AJ Bell among FCA targets over interest fee charges

Shares in Manchester investment platform, AJ Bell, fell by more than nine per cent this morning following concerns regarding interest and fees charged on accounts.

AJ Bell was one of 42 firms contacted by regulator The Financial Conduct Authority, setting out its concerns on the way they deal with any interest earned on customers’ cash balances.

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

The FCA recently surveyed 42 firms and found the majority retain some of the interest earned on these cash balances, which may not reasonably reflect the cost to firms of managing the cash. Many also charge a fee to customers for the cash they hold, known as “double dipping”.

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.

The practice of “double dipping” has raised concerns with the regulator and firms have been told to cease this.

Sheldon Mills, executive director of consumers and competition at the FCA, 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’re charging customers holding cash, results in fair value.

“If they cannot make that case, they need to make changes.

‘If they don’t, we’ll intervene.’

The FCA said firms will need to make any changes by February 29, 2024.

In response, AJ Bell said that, in its annual results last week, it stated its intention to continue with its philosophy of sharing economies of scale with customers as it grows.
Today (December 12) it confirms a significant package of pricing changes it has been working on for some time that will benefit its customers by around £14m per annum.

Chief executive, Michael Summersgill, said: “Our philosophy has always been to share our economies of scale with customers as we grow – an approach that is very much aligned with the Consumer Duty. We announced £5m of price reductions for our customers last year and have increased our interest rates on cash balances several times as base rate has increased.

“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 £14m a year. It is clear platforms are able to use cross subsidies where they do so to deliver fair value to customers across their entire proposition.

“So, as well as improving the competitive rates of interest we pay, we are also reducing our dealing charges for D2C customers and reducing the custody charges advised customers pay.

“The financial impact is fully factored into the guidance we provided in our annual results last week and our enhanced competitive position puts us in a great place to continue to grow our market share.”