Sippdeal shocker (& link to template complaint letter)

Rollinghome

SnowMan wrote: »

It makes a mockery of the FCA rules on re-registration if platforms are going to increase their re-registration charges to ridiculous figures like £25 per fund. There should be a limit at most of £10 in my view. Effectively it makes it very difficult to move platforms and is anti-competitive.

I'd agree that £25 per fund is likely to be excessive and unwelcome. They're coming in line with HL and increasingly seem to be being used as a deterrent.

People don't go through the hassle of moving from a provider without reason, usually because the service doesn't meet their expectations or because it's become uncompetitive. If they then face large charges for moving their account that adds insult to injury. If clients feel obliged to move then exit charges should be at no more than cost, especially after any change of terms.

ISAs and SIPPs of necessity involve a contract of some kind (which is why they are so loved by the investment industry) and if companies can't be trusted not to abuse that position then they may need stronger direction from the FCA. Personally, I'd be wary of any company I suspected of a culture of treating clients less than fairly.

Linton

Rollinghome wrote: »

I'd agree that £25 per fund is likely to be excessive and unwelcome. They're coming in line with HL and increasingly seem to be being used as a deterrent.

People don't go through the hassle of moving from a provider without reason, usually because the service doesn't meet their expectations or because it's become uncompetitive. If they then face large charges for moving their account that adds insult to injury. If clients feel obliged to move then exit charges should be at no more than cost, especially after any change of terms.

ISAs and SIPPs of necessity involve a contract of some kind (which is why they are so loved by the investment industry) and if companies can't be trusted not to abuse that position then they may need stronger direction from the FCA. Personally, I'd be wary of any company I suspected of a culture of treating clients less than fairly.

Wouldnt it be cheaper and probably quicker to sell and transfer as cash?

JohnRo

Linton wrote: »

Wouldnt it be cheaper and probably quicker to sell and transfer as cash?

That's what I did when moving to CS, you're still at the mercy of the outfit you're transferring from getting their act together in a timely manner though (Best Invest kept me waiting well over 5 weeks for a cash transfer) but at least they're not shafting you for the ridiculous bonus exit charges.

EdGasket

I am not happy with S**tdeal's proposed charges. I also notice the following gem:
"Disinvestment, if we need to sell some of your holdings to cover charges £29.95 per holding"
So if your Sipp is fully invested it looks like they will randomly sell something and charge you £29.95 on top of the £25 quarterly charge. I would hope they would request the money as a cash payment first but don't hold out much hope. I have emailed them and asked how this works in practice though and why they have introduced this charge on a Sipp which has no non-ETF funds in it.
As if that wasn't bad enough, the dealing platform is down for 'maintenance' again (also crashed for half a day when RMG began trading). If they are going to introduce more charges, they should at least improve the service.

Rollinghome

Linton wrote: »

Wouldnt it be cheaper and probably quicker to sell and transfer as cash?

That would depend on a a lot of factors, some of which you'd know and others you wouldn't. Moving £5000 in cash to save £250 in fees is a different proposition to moving £200,000 in cash to save £25.

Among those factors would be whether you'll pay trading fees either from the provider you're moving from or the one you're moving to, how long you'd be out of the market, and the big unknown, how much the markets move during your move and in what direction. Market movements wouldn't be so significant for very small sums but could be very costly for large sums and far outweigh exit fees.

In some circumstances the best option might be to consolidate into a single or fewer investments before moving, such as a suitable balanced fund, but everyone would need to do the calculations for their own circumstances.

ey143

When other various brokers including Selftrade and Interactive Investors introduced charges for their standard share dealing account and ISA share dealing accounts, they were forced to allow their clients to move their positions and cash to other brokers without charging them their normal transfer fees of circa. £25 per line of stock due to sheer complaints.

I have a SIPP with sippdeal for share trading but also a more complicated sipp elsewhere paying £600p.a. I dont think think I should be charged in the circumstances to move that sipp to someone else if I felt fit. Its only fair given that these changes are being imposed on us. I'll feed back the outcome of my complaint to them.

malfesto

The law (Unfair Terms in Consumer Contracts Regulations 1999) and guidance from the FSA (now the FCA) is pretty clear on the position of consumers who want to dissolve a contract in response to unilateral changes in Terms & Conditions. Any provider of financial services will need to waive exit charges (transfer fee, closure fee, etc) to customers who don’t agree with the changes and want to leave.

