep customers from going to competitors, according to investment provider rplan.

Under FCA regulation, brokers and investment websites must permit DIY investors to move their holdings – whether in an ISA, SIPP or as ‘unwrapped’ funds – to another provider without the customer being forced to sell and re-buy their holdings (called an ‘in-specie’ transfer or ‘re-registration’).

The alternative – selling and rebuying – can be expensive, and it can leave investors out of the market for many days while racking up costs.

Justin Modray, founder of comparefundplatforms.com, said: “It’s clear some platforms are charging excessive transfer fees that look more designed to discourage customers from leaving than simply cover the actual cost involved.

“I’ve heard from disgruntled Hargreaves Lansdown customers who are keen to move to cheaper deals elsewhere, but dismayed at facing a bill of several hundred pounds for moving their funds ‘as is’ due to Hargreaves’ steep £30 per fund in-specie transfer charge.

“TD Direct Investing is even more penal charging £35 per fund plus extra account closure fees.”

“In my view a charge of £10 per fund, as levied by Charles Stanley Direct and Clubfinance is fair and it would be nice to see this become the standard price point.”

Providers can levy two types of charge; an account closure fee, which applies on either transfer out approach (in-specie or sell and rebuy) and a charge per fund/share for in-specie transfers specifically.

A Hargreaves Lansdown spokesperson said: “Hargeaves pioneered ‘in specie’ stock transfers, offering this service long before other platforms were forced to by regulatory intervention. We also offer our clients the option to transfer out in cash without charging for this service. There are insurance products with exit charges as high as 6%

“Our charges for closing SIPP accounts are reasonable and of the lowest in the market and our package of outstanding customer service, competitive charges and DIY investing tools continues to win high approval, both from our clients and from informed independent analysts.”

Meanwhile, Stuart Welch, CEO of TD Direct Investing said: “This sort of comparison can be misleading – and an over simplification – because it does not compare like for like.

“At TD we are completely transparent and up-front about the charges we make. I think clients take a lot more into consideration when choosing who to invest with, such as service, accessibility and indeed the overall costs to run their account and invest online, and with us that starts with no charge to trade funds and from as little as £5.95 for equities.

“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. But 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.”

Basic transfer charges:

 

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