Hargreaves Lansdown and AJ Bell shares slump as regulator fires interest rate warning shot

Hargreaves Lansdown and AJ Bell have slumped in value this morning after the Financial Conduct Authority fired a warning shot at retail investment firms over the interest income they are making on customers’ cash.

In a statement today, the City watchdog said it had written to the chiefs of the major retail investment firms over concerns they “may not be providing fair value to customers”.

After surveying 42 firms, the regulator found that most retain at least some of the interest earned on customers’ cash balances, while some also may charge a fee — also known as “double dipping”.

The update has sent shares tumbling, with AJ Bell falling around 8.5 per cent and Hargreaves Lansdown sliding 8.9 per cent before recovering slightly.

Firms holding customer cash have raked in cash on the back of rising interest rates over the past year.

AJ Bell last week revealed a 50 per cent boost in pre-tax profits to £87.7m for the year to the end of September but defended the rates it was paying to customers.

Chief Michael Summersgill said the rate it paid to customers was “market competitive” and he was “not being made to feel I am looked at as an outlier or causing [the FCA] any concern.”

AJ Bell said today it is “reviewing the detail in the letter” and declined to comment further. Hargreaves Lansdown did not immediately respond to a request for comment.

The FCA has been firing warnings at firms under its remit over the past few months after it beefed up its powers under the so-called Consumer Duty in July.

High street lenders have been under scrutiny for failing to pass on interest rates on to customers. The watchdog said in July that banks needed to raise rates for saving accounts faster following criticism that lenders were quick to pass on higher Bank of England rates to borrowers but much slower to “savers”.

The regulator added last week however that banks were now paying higher interest rates for savings accounts and that data showed people are moving their cash to take advantage of this.