View the article online at http://citywire.co.uk/wealth-manager/article/a750999
Is it time for wealth managers to ditch exit fees?
by Eleanor Lawrie on May 16, 2014 at 11:26
As charges increasingly come under the spotlight, can wealth management firms continue to justify exit fees?
A number of firms charge transaction or redemption fees to clients who wish to move their portfolio to another wealth manager. Companies have defended the practice, as they say it costs money for them to make the switch and represents a cost that should not be borne by the business or other clients.
However, with the likes of St James’s Place charging as much as 6% on assets moved within a year, the charges stack up and many are now calling for a clampdown.
It is certainly an issue the FCA has in its sights. ‘We expect them to be proportionate to the cost of actually exiting a client. They should not be a barrier preventing someone from choosing to go,’ a spokesperson told Wealth Manager.
Cath Tillotson, managing partner at Scorpio Partnership, suggests exit fees ‘send the wrong signals’ to clients and questions whether firms are simply passing on the cost of the transfer process.
‘Exit fees are a deterrent; they are not a cost of doing business. If firms are concerned that their proposition is not compelling enough they should do more to improve the service rather than trying to trip up clients who are heading for the exit.’
Rob Hudson of Charles Stanley said his business took the decision that £10 charged per line of stock is around what it costs them as a business.
‘There is a cost to exit but it should never be used as a retention mechanism.’
On the platform side, Charles Stanley Direct is examining whether to cap its exit fees and Hudson hopes it could prove to be a widespread trend.
‘It will all unravel in the next two or three years. It’s up to the industry to be competitive enough to compel companies to make these decisions,’ he said.
News sponsored by:
As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.
Today's top headlines
From Nigeria to Pakistan and from Kenya to Kuwait, frontier markets are catching investors' attention as never before.