FCA could ban exit fees for investment platforms

The Financial Conduct Authority is considering banning exit fees for online investment platforms to promote competition in the fast-growing sector.

The regulator said it was concerned consumers could lose out because competition between platforms such as Hargreaves Lansdown was not working as well as it should. The investment platforms market has almost doubled in size to £500bn in the past five years, adding 2.2m customer accounts.

The FCA proposed measures designed to increase competition between asset managers that feature on the platforms, make it easier for consumers to switch platforms and alert customers who may be missing out on returns by holding lots of cash.

Switching platforms is too difficult and costly and restricts competition, the FCA said. In addition to an industry effort to set maximum switching times and give better information to customers the FCA said it could ban exit fees and make it easier for customers to switch between share classes.

Christopher Woolard, the FCA’s head of strategy and competition, said: "This is a market that has seen significant growth in the past five years with more customers than ever deciding to use a platform to manage their money. We know that competition is working well for many but it is important that the problems we have identified are addressed so that consumers don't lose out.”

Analyst Stuart Duncan at Peel Hunt said that after his initial read of the 110-page report, it "looks relatively benign for sector, with none of the proposals likely to cause too much concern".

He noted that the FCA had found no widespread evidence of overcharging and that a key conclusion was that there that no widespread competition concerns and no findings of excess profitability.

The interim report will now be available to concerned parties for comment, with a final report expected in Q1 of next year.