Is the amount of money investment platforms make from the cash we leave with them on account a scandal? Well, if not that, it is certainly something that shouldn’t be allowed to continue.
We report today that the big three firms make about £450 million a year from stingy returns that are sometimes as low as 0%.
As investors, we basically knew we weren’t getting a great deal from them on this. But when interest rates were near zero, the fact that brokers were paying the same didn’t matter. It seemed almost fair enough.
Since rates are now 5.25% it can’t be sustainable.
Hargreaves Lansdown noted to me that it doesn’t charge customers for holding cash, as if that were an act of generosity. It sure charges for everything else.
AJ Bell refuses to say how much it makes from such deals, which is a fairly clear hint that it knows the numbers would be embarrassing.
Well, they are out there now.
The City watchdog is poking around and should take action sooner rather than later.
The brokers are not committing a crime here, but they still shouldn’t be allowed to get away with it for too much longer.
They are doing what banks have done for centuries — taking a small amount from many customers, so no one really notices. But it is our money, not theirs, and it seems like everyone involved needs a reminder of that.
Perhaps the best outcome would be that the seemingly sluggish market sorts itself out.
Certainly, HL and the rest aren’t going to give up this cash cow without pressure from somewhere.
That might mean start-up rivals seeing how fat the brokers’ margins are and coming in with better deals. Alternatively, they could say that they will pay zero interest on cash, but won’t charge for share dealing.
That sounds like quite a good business model. Someone should go for it.
