Several experts have called on the regulator to impose and enforce stricter disclosure requirements on platforms, saying they were concerned clients did not know how much of their accrued interest was being kept from them.
The issue concerns interest accrued on money held in bank accounts from dividend proceeds or savings used to make regular investments.
It emerged in January that Hargreaves Lansdown generated £33m of revenue in the second half of last year from interest accrued on clients' accounts.
This was almost as much as the £34m income the Bristol-based business received from annual charges on its own funds.
But Hargreaves Lansdown is not alone. Research carried out by Financial Adviser showed the practice was widespread among platforms.
Financial Adviser found almost all platforms retain some of the interest earned, and some keep all of it.
Abraham Okusanya, founder of consultancy firm Finalytiq, said the regulator should approach the issue in the same way it clamped down on interest skimming by Sipp providers, where rules were introduced to require firms to disclose that they keep some of the interest.
Mr Okusanya said platform's keeping some of the cash is "poor practice" but within the current rules, and said the regulator's policy of requiring disclosure is "ineffective" and said the regulator "should get involved."
Mr Brodie said the FCA has "done nothing" on the issue despite being aware of it. He said "without a doubt" the FCA should be doing more.
There are already safeguards in place under the Financial Conduct Authority's Cass rules, which require firms to pay a retail client interest earned on client money unless it has otherwise notified the client in writing.
Firms are also required to disclose the costs and charges information associated with the platform.
But these rules could be strengthened. As part of its platform market study the regulator asked how disclosure requirements could be made more effective at warning consumers of the costs and charges associated with holding cash balances and whether there were more effective alternatives.
A spokesman for Hargreaves Lansdown said the firm was abiding by "very strict regulatory rules, account reconciliations, statements and reporting".
He said: "We place this [money] with various banks and the interest earned is Hargreaves Lansdown's. We share some of the interest with the client.
"The interest rate paid to clients is competitive and reflective of the nature of the account. Not all platforms pay interest, we do."
In client documentation Hargreaves Lansdown states that it "does not charge" for holding cash, but that it "receives all the cash" paid in interest, and then "separately" pays interest to clients "at rates determined by us."
Mike Barrett, consultant at the Lang Cat, said the wording certainly complied with the regulation, but he added: "The FCA have posed a number of questions to platforms regarding how they handle cash as part of the platform market study.
"The final report for this study is due later this quarter, and I wouldn't be surprised to see platforms being told to improve the disclosure to the end customer so that they are able to make informed choices."
Doug Brodie, managing director at advice firm Master Adviser in London, said: "If you hold Vodafone shares in your Sipp and the share rises in value, whose profit is that?
"Is the platform entitled to take part of that profit? When Vodafone pays a dividend it goes into the Sipp cash account – that cash is deposited with (a bank) who then pay interest on it.
"It is your Sipp. It is your individually numbered Sipp bank account. Whose cash is it in the bank account? Whose interest is it?"
Mr Brodie said platform customers he spoke to appeared "completely unaware" that the business kept some of the interest earned on their cash.
Alistair Wilson, Zurich's head of retail platform strategy, said his business currently retains 0.1 per cent of the interest from banking partners and passes on the rest to the client.
He said: "We make this fully transparent to clients and advisers and will also be including it in our costs as part of the forthcoming Mifid II disclosure rules.
"Unlike some other platforms, we do not require advisers to hold a minimum level of their client money in cash in order to meet client income payments, platform fees, and adviser charges.
"This means that, where appropriate, clients can be fully invested, without being obliged to hold part of their portfolio in cash."
Zurich stated the firm alerted clients of the practice in "six different ways" including in the charges information documents.
Ascentric meanwhile confirmed that all of the interest on a client's funds went back to the client. It declined to comment on the cost it incurs from holding this cash.
A representative of Standard Life said: "The management of cash holdings is treated in the same way as any other holding on our platforms and is actively managed by us.
"As a result of this we retain an element of the interest, treating it as a cash management charge."
The platform described the retention of interest as a "cash management and administration charge."
The Financial Conduct Authority (FCA) said it had nothing to add to the statements contained in the platform market study.
david.thorpe@ft.com
