UK watchdog scrutinises potential overcharging by investment platforms

By Iain Withers and Danilo Masoni

LONDON (Reuters) -Britain’s Financial Conduct Authority (FCA) flagged concerns on Tuesday about the amount of interest and fees charged by some investment platforms, warning 42 companies it could intervene to ensure fair value, sending shares in some firms sharply lower.

The regulator laid out worries about the amount of interest investment platforms earned on customers’ cash balances – which has risen as interest rates have gone up – and the practice of charging a fee for cash they hold, known as “double dipping”.

The FCA has called on investment firms to cease this practice, giving the companies until Feb. 29 to make the necessary changes.

It did not name any of the companies it has concerns about, but shares in some major London-listed investment platforms fell in early trading, with Hargreaves Lansdown and AJ Bell falling as much as 10%.

Hargreaves Lansdown was last down 6%, while AJ Bell was down 4% at 1408 GMT.

The FCA has prioritised the fair treatment of retail customers in recent months, rolling out tougher consumer protection rules to banks, advisers and investment firms as part its Consumer Duty regulatory push.

AJ Bell said in a statement on Tuesday afternoon it would roll out a series of price changes that would “benefit” customers by around 14 million pounds ($18 million) a year.

“We have been planning these latest pricing changes for some time. Now we have clarity from the regulator, we are pleased to confirm another significant package of pricing changes,” AJ Bell Chief Executive Michael Summersgill said, adding the changes had been factored into guidance provided by the firm last week.

Hargreaves Lansdown said it undertook an assessment of its practices earlier this year, adding it had passed on at least 90% of base rate rises to client cash balances and actively communicated with them about better alternatives.

Hargreaves Lansdown said it did not “double dip”, while AJ Bell said it did not charge a fee on cash held on its platform.

Ben Bathurst, an analyst at RBC, said in a note there could be extra pressure on platform revenues as a result of the FCA’s scrutiny, adding that Hargreaves Lansdown and AJ Bell appeared “most vulnerable to pressure”.

The FCA warned in its letter that platform charging behaviour could be causing “foreseeable harm” to customers.

“Investment platforms and SIPP (Self Invested Personal Pensions) 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,” said Sheldon Mills, Executive Director of Consumers and Competition at the FCA.

($1 = 0.7959 pounds)

(Reporting by Iain Withers in London and Danilo Masoni in Milan, editing by Sinead Cruise, Gerry Doyle and Sharon Singleton)