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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

Is it time for wealth managers to ditch exit fees?

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.

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1 comment so far. Why not have your say?

former employee

May 16, 2014 at 12:08

Exit fees should be outlawed by the FCA . Many platforms and brokers make ridiculous charges ( £25 or £30 a line of stock ) these are intentionally put there to stop clients and advisors moving

.Thge worst culprits are often the firms who are seen shyouting in the press about how brokers should be free to move without restrictive covenants !!! These themselves are barriers to a free market .

No matter what platforms tell you these type of costs are no way reflective of the minimal amount of work needed to re register stock .

The FCA should move to ban such charges and the press should name and shame the worst culprits - come on Citywire do your stuff !!!

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