The following is the complete text (very long) from the adjudicator with the Financial Ombudsman Services regarding my complaint against F&C. Feel free to quote the relevant findings in your complaint letter.

ADJUDICATION

complaint by: Malfesto
complaint about: F&C Management Limited
date of adjudication: August 2013

complaint
This complaint relates to Malfesto’s Private Investor Plan (‘PIP’). Malfesto is unhappy that F&C Management Limited (‘F&C’) imposed a transfer fee on the plan when he transferred his holdings following the business notifying him that it would be implementing a new charging structure as from 6 April 2013.

circumstances
In its letter dated 5 February 2013, F&C notified Malfesto that for regular savers, it was removing the existing 0.2% dealing charge on shares purchased through a monthly direct debit and for the reinvestment of dividends. It explained that as from 6 April 2013, there would be a charge of £12, plus Value Added Tax (‘VAT’) per trust for lump sum investments, including the reinvestment of switch proceeds and the sale of shares. Furthermore, the business stated it would be introducing an annual account charge of £40 + VAT - equivalent to less than £3.35 + VAT per month.

Following the notification, Malfesto contacted F&C stating he did not wish to accept the unilateral variation of the terms and conditions. F&C informed him that he would be incurring a transfer fee of £14.40 (£12 + VAT) per line of stock if he wished to transfer his holdings to his name in certificated form or to another provider. Malfesto subsequently complained to the business on the basis that it was not offering him the opportunity to dissolve the contract free of exit charges. Malfesto stated the business was in breach of the Unfair Terms in Consumer Contracts Regulations 1999 and the Financial Services Authority's finalised guidance 'Unfair contract terms: improving standards in consumer contracts' of January 2012.

The business did not uphold Malfesto’s complaint. In its response of 6 March 2013, the business stated it had considered the relevant regulations during its decision-making process regarding the implementation of the changes. It explained its view that the application of the ‘Standard Charge’ does not represent a form of exit charge or penalty that inhibits investors from transferring their holdings away from F&C freely. It explained its view that the transfer charge represents a standard incidental cost intended to offset the costs incurred in any event when investors choose to transfer their holdings out of the plan. F&C also stated that the transfer fee had been a standard product term from the plan’s date of inception.

Malfesto did not agree with F&C‘s response and raised further points in his subsequent emails to the business. After an exchange of a few emails with Malfesto in response to the additional points he had raised, the business stated in a ‘without prejudice’ email that its position had remained unchanged. It reiterated its belief that the charge was not an exit charge inhibiting investors from leaving the plans. It further stated it did not believe the charge would result in a ‘significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer’.

Moreover, F&C pointed out that it had considered its ‘Treating Customers Fairly’ obligations extensively and that it had focused on ensuring that all shareholders on the main register of the investment trusts are treated fairly as compared to investors within the Plan. The business stated it was of the view that if it continued to correspond formally with Malfesto with regard to his complaint and the complaint was subsequently referred to the Financial Ombudsman Service, this would result in a protracted process and would not be in either party’s interests. As such, F&C stated it was prepared to offer Malfesto £30 on an ex-gratia basis in full and final settlement of the matter, on the condition that he instructed the business to transfer out his holdings within 21 days of receiving the cheque for the sum of £30.

Dissatisfied with the business’ response, Malfesto referred his complaint to the Financial Ombudsman Service. He detailed the reasons why he believed the business had been unfair by imposing the stock transfer charge which he had paid in order to transfer out his holdings prior to the changes of 6 April 1013 coming into effect.

Following the complaint being referred to our service, Malfesto notified the business that he had declined its offer of £30 as he felt F&C had not considered the distress and inconvenience caused to him as a result of its handling of the complaint. He also stated that the business was seeking to avoid its ‘Treating Customers Fairly’ obligations via its non-disclosure condition in the settlement terms.

F&C then offered to issue a final response to Malfesto and also asked him for the terms under which he would be prepared to settle his complaint. Malfesto responded by offering to settle the matter if the business made a payment of £780 to his chosen charity. The business declined Malfesto’s proposed settlement offer on the basis that it was unreasonable and disproportionate to any loss, inconvenience or distress alleged by Malfesto. As such, the business stated it was happy for the Financial Ombudsman Service to resolve this complaint.

findings
Before I set out my findings, it may be helpful if I explain the approach that the Financial Ombudsman Service takes when assessing complaints. We are impartial and independent of both businesses and complainants. We give equal consideration to the information provided by both sides.

