Hargreaves, AJ Bell tumble as FCA warns on 'double dipping'

(Sharecast News) - Hargreaves Lansdown and AJ Bell tumbled on Tuesday after the Financial Conduct Authority said it had written to investment platforms and SIPP operators to express concerns about how they deal with interest earned on customers' cash balances.

The regulator noted that the amount of interest earned by some firms has increased as rates have risen. Having recently surveyed 42 firms, it found the majority retain some of the interest earned on these cash balances. "This may not reasonably reflect the cost to firms of managing the cash," the FCA said.

It also pointed out that many of them charge a fee to customers for the cash they hold, a practice known as "double dipping".

"The FCA is concerned these practices may not be providing fair value to customers and may not be understood by consumers or properly disclosed," it said. "The practice of double dipping has raised concerns with the regulator and firms have been told to cease this."

Sheldon Mills, executive director of Consumers and Competition at the FCA, said: "Rising rates mean greater returns on cash. Investment platforms and SIPP operators need now to ensure how much of the interest they retain and, for those who are double dipping, how much they're charging customers holding cash, results in fair value. If they cannot make that case, they need to make changes."

Firms have until 29 February 2024 to make any changes or the FCA will intervene.

At 0925 GMT, HL shares were down 7.2% at 710.20p, while AJ Bell was 9.6% lower at 281.60p.