Shares in Hargreaves Lansdown and AJ Bell experienced a significant drop following a statement from the Financial Conduct Authority (FCA) regarding its concerns about how investment platforms and SIPP operators handle the interest earned on customer cash balances.
Hargreaves Lansdown’s shares fell by 5.9%, while AJ Bell saw a decrease of 5.7%.
The FCA highlighted that the interest income for some firms has grown with rising rates.
In its survey of 42 firms, the FCA discovered that most retain a portion of the interest earned on these cash balances, which may not accurately represent the cost to the firms of managing this cash.
Additionally, many firms also impose a fee on customers for holding their cash, a practice the FCA referred to as “double dipping.”
The FCA expressed concern that these practices might not offer “fair value” to customers and might not be clearly understood or adequately disclosed.
The regulator has particularly raised issues with the “double dipping” practice and has instructed firms to stop this practice.
Sheldon Mills, the FCA’s Executive Director of Consumers and Competition, stated that firms must now ensure that the amount of interest they keep and, for those engaging in double dipping, the amount they charge customers for holding cash, should result in fair value.
He emphasized that if firms cannot justify their practices, they need to make necessary changes.
Mills warned that the FCA would intervene if these changes were not implemented.