Having reviewed a copy of the PIP’s terms and conditions, as amended in January 2006, I note that Section 9.5 states that ‘There are charges in respect of administration as follows:
- For each transfer of Plan investments out of the Plan into an Investor’s own name or that of
another Investor: (per Investment Trust) £12 + VAT ...’.

Given the above, I believe the business is entitled to impose the transfer fee on each Investment Trust. Nevertheless, I am mindful in this instance, Malfesto only requested the transfer of his holdings as a direct consequence of the introduction of the new charging structure. I therefore need to establish whether the business has done anything wrong by introducing a new charging structure while also imposing a fee upon Malfesto consequently transferring out his holdings.

In order to reach a fair and reasonable assessment of this complaint, I need to consider all the relevant laws and regulations, regulators’ rules, guidance and standards, as well as codes of practice and good industry practice amongst other things. I have given particular consideration to the Unfair Terms in Consumer Contracts Regulations 1999 which came into force in October 1999. I believe these regulations are particularly pertinent to the circumstances of this complaint. I also note that both Malfesto and the business have considered these regulations.

I should however clarify that it is not within the remit of the Financial Ombudsman Service to decide whether a particular contract term is unfair under the 1999 regulations. As such, I have not considered whether the introduction of the new charging structure in itself is fair or not, but rather, I have assessed whether it is fair and reasonable for Malfesto to incur a transfer fee on the plans when new contract terms are being imposed on him.

Section 5 (1) of the 1999 regulations states:
‘A contractual term which had not been individually negotiated shall be regarded as unfair if, contrary to the requirements of good faith, it causes a significant imbalance in the parties’ right and obligations arising under the contract, to the detriment of the consumer.’

Schedule 2 point (1)( j) further states, that one of the terms that forms part of the indicative and non-exhaustive list of terms which may be regarded as unfair includes
‘enabling the seller or supplier to alter the terms of the contract unilaterally without a valid reason which is specified in the contract’.

Under Section 15 entitled‘Alterations’, the 2006 terms and conditions provide that ‘Save to the extent that other provisions are made in the Rules of the FSA, the Plan Manager may for valid reasons amend, alter or add to the Terms and Conditions from time to time by giving not less that 28 calendar days’ notice in writing to the Investor’.

Additionally, I note that Section 9.9 of the 2006 terms and conditions states ‘The Plan Manager may, insofar as permitted by the FSA regulations, vary the amount of fees, commissions and expenses payable, the basis on which they are charged or reimbursed and/or the due date for payment on giving not less than seven Business Days written notice to the Investor’.

In this instance, I have considered that the business gave Malfesto 60 days’ written notice prior to implementing the changes on his PIP. Besides, I note that in its letter of 5 February 2013, the business explained the reasoning behind its decision to introduce the new charging structure. In brief, it stated that the new charging structure aimed to cover the administrative costs that were previously borne by itself and the underlying investment trust(s) and subsequently reduce the ongoing running expense of each investment trust.

Moreover, the business has explained that the previous charging structure became inherently unsustainable. It stated that the previous charging structure resulted in one group (those on the main registers) of shareholders in the investment trusts having to subsidise another group of shareholders (those invested through the Plans). The scale of this could not have been anticipated by the business at the time of the development and launch of the plans.

I consider the business’ reasons for the amendments as valid. Nevertheless, I am mindful the reasons allowing the business to amend the terms and conditions of the contract were not specified in the agreement. I have also considered that the terms and conditions that were amended in 2012 (prior to the February 2013 notification) do not specify the reasons for the variation either.

Schedule 2 point (2) (b) of the 1999 Regulations states that the scope of the aforementioned point (1) (j)
‘is without hindrance to terms under which the supplier of financial services reserves the right to alter ... the amount of other charges for financial services without notice where there is valid reason, provided that the supplier is required to inform the other contracting party or parties thereof at the earliest opportunity and that the latter are free to dissolve the contract’.

Given that Malfesto incurred the pre-existing transfer fee when he transferred his holdings out of F&C, I am of the opinion that he was not ‘free to dissolve the contract’. I note the business’ argument that 'freely' does not entail the waiver of all incidental expenses incurred during the exit. However, my view is that 'freely' would entail waiving any financial or practical barriers to exiting the contract.

