Shares in investment platform Hargreaves Lansdown are -4.1% after the UK Financial Conduct Authority (FCA) indicated it is considering banning exit fees from online trading platforms and requiring them to offer more cost effective switching between share classes. Both ideas are designed to lower barriers to changing providers.

The FCA-conducted consumer survey found that some of the primary barriers to switching platforms were that it took too long (38%), that the process was too complex (29%) and that exit fees were stopping consumers from moving providers (28%). Of the above reasons, addressing exit fees appears to be the most straight-forward move for the financial regulator, with most of the other reasons (time, process, product comparison, etc) being down more to clearer quality-of-service guidelines, which could be industry-drafted.

While many trading platforms will agree to pay the exit fees of customers they are trying to entice, this is not always the case, and the overall process still appeared to be lengthy and discouraging to customers who are ultimately only trying to find a better home for their investments. Furthermore, the survey found that a not-inconsiderable 7% of consumers in the survey had attempted, and failed, to switch providers.

Around half of the largest online investment platforms charge exit fees, so Hargreaves Lansdown is far from the only company affected. Being the largest, though, means it is the biggest target for potential new rules, and thus hurting the most on the UK 100 this morning.

FCA’s latest proposals are far from final, with the regulator itself noting that there could be legitimate costs associated with transferring consumers, like the advisory component of switching platforms. Nonetheless, the tone of FCA’s Investment Platforms Market Survey appears to be tilted in favour of consumer protection rather than genuinely soliciting the industry’s views.

Artjom Hatsaturjants, Research Analyst, 16 July 2018