Interactive Investor boss Richard Wilson says FCA ‘fumbled the ball’ on ‘hostage’ exit fees

The boss of Britain’s second biggest investment platform has accused rivals of taking customers “hostage” by charging high exit fees that trap them.

Richard Wilson, CEO of Interactive Investor, said the Citywatchdog had “fumbled the ball” by failing to stamp out exit fees in the sector.

He told the Evening Standard: “We’ve still got a bunch of wealth managers who take their customers hostage. You’ve got a couple, they charge 6% exit fees — literally, you’re kidnapped. It’s a disgrace.”

High exit fees leave many customers facing a huge haircut to their returns that make switching unviable.

Interactive Investor, which has 400,000 customers and £55 billion under management, was one of the first platforms to abolish exit fees in 2017. Since then, others have followed, including Hargreaves Lansdown, the biggest self-directed investment platform in the UK. However, not all platforms have axed them.

The Financial Conduct Authority identified exit fees as an issue in 2018 and proposed a possible ban, but a review of the market launched in 2019 was shelved due to Covid before being abandoned. The regulator said there had been a “marked shift in the market away from exit fees” since it first kicked off its review.

Wilson said: “For me, it’s about trust. You stand and fall on your proposition with trust. You don’t win that argument with handcuffs, you win it by being authentic.

“It’s a shame the FCA hasn’t finished the job.”

A spokesperson for the regulator said: “We have taken extensive action to improve the switching process for customers. Most firms either no longer charge exit fees or plan to drop them and those who do continue to charge are outliers.

“We are keeping the market under review and will not hesitate to act if we see harm re-emerging in this area.”