Shares in investment platforms slumped after financial watchdogs warned them against ripping off customers by ‘double dipping’.
Hargreaves Lansdown, AJ Bell and Abrdn saw a collective £458million wiped off their value after the Financial Conduct Authority (FCA) launched a crackdown on unfair charges.
In a letter to 42 companies, the regulator laid out its concerns over the way they deal with interest earned on cash balances in customer accounts.
The FCA said most of the firms are keeping some of the interest for themselves while also charging customers a fee to hold the cash, in a practice known as ‘double dipping’.
A spokesman for the watchdog said it was ‘concerned these practices may not be providing fair value to customers and may not be understood by consumers or properly disclosed’.
Hargreaves Lansdown, AJ Bell and Abrdn saw a collective £458m wiped off their value after the Financial Conduct Authority launched a crackdown on unfair charges
The spokesman added that firms ‘have been told to cease double dipping’.
Platforms have enjoyed a windfall on the back of higher interest rates, allowing them to hold customers’ cash at an improved rate with banks, and keep a chunk for themselves, earning margins of around 2 per cent typically.
Firms who retain interest collectively made an estimated £74.3million in revenue from this practice in June alone, according to the FCA.
The companies have until the end of February to make any changes or the FCA will step in.
The warning sent shares in Hargreaves Lansdown down 6.7 per cent, AJ Bell lost 3.4 per cent and Abrdn slid 5.1 per cent lower.
Following the warning, AJ Bell announced a ‘significant package of pricing changes’ which will impact trading fees and interest rates.
Chief executive Michael Summersgill said: ‘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 which will benefit our customers to the tune of £14million a year.’
Meanwhile, Hargreaves Lansdown said it ‘notes the letter’ from the FCA and is ‘aligned with the focus to ensure good value and outcomes for clients’.
‘Hargreaves Lansdown does not undertake the practice of double-dipping which is a focus of the FCA statement,’ said a spokesman for the firm.
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