Beware fund platform exit charges

Competition between fund platforms continues to hot up, with some very good low cost deals available. But will you be penalised for moving away from a platform with uncompetitive charges?.

The good news is platforms must allow you to transfer your investments 'as is' (called 'in-specie' or 're-register') to another platform of your choice, provided the same funds are obviously available (more on that in a moment). The bad news that some charge an arm and a leg for doing so.

Ways to transfer

Let's start with the basics. There are two was to transfer your investments from one platform to another: either sell them, transfer cash then repurchase on the new platform, or transfer them across in-specie.

Sell & repurchase

While straightforward, you might incur dealing charges when selling and/or repurchasing the investments. Plus, your money could be out of the market for at least several days. Furthermore, if you realise gains outside of an ISA or pension they might be taxable.

When transferring an ISA or pension in this way make sure you let the new platform handle everything, otherwise you risk losing your ISA allowance or breaking pension rules.

In-specie

Even simpler still as your investments are moved across exactly as is. Since they're not sold there's no issue re: tax or being out of the market. However, the transfer can end up taking a few weeks and platforms usually charge a fee, per fund/share, if you want to move away from them.

Note: In-specie transfers are only possible when exactly the same fund version is available on the platform you're moving to. For example, if you hold Fund X 'A' units the 'A' units must be available on the new platform.

Exit charges

Two types of charge may apply. An account closure fee, which applies whichever of the two transfer methods you use, and a charge per fund/share for in-specie transfers. The charges for a range of popular platforms are listed below:

Platform	Close Account			Transfer In-Spicie (per fund/share)
	Direct	ISA	SIPP
Alliance Trust Savings	Nil	£60	£150	£20
Barclays Stockbrokers	Nil	£60	£90	£30
Bestinvest	Nil	£60	£150	£25
Cavendish Online (FundsNetwork)	Nil	Nil	£150	Nil
Charles Stanley Direct	Nil	Nil	£150	£10
Clubfinance	Nil	Nil	N/A	£10
Hargreaves Lansdown	Nil	Nil	£90	£30
Interactive Investor	Nil	Nil	£360	£15
rPlan (Cofunds)	Nil	Nil	N/A	Nil
Share Centre	Nil	Nil	Nil	£25
Sippdeal	Nil	Nil	£90	£20
TD Direct Investing	£5	£60	£90	£35

All charges include Vat at 20% were applicable

Are these fees a rip-off?

When you move away from a platform there is some admin work involved, so perhaps it's only fair they charge a nominal fee for the service. However, a quick look at the above table suggests some fees are far from nominal and perhaps more intended to discourage customers from leaving than cover costs.

For example, I've received emails from disgruntled Hargreaves Lansdown customers shocked at being charged hundreds of pounds to transfer their portfolios in-specie to cheaper competitors. The savings elsewhere were such that HL's charges were worth paying, but it's a bitter and arguably unfair pill to swallow. And TD Direct Investing is more expensive still.

In my view £10 per stock (i.e. fund or share) for in-specie transfers would be a fair price point. It should more or less cover admin costs and isn't too painful for investors. Although Cofunds and FundsNetwork (in this context rPlan and Cavendish Online) currently do it for free, suggesting that perhaps these charges should just be scrapped altogether, period.

A similar argument holds true for account closure fees. Interactive Investor easily scoops the wooden spoon here with a whopping £360 charge to close its SIPP.

Your views?

I'd be interested to hear your views or experience regarding these charges. Please share below.

Read this article at http://www.candidmoney.com/articles/268/beware-fund-platform-exit-charges