FCA proposes platform exit fees ban to improve competition and help cost comparison
14 March 2019
The FCA has said it will ban exit fees charged by some platforms to switch out of their service. It is also advisers who charge for platform switching.
The move was announced in the Investment Platforms Market Study Final Report as part of the regulator’s focus on improving competition in the market and improving service and transparency for consumers.
The FCA said its Interim Report, published in July 2018, had found that exit fees were one of the three biggest actual and perceived barriers to switching and the main financial cost of switching for consumers. It also found that exit fees contributed to the complexity that affects consumers’ understanding of costs and charges, “making it more difficult for consumers to compare different platforms”.
The FCA proposes to ban rather than cap exit fees, seeing this as “more effective than a cap in removing the barrier to switching and increasing firms’ incentives to deliver better propositions”.
As well a making switching less expensive for consumers, prompting those who may have been deterred from switching previously because of the cost to switch to a better deal, the FCA aid it considered the proposal “should have a positive effect on competition across the market [so] all consumers will benefit, not just those who switch.”
The FCA noted that many firms currently recover switching costs through the platform fee. This, it said “ensures that there are no additional fees from exit that create a barrier to switching or add unnecessary complexity to firms’ charging structures.”
The FCA noted also that what constituted a platform or was recognised as such by consumer was not always clear and is questioning whether “comparable” services to platforms, such as firms that safeguard assets or manage investments, should also come under the ban.
The regulator has put this proposal back out to the industry in another consultation paper, covering: how an exit fee should be defined; the scope of the intervention; whether the intervention should be a ban or a cap on such fees. Deadline for responses is 14 Jun 2019.
What are the top skills employers typically want to see from a paraplanner? Lewis Byford, co-founder of financial services...
Are you signed up to the Professional Paraplanner daily website alert? For more technical, tax, pensions, investment, retirement, protection...
With £355 billion of debt having been accumulated in the past year and a potential £204 billion or more to be...