FCA raises alarm on platforms' handling of customer cash interest

investmentweek.co.uk:

Firms have been told to make changes by 29 February 2024.

The regulator said the amount of interest earned by some firms has increased as rates have risen.

It surveyed 42 firms in July 2023 and found the majority (71%) retain some of the interest earned on these cash balances, which «may not reasonably reflect the cost to firms of managing the cash». This retained interest falls between a range of 10% to 100%, at an average of 50%, while collectively these firms earned £74.3m in revenue from this practice.

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Many also charge a fee to customers for the cash they hold, known as «double dipping». This has raised concerns with the regulator and firms have been told to cease.

The FCA said it is concerned these practices «may not be providing fair value to customers and may not be understood by consumers or properly disclosed».

Firms have been told to make changes by 29 February 2024.

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Executive director of consumers and competition Sheldon Mills 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 are charging customers holding cash, results in fair value. If they cannot make that case, they need to make changes. If they do not, we will intervene."

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