 wrote to investment platforms asking for details on how much they earn from customers' cash deposits, to find out if their approach is in line with the new Consumer Duty, which came into effect on July 31. Hargreaves Lansdown's net interest margin – the gap between what clients earn in interest on cash and what the platform earns – has widened from 0.37 percentage points last year to 1.92 percentage points, according to its annual results. It estimates this will remain steady at 1.8 to 2 percentage points in the next financial year. Last year rival platform Interactive Investor was paying 0pc interest on cash deposits below £10,000. But it raised this to 0.4pc after a report by The Telegraph. It has since increased the rate to 1.75pc. Some critics argue that investment platforms should pay their customers the full Bank Rate – currently 5.25pc. Justin Modray, of financial adviser Candid Financial Advice, said: 'The right thing to do is pass all interest onto clients.' Others argue that they should pay a rate that is competitive within the savings market. The average rate on an easy-access account today is 3.08pc , according to financial data provider Moneyfacts. 'It's always felt unfair that investment platforms and stockbrokers should make a turn, sometimes a very large one, on client cash,' said Mr Modray. 'The FCA's new rules intended to even the playing field for consumers may help, but I suspect platforms will require a stronger prod from the regulator.' The investment platform, which has 1.8 million customers, saw its ongoing revenue surge by 48pc year-on-year, from £414m to £613m. Hargreaves Lansdown said it has passed on over 85pc of the benefit of Bank Rate rises to clients during the last 12 months. It offers competiti){kind=link}
Profits jump despite pressure on investment platforms to deliver ‘fair value’ to customers
Britain’s biggest stockbroker has pocketed a quarter of a billion pounds of interest on cash balances while its investors struggle with rampant inflation.
Hargreaves Lansdown squeezed a £268.7m profit from customers’ cash deposits in 2022-23, up from just £50m in the previous year, accounts published today reveal.
Hargreaves Lansdown generated almost as much revenue from cash as it did from platform fees (£270m) by creaming off a portion of the interest its investors earned. The Bank of England increased rates seven times across the 12-month period.
Investors typically hold a small portion of their portfolio in cash as a protective measure against falling markets, and so they can easily take advantage when a buying opportunity presents itself.