Shares in Hargreaves Lansdown (LSE: HL) and AJ Bell (LSE: AJB) plunged in early trading after the Financial Conduct Authority (FCA) cracked down on “unfair” practices relating to interest earned on customer cash balances.
The regulator wrote to 42 firms expressing concerns about retaining interest on customer balances while also charging account fees, a practice known as “double dipping.” It has demanded all firms cease this by next February or face enforcement action.
Hargreaves shares sank over 7% to 708p while AJ Bell tumbled nearly 9% to 284p. St. James’ Place, another company in the sector, fell 1.9%.
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Analysts warned the regulatory clampdown could negatively impact margins. The FCA questioned whether firms were fairly reflecting costs in the interest they retained amid rising rates. It also raised concerns about poor disclosure and understanding of these practices.
The damning review piles pressure on platforms already hit hard amid a dismal year for markets.
