The City watchdog has proposed banning exit fees on investment platforms as part of a package to improve the switching process for consumers.
The Financial Conduct Authority (FCA) also mooted a rule that would allow customers to switch platforms and remain in the same fund without having to sell their investments in a bid to improve competition in the market.
A consultation into a ban or restriction on exit fees has been launched, with the FCA saying it believes a full ban would be a more effective method of removing restrictions to switching.
In a report published today the FCA that some firms charge more in the exit fee to customers than the costs the company incurred by their departure.
FCA executive director of strategy and competition Christopher Woolward said: “While the market is working well for most of its consumers, the package we’ve announced today should make it less expensive and time-consuming for investors to shop around and move to the platform that best meets their needs.
“As part of that, we believe it is right that we restrict exit fees, so people can move their money freely.”
The industry response to the news was largely positive, with Vanguard, Zurich and Fidelity international backing the scheme.
Vanguard Europe head of personal investing Nick Blake said: “We believe a total ban would be appropriate.
“Fees penalise consumers and only serve to deter them from switching investment provider.”