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Hargreaves prepares for RDR boost as profits jump 30%

by Jun Merrett on Feb 06, 2013 at 07:44

Hargreaves prepares for RDR boost as profits jump 30%

Hargreaves Lansdown has reported a 30% boost to profits in the last six months of 2012, and argued it was poised to benefit from a trend towards execution-only services as advisers exit financial services under the retail distribution review (RDR).

Hargreaves has reported a £93.7 million pre-tax profit for the six-month period, up from £72.0 million over the same period of 2011. Assets under administration rose from £26.3 billion to £30.4 billion over the six months.

Chief executive Ian Gorham (pictured) said the RDR was having 'no negative impact' on the business and that it would benefit from a move towards execution-only investing.

‘We note that (net) over 1,200 financial advisers left Financial Services Authority authorisation in the 18 months to 31 December 2012, over 4% of the entire industry.  We remain of the view that a general trend towards DIY investing is likely to be beneficial to our cause, as people discover the value and efficiency to be gained through self-directed activity and a Hargreaves Lansdown account,' he said. 

Hargreaves has tripled the number of employee members signed up to its workplace investment service, Corporate Vantage. The service, which currently has 64 schemes live or to be implemented, has 10,200 employee members, up on the 3,569 members in 2011, with assets at £222.4 million, an increase of 67% in the last three months.

Gorham added: ‘Despite continued economic uncertainty in the UK, Hargreaves Lansdown has had the scale, financial strength and market presence to continue to improve its position.'

Hargreaves attracted 21,000 new clients in the first half of 2012, an increase on 16,000 new clients over the same period in 2011.

The execution-only platform Vantage’s assets under administration increased to £29 billion in second half of 2012 from the £22 billion reported in the same period in 2011 with client numbers up by 5%

Assets on the company’s portfolio management service also increased to £1.8 billion in the last six months of 2012 from the £1.5 billion reported in the second half of 2011.

The company also reported a £1.2 million Financial Services Compensation Scheme bill over the six months.

22 comments so far. Why not have your say?

Graeme Ferguson

Feb 06, 2013 at 08:20

No Negative RDR impact, though it would be interesting to know if the clients on the Platform fully understood how they made their money.

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Feb 06, 2013 at 08:20

I don't understand why anyone would wnat to use Hargreaves given that they do not offer any 'new share classes' which in my view makes them very expensive!

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Really via mobile

Feb 06, 2013 at 08:28

Just look at their TERs on their multi manager portfolio and bid offer spread -so expensive and poor performance

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Feb 06, 2013 at 08:42

It's ironic that SJP and HL shares are performing so well. It's seems that price is becoming the main driver with a great deal of advisers and providers when the success of these two organisation is based around service and an extremely efficient web experience !

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Scotty McJock

Feb 06, 2013 at 09:02

@EVHE Its interesting the comment about HL and SJP both doing well, given that they have radically different models. Is the common link, irrespective of what you may think of them as potential competitors, that they are well run businesses, have clear business plans and a defined marketing strategy?

IFA businesses and Financial Planners that give greater attention to these areas should have nothing to fear.

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Graeme Ferguson

Feb 06, 2013 at 09:12

@EVHE... it depends on what you define as service? I would argue that clients of HL believe they get some element of advice service and also that it is very cheap as a platform.... however they get none, have no come back to the company and in general their charges are not cheap.... YES HL have been amazing at marketing.

As for SJP, again fantastic marketing over the years making them a high end "independent" sales force......

The sad thing is that client distinction on these propositions and a full IFA are cloudy, not from the IFA side but from the fantastic brand marketing of these selling monster companies!

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Feb 06, 2013 at 09:47

They're doing well?! We must attack them!! ......Such a sad mentality.

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Mark Cooper

Feb 06, 2013 at 09:53

The two biggest stock-market beneficiaries of RDR appear to be an old Direct Sales force using the Carry On Selling method (no sale no fee) and an opaque high-charging Platform offering no accountable advice but all the "guidance" and opinion they can muster.

Let's congratulate the architects of this fiasco. Oh hang on, they've all left the building.

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Feb 06, 2013 at 09:57

Barman- Even sadder when you cant differentiate between GF's intelligent observation and an attack.

To assist;my comment is both.

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James Marchant

Feb 06, 2013 at 10:11

Both of my neighbours are HL investors and neither have any idea how HL make their money, presumably the cash rebate ban will address that in due course!

Having said that, the HL platform is a superb bit of kit, investors seem to like it so why knock a UK financial services success story? There are plenty of clients out there who need advice. A flash platform, strong brand and clever marketing will never replace good quality advisers giving good advice.

