Investment platforms' charges criticised

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Some investment platforms have introduced more charges following regulatory changes, according to new research.

Some investment platforms are imposing up to 20 separate charges, according to new research, making it impossible for people to compare on a like-for-like basis.

The claims come as platforms are accused of responding to new regulation requiring them to be clear on commission received by introducing new, hidden charges elsewhere.

The True and Fair Campaign, which is run by investment company SCM Private and is calling for more transparency in the costs of investing, is calling for an Office of Fair Trading investigation into the investment industry.

It says UK investors are paying 58% more than their US counterparts. It also claims that following the Retail Distribution Review (RDR), which requires platforms to end the practice of taking commission from investment providers, many platforms have introduced more charges.

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Cornucopia of charges

Investment platform Nutmeg has identified 20 charges that may be levied by a platform. Some you'd expect, for instance the likes of investment charges and platform charges. However, there's a whole plethora that are charged by some, but not by others, including:

auto dividend reinvestment – a charge levied for reinvesting any dividends from investments such as shares and tracker funds;

inactivity charge – for not buying or selling for a certain period of time;

transfer out charges – for moving an ISA to another platform;

exit fees – for withdrawing your funds;

account change charges – levied for changing something as simple as an address.

Fidelity has called for a ban on exit fees, citing these and other fees as pushing up the cost of investing in the post-RDR world. It doesn't charge exit fees and is offering to pay investors' exit fees if they switch.

Most transparent platforms

And research by investment platform rplan, in conjunction with Candid Money, scored the biggest investment platforms on how transparent their charges are.

Perhaps unsurprisingly, rplan came top, with Cavendish, Chelsea Financial Services and Fidelity sharing second spot.

Here's the table in full:

Position

Platform

1

rplan

2

Cavendish

-

Chelsea Financial Services

-

Fidelity

5

ICICI Bank

-

Willis Owen

7

Alliance Trust Savings

-

BestInvest

-

Charles Stanley Direct

10

Barclays Stockbrokers

-

Hargreaves Lansdown

-

TD Direct Investing

-

AJ Bell YouInvest

14

Interactive Investor



Justin Modray, Director of Candid Money, said: "I would like to see all customers receiving a breakdown, in pounds and pence, of how much they pay to the broker, platform and fund managers based on their basket of investments. Without this far too many customers will continue to pay over the odds since they are otherwise unlikely to realise just how much they are paying."

Competition for investors

Meanwhile, Hargreaves Lansdown is offering to pay cashback to switchers as competition hots up ahead of the ISA limit increasing to £15,000 on 1st July.

And AXA Self Investor is waiving its 0.35% annual ISA fee until 1st May 2015 if you invest by 30th April.

However, it's important not to be swayed by these offers if ultimately you're going to be paying more in charges.

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