During my assessment of this complaint, I have also considered the undertaking given by Jarvis Investment Management Plc published in February 2009, following action taken by the Financial Services Authority (‘FSA’). A copy of this undertaking can be accessed from the link below: (Google Search "prime_jarvis.pdf ") I note that Malfesto referred to this undertaking in his correspondence to the business which commented that the amended term following the undertaking did not provide for the stock transfer fee being waived. My view is that the amended terms and conditions did not specify the types of transfer fee that would be waived and it could have included both 'cash' and 'in specie' transfers.

Furthermore, the FSA's finalised guidance 'Unfair contract terms: improving standards in consumer contracts' of January 2012, which has also been considered by both Malfesto and F&C, states that 'we would not regard consumers as being free to dissolve the contract if the terms did not provide that any exit charges would be waived to remove financial barriers to exiting the contract'. In my opinion, the use of the words ‘any exit charges’ implies that incidental expenses incurred in any event upon exit of the agreement, whether in the form of closure fees, ‘in specie’ or ‘cash’ transfer fees are not excluded.

I have considered that Malfesto could have exited from the contract without incurring any fees, rather than requesting a transfer in specie. However, I am mindful if Malfesto had liquidated his holdings, this would have entailed the crystallisation of his gains and losses (even if no capital gains issues would have been applicable in this case).

I believe the imposition of the transfer fee on each Investment Trust has caused a significant imbalance to the detriment of Malfesto. In my opinion, it does not seem fair and reasonable for Malfesto to have to incur the transfer fee when new terms and conditions to which he has not agreed are potentially being unfairly imposed on him.

Additionally, I note that in its correspondence dated June 2012 to our service, F&C has acknowledged that Malfesto experienced some inconvenience as a result of its unprecedented volume of calls in February 2013. I also note that the business has accepted that as a result of an administrative error on its part, it sent Malfesto an item of correspondence to his old address. Given the above, I believe a payment of £100 is warranted in the circumstances of this complaint in order to reflect the distress and inconvenience caused to Malfesto.

I appreciate that Malfesto is expecting a higher amount as compensation for the distress and inconvenience caused to him and that he has indicated that he would like the business to pay this money to his chosen charity. Nevertheless, I should perhaps highlight that any amount recommended by this service to reflect the distress and inconvenience caused to a consumer is likely to be modest. As such, I believe a payment of £100 seems fair and reasonable in the circumstances of this complaint.

conclusions
For the reasons I have explained in my findings, I believe this complaint should be upheld.

I recommend the business to refund the £24 + VAT transfer fee incurred by Malfesto, together with interest at a rate of 8% simple from the date of payment to the date of settlement.

If the business considers that it is legally required to deduct income tax from the interest, it must send a tax deduction certificate with the payment. Malfesto can reclaim the tax from HM Revenue and Customs (‘HMRC’), if appropriate.

Furthermore, I recommend the business to make a payment of £100 to Malfesto for the distress and inconvenience caused to him. It is then entirely Malfesto’s choice to keep the money or donate it to his chosen charity.

Financial Ombudsman Service.

SnowMan

I would also suggest that any investor with Youinvest who faces a large increase in fees and decides to move to another platform, should ask Youinvest to waive all re-registration charges and selling costs to move away.

Should they refuse then register a complaint and then take the matter to the Financial Ombudsman Service in relation to the unfair terms in consumer contracts legislation on receipt of Youinvest's final response or 8 weeks after complaining whichever is earlier.

I successfully took a claim against Hargreaves Lansdown to the Financial Ombudsman Service when they refused to waive re-registration fees in a very similar scenario, and the FOS decided in my favour.

I think Youinvest’s terms and conditions allowed them to increase charges in line with national average earnings, but anything above that is challengable under the unfair contracts terms legislation if they do not allow a cost free exit route.

No guarantee of success of course but I can't see Youinvest being able to successfully defend a complaint made on this basis.

ey143

Malfesto,
This is brilliant, thank you and I will quote this.

I have to ask though, did you really want to go through all this effort for the sake of £24+ vat and interest - I'm guessing it was the principle but surprised you had the patience.

I have a complaint registered with the FOS in respect of Selftrade who failed to notify me that a change in status of a stock to become ineligible to be held in an ISA was communicated 2 years too late and I was forced to sell it at a loss. Because you cannot claim capital loss relief on isa holdings, I crystallised the loss. Had they informed me 2 years earlier when the stock changed status I could have crystallised a gain.

