UK Regulator Investigates Potential Overcharging by Investment Platforms

The UK's Financial Conduct Authority (FCA) has raised issues about potentially excessive charges by investment platforms, particularly concerning high interest and fees. They've warned 42 firms of potential action to enforce fairness. As a result, stock prices of some companies, like Hargreaves Lansdown and AJ Bell, dropped significantly.

The FCA's chief concerns involve high interest earnings from customer cash and the practice of "double dipping" charging fees on cash holdings. Companies have been given until February 29 to make changes.

While no specific companies were named, Hargreaves Lansdown and AJ Bell shares fell by up to 10% early on. Subsequent drops were 6% for Hargreaves and 4% for AJ Bell.

The FCA's recent actions align with its commitment to improving consumer protection. In response to the FCA's stance, AJ Bell announced upcoming price changes expected to save customers about £14 million annually. Hargreaves Lansdown noted it had already been passing on interest rate rises to clients and ensuring them better options without "double dipping."

Analysts from RBC, including Ben Bathurst, predicted that the scrutiny may put further pressure on the revenue of platforms, with Hargreaves Lansdown and AJ Bell being notably at risk.

The FCA's Sheldon Mills emphasized the importance of investment platforms and SIPP operators providing fair value, especially regarding retained interest and charges on cash holdings.