So if accurate pricing is important to advisers, why have these exit fees in the first place? If the adviser, having done his due diligence, is inclined to re-reg their client over to another platform, surely in the spirit of transparency, flexibility and increasing competition in the market, this should be an easy and penalty-free process.
The reality facing the adviser in this position is a myriad of complex exit fees, some charged as a flat rate ‘account closure fe’” and some a specific charge per fund for in-specie transfers, (ensuring that clients would be charged considerably more if they had smaller amounts invested in a variety of funds). Surely if a platform can manage to accept the money on to the platform (via re-reg) it must be able to allow the assets to leave the platform (via re-reg) or so you would think. The actual process of moving assets over from one platform to another is not yet totally automated or uniform across all platforms and does vary slightly from money coming in and money going out. However, the principle remains the same.
Last year, the Tax Incentivised Savings Association put in place service levels designed to help move towards a faster and more efficient system of re-registration between platforms. There was a target set of six days for platform transfers, and it was reported that the take up of those who had joined or were committed to these changes was good.
Issues facing platforms accepting re-registration business can include complications over share classes. If the ceding platform offers a share class not offered by the accepting platform, or varying exotic investments that are not offered across platforms, not all platforms are as yet geared up for ETFs, or investment trusts, or even investments in models, so complications can arise when trying to bring money across. However, none of these should be a barrier to re-registration or exit, and if it is looking like they might be, then this should be made very clear at the outset to both the adviser and the client.
I have heard some arguments for maintaining exit fees for encashment and re-regs: the customer has benefited from the charges at the outset which were lower so they are redressed on encashment; or the exit fees are always made clear. I do not agree with either of these. Buying an investment is not like locking into a fixed-rate mortgage, where you know that your fixed two-year rate can be set at significantly lower than the base rate and you ‘gamble’ on that remaining the case throughout the term of your rate. If you encash before the time is up, then it might seem logical that you might be subjected to a penalty fee. Nor are exit fees always made clear or highlighted in any meaningful sense in all the industry chatter about ’platform price comparisons’.