I'm now trying to claim the value of the loss of tax relief because I was forced to sell otherwise would have left it in my portfolio. The FOS rejected my claim and I am now appealing. The case has been delayed for nearly 12 months now pending an answer but they are flooded with too many ppi complaints.

bowlhead99

Sorry this is off topic a bit from Sippdeal charging structure but I am curious:

ey143 wrote: »

I have a complaint registered with the FOS in respect of Selftrade who failed to notify me that a change in status of a stock to become ineligible to be held in an ISA was communicated 2 years too late and I was forced to sell it at a loss.

Not completely sure I follow your post but this sounds like you could have sold the stock on any number of days when it was in profit, including the day it changed status and various days after, but you did not. You chose to hold on to it for a couple of years longer, during which time it lost its paper gains and started to make losses. When they told you that you could no longer hold it in the wrapper and would have to sell and rebuy it outside an ISA if you still wanted it, you sold it.

Do I have the situation right so far? I presume none of this is grounds for complaint as yet, because making the wrong decisions on when to take, maintain, or reduce your exposure to assets is something that everyone does from time to time and Selftrade couldn't compensate people for that.

Because you cannot claim capital loss relief on isa holdings, I crystallised the loss.

You made a cash loss but not a tax loss, because what happens in in ISA isn't seen by the taxman.

It was your choice to buy a loss-making asset inside an ISA rather than outside an ISA which would have been more tax advantageous because it would have banked the tax loss to use against future unwrapped gains. The fact you have an un-relievable loss is your own fault, because you could easily have taken it out of the ISA and rebought outside at any point in the previous 2 years of your own volition, if you were looking to take advantage of making tax losses outside the ISA.

But most people with that psychic skill wouldn't buy something they think is going down of course. So you thought it would go up, and maybe if Selftrade had told you to sell at the earlier date, you would realistically have taken the cash out of the wrapper and rebought the asset ouside the wrapper. Then two years after you would be sitting on an unforced opportunity to take a tax loss. By keeping assets in the wrapper you don't get opportunities to take tax losses. However, you say you wouldn't have sold anyway, so surely Selftrade should not compensate you for the economic value of not having that tax loss opportunity available to you two years hence, because you wouldn't have taken it.

Alternatively if you sold at the earlier date you might have NOT rebought that asset outside the wrapper, and instead bought a different asset inside the wrapper to maximise your use of wrappers. There would never be any tax losses available on those replacement assets even if they lost 100% of their value. So you have not lost out on a tax loss in that situation either (i.e. a tax loss on a different comparable ISA qualifying asset) so again Selftrade shouldn't compensate for one.

Had they informed me 2 years earlier when the stock changed status I could have crystallised a gain.

Sure, if you had wanted to get a gain from the stock you could have sold it when it was in positive territory as mentioned earlier. You chose not to. For most people, being told they must sell something which has gone up, is an annoyance, because they want to keep it. You wanted to keep it, so you did. It was the wrong decision.

You seem to be looking for them to compensate you for not coming in and telling you to do something you didn't want to do. Instead they gave you absolute free reign to do whatever you wanted and you made a bad call (not to sell) every single second that the price was over your buy price and the opportunity to sell was available. Not really the sort of thing one expects to get compensated for.

I'm now trying to claim the value of the loss of tax relief because I was forced to sell otherwise would have left it in my portfolio.

But as mentioned above, you can never get tax loss relief on anything sold in an ISA. And if you had cashed out the ISA two years ago (like you could have, of your own volition) and bought the stock outside the ISA, you would not have been forced to sell two years later and you would have left it in your portfolio and you would not have got any tax loss relief that route either.

I'm not sure if I've explained myself very clearly but having looked at all the angles I can think of, I don't see where the tax loss compensation comes from. I can understand that you would rather have not made a loss on something knowing you could have acted to make a profit on it two years ago and reinvest in something better, but your investment strategy is not Selftrade's problem.

If your issue is that you have now got physically less money than you started with in the ISA because you cashed in a loss, and really you would rather have that number of shares instead of that amount of cash, you could have taken the cash outside the ISA and bought the shares unwrapped again, right?

Ironically with the last round of ISA changes, more things can be held in ISAs these days (e.g. AIM shares) But to be honest unless you can explain the grounds for complaint better, I'm glad the FOS are not prioritising your appeal as it seems a little frivolous... and at the end of the day it is the likes of me (through taxes or price of financial services) who pays for it. Back on topic perhaps Sippdeal's revised prices would be lower if they could pay lower FCA/FOS fees because there were fewer 'trying it on' complaints.