THE TOP CLASS WEDNESDAY UPDATE HASN’T EVEN GOT A YACHT
If you switch the radio off, and get everyone in the office to shush, and the cars outside to stop, and the children to stop playing, and the wind to drop, you can just, if you try really, really hard and perhaps get your ears syringed a bit, hear the world’s smallest violin, wielded by […]
What next for SJP and exit fees?
Over the last few weeks you can’t have failed to notice that The Sunday Times has been giving St James Place a good shoeing. Luxury cruises, opaque fees, leaked phone calls….the hits keep on coming. It’s not been a good month for whoever does SJP’s PR.
One area that has come under criticism (again) is the question of their “exit fees”, or “early withdrawal fees” as they describe them. The Sunday Times (15th September) states “SJP believes the City watchdog wants it to scrap early withdrawal charges on pensions and bonds, and thinks the firm sails “close to the edge” of regulations”.
As luck would have it, the subject of exit fees is something the FCA is currently pondering. The Investment Platform Market Study final report was published earlier this year, with a supporting consultation paper carrying a “discussion chapter” on exit fees. The consultation closed in June, with the paper stating: “For the discussion on exit fees, we will consider responses to the questions and may issue a formal consultation later in the year.”
So, here we are mid-September, everyone is back at work and school, and there isn’t much left of “later in the year”, so what can we expect in response?
Essentially, the FCA has two options:
It proceeds with a ban on exit fees, or
It backtracks and decides a ban isn’t necessary.
I think it would be very unusual for the regulator to make a u-turn at this stage of the process, not least since it recently came under Parliamentary scrutiny for lack of action. So I’m going for 1; there will be some sort of ban.
This is where things get interesting for SJP watchers.
The consultation proposes a ban for Platform Service Operators, which means Life Company models such as SJP would not be covered. However, the FCA recognise this, and has asked the following killer questions within the consultation: 1
“If we introduce a ban or cap on exit fees, should it apply to firms offering comparable services? If not, what are the reasons why a ban/cap should or should not apply to particular types of firm or service?”
“If your firm is a product manufacturer as well as a distributor as defined, what exit fees are applied within the products and services you offer to clients? If such fees exist, please provide a rationale for this charging model.”
“How prevalent are cases where product-related exit fees pose a similar or greater barrier to switching in the investment platforms and comparable services market?”
If there is to be a ban on exit fees, then it’s far from certain who it will cover. If it is just for Platform Service Operators the platforms impacted will argue (with some justification) about the unfair playing field this creates. However, if the FCA grasp the nettle and read across to Life Company models, what about other charges that look and quack like an exit fee? For example early encashment fees where an enhanced initial allocation was paid. Market Value Reductions (which of course aren’t exit fees, but have a whiff of them) on With Profits might even come into the spotlight.
This really is a complex area and the best outcome is not clear.
If the FCA’s deadline of responding to the consultation by “the end of the year” is to be believed, the regulator will currently be sifting through the industry responses to those exit-fee killer questions. Those responses, and perhaps the regulator’s choice of Sunday reading, might well define the next chapter in the SJP story.
[1]. Source https://www.fca.org.uk/publication/consultation/cp19-12.pdf
ONLY 9 WEEKS TO GO UNTIL THE LANG CAT’S DEADx TALKS RETURNS
No, not until Christmas (you’ve got 15 weeks for that. Depressed yet?) But it is just nine weeks until the lang cat returns to The Crypt on the Green in fashionable Clerkenwell for the sixth in our annual series of THE DEADx TALKS. We’ll be there on the afternoon of 14 November, and the purpose […]
THE TOP CLASS WEDNESDAY UPDATE NEEDS NO WET SIGNATURES
Here we are again, siblings. Did you know that 2019 is 70% complete? I’m rounding up, it’s only 69.6% and we won’t go through 70% until Saturday, but I’ve always said that spurious accuracy in whimsical yet informative financial services weekly Updates is unnecessary and overrated. Although, to be completely accurate, the nature and quantum […]
#WorldSuicidePreventionDay
Some of you might already know that I’ve been out and about this year on the conference circuit doing my bit to try and change the way we talk about mental health in the context of the financial services sector, a marketplace (1) traditionally male dominated and as a result (2) really rather bad at […]
THE TOP CLASS WEDNESDAY UPDATE ALWAYS SITS UP STRAIGHT
A shorter Update from me this week, mainly because instead of writing it last night like I normally do, I was up late ending myself with laughter at coverage of the House of Commons. All this uncertainty makes me think more than ever about the value of having someone who can give the longer term […]
THE TOP CLASS WEDNESDAY UPDATE ALWAYS STATES ITS VALUE
It is a truth universally acknowledged that I know absolutely hee-haw about football. Not only don’t I know anything about it, such is my fear of hypermasculine conversations about it that I’ve been known to offer to go to the bar when the subject comes up. Which is odd, as the game I really follow […]
THE TOP CLASS WEDNESDAY UPDATE ALWAYS STATES ITS VALUE
It is a truth universally acknowledged that I know absolutely hee-haw about football. Not only don’t I know anything about it, such is my fear of hypermasculine conversations about it that I’ve been known to offer to go to the bar when the subject comes up. Which is odd, as the game I really follow […]
THE TOP CLASS WEDNESDAY UPDATE SAYS IT’S A DEAL, IT’S A STEAL
You know that bit in Lock, Stock And Two Smoking Barrels where Dog’s crew are ripping off Snow White and the Three Little Chemists, and they’re defending themselves with an air rifle and as the second guy in the crew gets shot with the air rifle, Dog says “I don’t believe it. Can everyone stop […]
THE TOP CLASS WEDNESDAY UPDATE SAYS IT’S A DEAL, IT’S A STEAL
You know that bit in Lock, Stock And Two Smoking Barrels where Dog’s crew are ripping off Snow White and the Three Little Chemists, and they’re defending themselves with an air rifle and as the second guy in the crew gets shot with the air rifle, Dog says “I don’t believe it. Can everyone stop […]
