To address the issues uncovered, the FCA is consulting on rules to allow consumers to switch platforms and remain in the same fund without having to sell their investments, and is proposing to ban or cap exit fees.
“The proposed restriction on exit fees would apply to platforms, and also firms offering a comparable service to retail clients,” says Mr Woolard. “The FCA is seeking views from the wider market about how a restriction could work, before consulting on any final rules.”
Bella Caridade-Ferreira, founder of comparetheplatform.com, which launched an online calculator following the FCA’s study, says: “Platform exit charges can vary widely. Some make no charge at all and they should be commended.
“But some do levy some kind of charge. It could be for the whole portfolio, by wrapper or even a fee for each underlying investment. It pays to check how much a switch is going to cost you.”
Some advisers claim that the current regulatory framework makes transacting some business unprofitable, which Ben Hammond, principal consultant at Altus says is leading to the oft-quoted ‘advice gap’.
He adds: “Some platforms can make it more efficient to do business when compared with non-platform business, especially for existing clients. If this is the conclusion from an adviser’s due diligence, then it could well be the most suitable place to put a customer’s business.
“Many advisers are looking at the auto or robo-advice routes for their clients, especially when it comes to events that may not require a full advice process, such as topping up an Isa.”
According to Mr Hammond, some advisers quote that around 80 per cent of their business turnover is from existing clients, and that trust wins and retains most of their business.
Furthermore, most customers looking for help with their investments or tax planning will be happy to collaborate with an adviser, providing the service is professional and the costs are competitive.
He concludes: “As with any industry, it’s all about value for money and advisers need to be aware of the need to balance functionality with cost – cheapest is not always best.”
Jenny Turton is a freelance journalist
