Nick Paler’s interview with HargreavesÃ¢?? Ian Gorham in Professional Adviser last week caught my eye. Headlined ‘We will not scrap exit fees until FCA tightens transfer rules‘, in it Gorham explains the thinking behind Hargreaves campaign for the FCA to take action and make transfers of stock easier to do across the whole industry.
It’s a long quote, but stick with us, we’ll break it down as we go through:
If I made it free to transfer out, then what pressure is there on the regulator to act? We agree there is a problem, and we would love the cost of it to come down, but the regulator’s position at the moment is to leave it to TISA to solve. However, there are so many vested interests that it is unlikely anything will get changed.
“If I made it free to transfer out …”
As an ex-regulator, this made me sigh. In the 20 years since I first darkened the door of the Securities and Investments Board in Moorgate it exemplifies one phenomenon that, for all the shifting of brass plates, changes of regulation and ‘new starts’ to the regulator/industry relationship – doesn’t seem to have changed. And that’s the trusty, all ills lead back to the regulator position.
If the [insert name of current regulator] are not causing problems by interfering unnecessarily with a market that works perfectly well, they are failing to act and so causing the market to malfunction in some way. With a remit including the fair treatment of consumers and the competitiveness of markets, the FCA will of course be involved in this debate at some level. But,the regulator needs to act, attitude is just depressing.
“We agree there is a problem but … “
The cynic in me wants to read this as, We know what we’re doing is wrong but we’re not going to do anything about it until someone takes away all our excuses and makes us stop. Or as one of my colleagues more colourfully put it, Me and my friends are going to keep on punching my sister until my Mum gets sick of it and bangs our heads together.
We’ve already set out our stall at the lang cat as being pretty, meh! on the subject of hefty exit charges. The article about HL has raised the issue in our minds again, but this isn’t just about them. They are not alone in charging around Â£25 per line of stock. Barclays’ Â£30 per line of stock comes in for a mention in Paler’s article too and there are others. This is a collective industry bad.
“…the regulator’s position at the moment is …”
Ã¢?Â¦ not directly intervening, and we really hope they don’t have to.
The PS13/1 platform regulations came into force on Sunday (6 April 2014). They have nothing specific to say about exit fees, although they do include some guidance around charges that might imply product bias on the part of a platform (see COBS 6.1E.3G). This was a new dawn for platforms, but it did not rise on a regulatory answer to the evil of the (allegedly) profitable exit charge.
So we’re back again to looking in the mirror and asking ourselves whether we’re genuinely being true to the old faithful – Principle 6 (A firm must pay due regard to the interests of its customers and treat them fairly) and the associated TCF Outcome 6 (Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint).
“… so many vested interests …”
Back in February the Telegraph had a go at starting a campaign to end fund shop, exit fees.
Perhaps if a couple more of the major D2C providers got behind this by scrapping, or at least significantly reducing – their exit charges (kudos to Fidelity, Chelsea and AXA Self Investor who already don’t do the exit charge thing) the ‘vested interests’ might have a change of heart.
With your excellent value propositions you have nothing to fear, and the free flow of money around the market is in everyone’s best interests, no?