FCA May Impose Exit Fee Ban on Retail Investment Platforms

Amidst a wave of Brexit Brexit Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Read this Term angst, the Financial Conduct Authority quietly released a report on Thursday detailing developments in the UK's retail investment market.

More specifically, the British regulator was looking at the problems retail investors face when using investment platforms.

The market for such platforms in the UK has grown exponentially in the last decade.

According to the FCA, investment platforms had approximately $250 billion in assets under management in 2013. Today that number is thought to be in excess of $500 billion.

Similarly, the number of retail investment accounts in the UK grew by 2.2 million between 2013 to 2017.

In its new report, the FCA said that, though profit is not “excessively high” for consumers, the market is working well.

For better or worse, it isn’t entirely clear what the FCA thinks; the regulator also said that people who pay more tend to get more non-price features and are more satisfied with the products they have.

Easy switch

If there is going to be regulatory intervention by the FCA, it will be in attempting to help consumers move between different investment platforms.

For example, the regulator said that it should be possible to move funds from one platform to another, without first converting those funds into cash.

The FCA also said that it would consider putting a cap on exit fees, or possibly banning them altogether, in order to ensure that consumers can switch to another provider more easily.

“We will review the industry’s progress in making the switching process more efficient and helping consumers access comparable charging information,” said the regulator in its report. “If progress is not made then we will consider further intervention.”

Most of the major platforms are operated by major banks and asset managers. Barclays, HSBC, and Fidelity, for instance, provide some of the most popular platforms to retail investors in the UK.