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The UK financial regulator, the Financial Conduct Authority, says it is considering banning exit fees charged by online trading platforms and may also require them to offer more cost effective switching arrangements between share classes. This followed on from a survey of investors that was conducted by the FCA.

The regulator found that investors were encountering difficulties in switching between investment platforms, mainly because it takes too long (38% of cases) or it is too complex (28% of cases). It also found that 28% of investors were not moving providers because of exit fees.

The exit fees issue is looking like the one the FCA is most likely to address in the immediate future. Others  – like quality of service – can be tackled via a voluntary industry code of conduct.

Some trading platforms have offered to pay the exit fees shouldered by traders who want to switch platforms, but this is not always the case.The overall process still appears to be lengthy and time consuming for investors who are simply trying to find a better home for their portfolios. Quite a high number – 7% – of investors told the FCA they had actually not succeeded in being able to switch investment platforms.

About half of the largest of the online investment platforms still charge exit fees.

“The FCA’s proposals are far from final, with the regulator itself noting that there could be legitimate costs associated with transferring consumers, like the advisory component of switching platforms,” notes Artjom Hatsaturjants, research analyst with Accendo Markets. “Nonetheless, the tone of the FCA’s Investment Platforms Market Survey appears to be tilted in favour of consumer protection rather than genuinely soliciting the industry’s views.”

 

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Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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