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Knowledgable insider

Feb 06, 2013 at 10:16

Figuring out what the FSA is up to and then running rings around the 'rules' lies at the heart of these two company's success - good luck to them i say! The FSA is a foolish organisation with even more foolish rules that are complex and ever changing. Both of these companies manage to fly in the face of what the FSA state is their objective.

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James Clancy

Feb 06, 2013 at 10:23

I had an intresting letter from HL the other day. I wonder how they get away. I am sure I will compliance consultants would raise an eyebrow on some of the contents of this letter.

Perhaps Citywire would like to publish it and then we could really have a debate on the merits of execution only.

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James Clancy

Feb 06, 2013 at 10:25

sorry for the typing are it should have said "my" instead of "I will"

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Feb 06, 2013 at 12:15

So the general conclusion is:

1 Firms who are quoted have to give periodic updates on their level of business. If they are doing well, we take exeption to their business model.

2 Non quoted firms can keep their results to themselves for a long time before eventually published. Therefore they may be doing better than the quoted ones, but who knows?

3 Quoted firms tend to be more sales and product driven, as well as AUM, otherwise, where is the growth coming from? Quoted firms cannot stand still, they must grow revenue for their shareholders, otherwise they will wither and reduce their ability to raise money. Private companies can adopt a strategy that takes into account the owner/MDs needs into account, as well as his/her team.

4 HL may provide a self trade platform, but it cannot appeal to the majority of investors who have no clue about longer term investments.

5 Following the announcement that Barclays feel HL are one of the firms that will benefit post RDR, should it adapt its own platforms to accept almost any security or mutual,to give potential clients the ability to trade in a wider range than HL, and, as they are the largest stockbroker in the world, (their claim) maybe they can be cheaper for the client once rebates are abolished and benefit from this type of model.

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Feb 06, 2013 at 12:17

There is one reason that these companies continue to do well, no matter how we try to describe it, no matter how deeply deluded some of us are about the service we offer. The business of giving financial advice is a 'selling job', we shouldnt be scared to admit this and deal with clients on that basis. These two companies certainly have no fear of being sales orientated.

It is why we are here, anyone who tries to dress it up in any other way is simply deluding themselves.

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fomer bank 'adviser'

Feb 06, 2013 at 12:33

fair play to them. they offer a great service.

they give clients lots of information, some of this is bordering on advice as their motive is to get people to invest more money.

the reason they are so successful is that a large section of consumers don't trust advisers. clients can look at the internet and get advice for free, it is difficult to fight against this so we have to offer soemthing they can't. i am an adviser in my 30's, most of my peers wouldn't go near a fianncial adviser, they would prefer to use the internet and make their own decisions. we need to engage with these consumers

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Michael Brown

Feb 06, 2013 at 12:59

as people discover the value and efficiency to be gained through self-directed activity and a Hargreaves Lansdown account,' he said

One has to question the value when very few clients realise the costs of being in and then getting out.

I personally do not care as when I come across their clients it is very easy to move them and reduce the costs top the client. So big thanks to them for getting them to invest and them for me to manage the assets effectively.

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Mark Cooper

Feb 06, 2013 at 15:22

There is no doubting the marketing skills and ultimate profitability of the two listed Companies in question.

What grates is their freedom to work under a completely different set of rules.

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Feb 07, 2013 at 09:32

I just wish they would provide their customers with an annual list of charges deducted.....

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richard cook

Feb 07, 2013 at 17:49

We must stop this inward looking and accept that the public do not value financial advice and are voting with their feet. The public will trust their own financial adviser but they certainly dont trust the rest of us and feel safer looking after their own investments. It is time every IFA signed up to the Hargreaves Lansdown newsletter and all the marketing which supports it and start to understand why the public are responding in such great numbers. Look at your web site. The probability is that all you are asking a visitor to do is give you their contact details. That feels very dangerous when all they want to do, for now , is continue their research without having to speak to a human. With the right processes in place they will let you know when the time is right to move on to a one to one conversation which can result in the long term relationship we all want. If we are to survive it will be because our marketing and relationship skills have been finely honed. If you have no-one to speak to all the qualifications in the world are pretty useless

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Feb 07, 2013 at 18:43

I still just wish they would provide their customers with an annual list of charges deducted.....

Would it have been useful if RDR had included a clause obliging all platforms to provide an annual list of charges deducted in a standard format?

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Mark Jeffries

Feb 10, 2013 at 12:50

The question "Why do people use HL?" has been asked? Perhaps a mistrust of the financial advisory community would be a good place to start. As to the comments about investors being blind to the way that HL make their money, as if they would recoil in horror at the truth, the advisory community has hidden behind opaque commission structures for years.

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