If you want to switch your investments to a different stocks and shares Isa or pension provider, you could be whacked with exit fees as high as £750, new Which? Money research has discovered.
Investment brokers, or fund supermarkets, are websites that allow you to buy and sell investment funds or shares online. When using these sites, you often hold your investments in a general investment account, stocks and shares Isa or through a self-invested personal pension (Sipp).
But if you wanted to switch to another company, Which? Money has found that you could be in for a shock. Of the 12 supermarkets most commonly used by Which? members, seven levy a switching charge for every investment you hold – the highest charging £25 per holding with no upper limit.
If you held a mixture of 30 funds and shares – one in five Which? members have 20 or more – and wanted to switch, you could face charges of £750 to leave.
- This research appears in the June 2017 edition of Which? Money. Take a two month trial to Which? Money for just £1 today.
Fund supermarket exit fees revealed
Three companies – Hargreaves Lansdown, AJ Bell Youinvest and Bestinvest – charge £25 per holding with no upper limit. All three charge account closure fees, too – AJ Bell charges £75 (plus VAT) to close, while Hargreaves charges £25 plus VAT to close either an Isa or a Sipp.
Besinvest charges £50 plus VAT to close an Isa and between £200 and £300 to close a Sipp, depending on how long you’ve held it for, with higher charges if two years or less.
Halifax charges £25 per holding but caps total charges at £125.
Others – including HSBC, Interactive Investor and Selftrade – charge £15 per holding, although HSBC only charges for shares, not funds and has no account closure fees, while Interactive Investor will let you leave for free (up to 10 holdings) if you do so in the first year. Selftrade charges no account closure fees.
Only two companies – Fidelity and TD Direct Investing – let you switch without charge. Others don’t charge holding fees, but do charge Isa or Sipp closure fees, in some cases both.
Why are these fees charged?
Fund supermarkets told us that there is an administrative cost to complete transfers from one broker to another, and that the fees levied are designed to cover only this – not to make a profit.
Bestinvest told us that, like some other fund supermarkets, it will pay up to £500 towards the cost of moving your investments to its services – covering some or all of the fees you may incur on the way over.
If you decide to leave your fund supermarket, you may always encounter account closure fees, but you could avoid holding fees by selling all of your investments and repurchasing them with your new broker.
‘Cash transfers’, as they’re known, are quicker, but your money will be ‘out of the market’, meaning that if shares go up, you could miss out on some of the gains.
The most popular fund supermarkets
Of course, if you find the right fund supermarket that gives you a broad choice of investments, great tools and excellent customer service at the right price, you’ll have no reason to switch.
Our latest customer satisfaction survey, which asked more than 1,000 real investors to rate their fund supermarket, reveals the most and least popular companies among Which? members.
Want to find out which company sits at the top of the table, with a customer score of 77% – and who languishes at the bottom, with a score of just 43%?