Interactive investor, the parent company of Moneywise, has permanently scrapped exit fees for all its customers
The fund supermarket temporarily removed exit fees last December as it prepared to merge with TD Direct.
It has now moved to ban exit fees entirely, with immediate effect. Prior to December 2017, it charged departing customers £10 per holding, capped at £250.
In addition, interactive investor has launched a cashback promotion offer, which will help reduce exit fee costs for new online customers who transfer. This will apply until the end of the year for investors who transfer to interactive investor.
The cashback offer will mean investors receive £100 for investments of between £25,000 and £100,00, £250 for £100,001 to £250,000, £500 for £250,001 to £1,000,000, or £2,000 for transfers of £1,000,001 and above.
Richard Wilson, chief executive of interactive investor, says: “For over 20 years, ii has fought for simple, clear prices so the consumer is free to make the choice that is right for them, without fear of hidden costs or constraints. Exit fees are incompatible with this principle.
“We have made our position clear with the Financial Conduct Authority, during its recent Platform Review, that while competition should be free it should also be fair, and the only effective solution to remedy today’s shoddy practices is to ban exit fees altogether. Talk is cheap, so we hope today’s announcement signals our commitment to stand behind our position.
“In fact, since 2017 we quietly waived all exit fees but we feel now is the time to remove them permanently.”
The Financial Conduct Authority has already proposed banning exit fees, which can often amount to hundreds of pounds. The regulator says the charges discourage customers from moving their money to a different provider and are effectively a barrier to competition.
The reason exit fees can end up being steep is due to the way the charges are applied per holding. Investors pay a fixed fee, typically ranging from £10 to £25, on every holding in their portfolio when switching brokers.
Therefore, someone who has 20 holdings will pay anything between £200 and £500, depending on their broker’s exit fee charge and whether charges are capped at a certain level.
Some fund supermarkets argue that exit fees are a legitimate way to cover the cost of moving a customer’s money. Imposing the charge may help them keep fees lower for other customers.
But sceptics point out that as exit fees can be excessive they can deter investors from shopping around for a better deal.
That’s backed up by a survey of 800 customers by the FCA, which revealed that 26 per cent found exit fees difficult or quite difficult to understand, with 28 per cent of people saying the charges were stopping them from moving providers.
Interactive investor is the second-largest investment platform in the UK. It currently has a total of £20 billion asset under administration (AUM) and 300,00 customers.
That number is set to increase as last month interactive investor agreed a £40 million deal to buy Alliance Trust Savings from Alliance Trust PLC. The deal, subject to regulatory approval, will bring together two of the UK’s largest fixed priced investment platforms in the UK.
The acquisition will result in total assets growing to £35 billion. In addition, customer numbers will increase to 400,000.