P1 Platform (P1) has launched an online calculator that shows advisers the true cost of an investment platform once interest retained on client cash balances is factored in. 

The calculator allows advisers to compare a variety of platforms to reveal how much interest a client's cash holdings generate, how much of it the platform keeps, the resulting uplift to the effective platform charge and the long-term impact on client outcomes. The launch comes as the FCA prepares to finalise rules on retained cash interest. 

P1 created the calculator off the back of the recent work conducted by Transact on bringing together information about client account interest retention across the platform market. Transact, which passes all interest earned to clients, has argued that retained interest should be treated as part of the overall cost disclosure to clients when assessing value and suitability. P1 entirely supports Transact’s view on this, and while platforms should rightly be able to generate revenue in whatever way they see fit within the regulatory environment, transparency to advisers and clients is key. 

Platform comparisons typically focus on published charges such as platform ad valorem charges, dealing costs, and wrapper charges. Retained interest does not appear as an explicit charge and is often missing from due diligence, despite directly reducing the total return clients achieve on their platform holdings. 

This matters most where advisers negotiate reduced platform fees, which in many cases are subsidised by the revenue platforms generate from retained cash interest. The headline fee may therefore understate the platform's true cost to the client. 

For example, a client with a £500,000 portfolio holding 5% in cash would have £25,000 on deposit. If the platform retains 2% from the interest earned on that cash, the client forgoes £500 of interest each year, equivalent to an additional 0.10% platform charge. A platform with a headline fee of 0.20% would therefore have an effective cost of 0.30%, 50% more than the quoted fee. Assuming 5% annual growth, that additional cost could leave the portfolio approximately £25,000 smaller after 20 years. 

The FCA’s findings in 2023, found that 71% of platforms and SIPP operators retained at least some of the interest earned on client cash balances, with firms retaining around half of that interest on average.  

The FCA's final rules on this are expected by the end of 2026, with new cash interest disclosure requirements currently proposed to take effect from June 2027. 

While those proposals focus on transparency for existing customers, P1 argues advisers should also consider retained cash interest when selecting a platform.  

The P1 calculator is available now at P1 Cash Interest Calculator. 

James Priday, Chief Executive Officer, P1 Investment Services, said: "Advisers put considerable effort into comparing platform charges, but much of that analysis focuses on published fees. The treatment of client cash is often overlooked because it does not appear as an explicit charge. 

Yet from a client's perspective, retained interest has exactly the same effect as a higher fee. Every pound of interest retained by a platform is a pound that is no longer compounding for the client. 

This is not a marginal issue. For many clients, the impact of retained cash interest can be comparable to, or even exceed, the differences in platform fees that dominate most platform comparisons today. 

Transact has done important work to highlight this issue and we agree with its analysis. We built this calculator so advisers can quantify the impact, strengthen their due diligence processes and make better-informed platform recommendations for their clients." 

Tom Dunbar, Chief Executive Officer, Transact, said: 

"It is great to see new tools emerge to help financial advisers incorporate the impact of cash interest retention into the platform due diligence and selection process. Greater transparency supports more informed decision-making, helps advisers assess fair value more effectively, and ultimately leads to better outcomes for clients.”