The FCA has written to funding platforms and SIPP suppliers to ask them to reveal how a lot of the curiosity they obtain from money and financial institution deposits they go on to their prospects.
The difficulty has come into focus in current months as rates of interest on money deposits have risen sharply, with some banks providing deposit charges of as much as 6% or extra.
Insurance policies on how money curiosity on consumer accounts is dealt with fluctuate broadly between platform suppliers.
Some platforms, corresponding to Transact, return all money curiosity to purchasers however different suppliers, corresponding to Quilter, use the curiosity on money to scale back consumer charges elsewhere. Others have variable insurance policies, with some passing on curiosity on money and a few not less than a part of the curiosity.
There isn’t any frequent coverage and no clear regulatory requirement though the brand new Shopper Obligation could change this with its requirement to deal with prospects pretty always.
A spokesman for the FCA stated: “We need to perceive in higher element how curiosity on prospects’ money is handled within the funding platform market, and to know how platform corporations have thought-about their strategy to this curiosity consistent with the Shopper Obligation. We’ve additionally requested some SIPP corporations the identical questions.”
The FCA desires to make sure that prospects are handled pretty on the curiosity they obtain on money and financial institution deposits held as a part of their investments, in addition to financial institution accounts.
The watchdog held a gathering with banks final week and says it would have a look at different merchandise the place curiosity is paid to shoppers.
The textual content of the letter to corporations on their money curiosity insurance policies includes these questions:
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Does your platform retain any of the curiosity it earns on prospects’ money balances?
If the reply is ‘sure’:
1. What are the present charges of curiosity you obtain on prospects’ money balances? Are you able to please embody in your reply:
a) the present common charge
a) in case you obtain completely different charges from completely different banks (or deposit takers), a desk setting out these completely different charges
1. Of the curiosity you earn from prospects’ money balances, how a lot of this do you go on to your prospects? Are you able to please embody in your reply:
a) the present common charge
a) if you’re paying prospects completely different charges for various accounts (e.g., ISA, SIPP, GIA) and completely different (tiered) quantities held in money, a desk setting out how the quantity paid varies by account and quantity
2. How have the above charges (coated by questions 1 and a pair of) modified over the past 18 months? Please set your reply out in a desk with a brief clarification as to why the speed modified and the affect of the change.
3. Do you might have plans to vary the charges you pay sooner or later? In that case, please define these for us and clarify the rationale.
4. How a lot has the agency earned in curiosity on prospects’ money balances over the past 18 months. Might you please set this out in a desk, damaged down by month.
5. Does your agency apply an account price to money held in its prospects’ funding accounts? If the reply is sure, please tell us the quantity and nature of this price (e.g., proportion of AUA; flat price). If the price varies between completely different wrappers (e.g., ISA, SIPP, GIA), please set out the various quantities in a desk.
6. Please present a hyperlink to the placement in your web site the place you clarify your strategy to the retention of curiosity to your prospects.
7. Has the agency reviewed its strategy to the retention of curiosity within the gentle of the Shopper Obligation?
8. In that case, may you summarise the end result of that evaluate?”
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The FCA plans to make use of the data to resolve if additional motion must be taken or if additional data is required.