FCA could impose UK Investment platform exit fees

March 14, 2019, | AtoZ MarketsThe UK Financial Conduct Authority (FCA) on Thursday released a report detailing developments in the UK’s retail investment market. As one of the measures aimed to help consumers move between different investment platforms, the British authority proposed for UK investment platform exit fees.

UK investment platform exit fees might improve competing

At the start of this month, the FCA clarified that the regulator will onshore of the European Securities and Markets Authority’s (ESMA) temporary binary options prohibitions and CFDs restrictions. Following this news, the FCA shared today a research which shows that it is difficult for some consumers to switch their investment platform, in case of a brexit. This might be one of the reasons for FCA to start considering to impose investment platform exit fees.

According to the regulator, consumers may encounter difficulties when switching due to time, complexity and associated costs – partly due to the exit fee they have to pay and difficulties switching between classes of units.

FCA consults with the experts on better options for investment firms

The FCA said it is consulting with industry experts about the rules that allow consumers to decrease investment platform exit fees, switch platforms and stay in the same fund without having to sell their investments and suggests banning or restricting exit fees.

“Although the market works well for most of its customers, the package we announced today should make it less expensive and time-consuming for investors,” said FCA’s Executive Director for Strategy and Competition Christopher Woolard.

“In this regard, we consider it right that we limit the exit fee so that people can freely move their money.”

The FCA initiative in brief

The authority follows the initial recommendations set out in July last year. It was looking at the problems retail investors face when using investment platforms. FCA’s goal is to help five types of clients in the £ 500 billion sectors, dominated by Hargreaves Lansdown and small companies.  Among the clients noted in the FCA’s initial report were :

  • users who want to switch platforms
  • platform users who are not associated with a financial advisor
  • clients who use model portfolios
  • clients with large cash balances
  • orphan clients who no longer have no relationship with a financial advisor.

During its initial report, the regulator stated that it would provide investment platforms with an opportunity to make changes or consider further measures, including a ban on field fees, before the start of 2019.

The British regulator also noted that it might enable consumers to move funds from one platform to another, without first converting those funds into cash.

The UK FCA assured that it would consider very seriously putting a cap on exit fees, or possibly banning them altogether, in order to ensure that consumers can switch to another provider more easily.

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