Cash levels at Hargreaves Lansdown increased by £2.5bn in the first six months of this year as the company faces pressure to return uninvested money.
The market-leading finance firm based on Anchor Road posted results from June 2020 that showed cash assets of £13.6bn, up from 11.1bn in December 2019 and £10.7bn the previous year because people have failed to reinvest or withdraw their funds during the turbulent period.
Commenting on the latest figures, Hargreaves Lansdown CEO Chris Hill highlighted the company’s client-centred approach and said it will “continue to be at the forefront of responding to change and evolving our proposition to the benefit of clients”.
But the Financial Conduct Authority (FCA) is concerned that if an investment platform was to collapse, investors would struggle to recover the cash money accumulated.
In a warning letter sent to several companies, the FCA highlighted some of the “significant increases” in client money balances between January and June 2020 and stated the need for firms to “prevent harm to clients”.
The letter said: “Senior managers should consider whether the firm needs to hold client money balances which are unlikely to be reinvested, or whether it would be in your clients’ better interests to place these balances directly with their own current or savings account providers.
“We consider it good practice in this period for firms to communicate with clients about increased client money balances to ascertain whether these should be returned to them or continue to be held by the firm to facilitate further investment in the short term.
“In line with the above, if it is in clients’ better interests during this period, we expect firms to return client money balances which are unlikely to be reinvested in the short term. The FCA will continue to review client money balances and follow up with firms that report significantly increased balances.”
Hargreaves Lansdown is a FTSE 100 company that posted £104bn total assets under administration in June 2020, up from £99.3bn in 2019.
The firm declined to comment on the recent increase in cash reserves but said it is in contact with the regulator and stated that investment cash accounts are easy access trading accounts and there has been a huge spike in the numbers of people trading off the back of the volatility in the markets.
Main photo by Martin Booth
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