Shares of British financial companies Hargreaves Lansdown (GB:HL) and AJ Bell Plc (GB:AJB) tumbled over 9% in early market trade today following a warning from the Financial Conduct Authority (FCA). The British regulatory authority announced that it has identified and sent letters to 42 investment platforms and Self-Invested Personal Pension (SIPP) operators, cautioning them about the way they charge interest on customers’ cash balances.
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FCA Raises Concerns
Importantly, some firms have increased their interest income in tandem with increasing interest rates. Moreover, these firms engage in a practice called “double dipping” by charging customers a fee for holding cash. The FCA warned that customers may not be aware of the practice, which makes it unfair. Firms have been given time until February 29, 2024, to change their practices, failing which could lead to regulatory intervention.
As per a Reuters report, research firm Jefferies has pointed out that changes as per the FCA’s requirements would impact both companies. Notably, changes in the current mechanism could impact the revenue margins of Hargreaves and AJ Bell due to the deduction of the platform fee charged by these companies. Moreover, net interest income would be negatively impacted owing to revising the interest rates.
About Hargreaves Lansdown and AJ Bell
Hargreaves Lansdown is an FTSE 100 listed financial services company that sells funds and shares to retail investors. It offers investment products and services, financial planning, and advice. Year-to-date, HL stock has lost 12.7%.
AJ Bell Plc is an investment platform that provides investment administration, dealing, and custody services. AJB is a relatively smaller company and is a part of the FTSE 250 index. AJB stock has lost 19.5% so far this year.
We compared both stocks with the help of the TipRanks’ Stock Comparison Tool. Below is a snapshot of the performance of both HL and AJB stocks based on some of TipRanks Essentials’ parameters.
