Platforms face ban on taking 'dirty margin' from clients' cash interest, says Nucleus chief

David Ferguson told Out-Law.com that some platform providers currently take a slice of the interest gained on overnight bank deposits but warned that clients may not always be made aware of this arrangement. He described the practice as "outrageous" and predicted that the Financial Services Authority (FSA) would shine a light on this "dark corner of financial services".

Most client users of platforms "will tend to have a cash holding within an account," Ferguson said. In Nucleus' case he said that about 6-8% of client assets are held in cash. Ferguson said that platforms try to negotiate with banks in order to obtain the best interest rate they can on the storage of the money, but said that some platform providers have a "tendency to skim a dirty margin from that".

He said that there are currently no "hard and fast rules" that explicitly prevent companies from taking a proportion of the interest they negotiate with banks for storing clients' cash. However, he said that the FSA would likely ban the practice when setting out further rules for platforms next year.

"There is a whole move towards transparency of fees across the industry and it is our view that companies should be open about a charge that they take in that way," Ferguson said. "It is outrageous that platforms take a dirty margin from clients in this way in this day and age."

"The FSA has been pretty clear on the direction of travel on this. I think they would rather see charges detailed transparently so that clients can understand them," he added.