Hargreaves Lansdown founder Peter Hargreaves has attacked advisers' hourly charges, branding them delusional, and said the company had benefited from banks exiting advice and new re-registration rules.
The FTSE 100-listed company posted a 28% rise in pre-tax profits, £195 million, for the year ended 30 June 2013 and announced that it had 507,000 clients, up 76,000 since June 2012.
Peter Hargreaves, founder and executive director of the company, said the business had been boosted by regulatory changes which had forced banks to exit advice, advisers to change their charges, and platforms to re-register client assets.
‘We have 76,000 new clients in 12 months [this is down to] banks curbing their services and a lot of IFAs didn’t feel like taking exams or couldn’t charge fees,’ he said.
Hargreaves said advisers would struggle to charge clients fixed or hourly fees and enjoy the same level of profitability they had before the RDR when they could accept commission.
‘Anyone who says they can charge an hourly rate for investment advice is delusional,’ he said. ‘Because if you ask how much advisers are valued at per hour they come up with £15-£20 per hour but on commission they were on £200-£300 an hour, and you can’t live on that difference.
‘Very few advisers will be able to charge an hourly rate and the ones that can they’re exaggerating so a percentage basis is the only way to charge.’
He said there had been ‘a huge amount of pent-up demand’ for investors to move assets from advised platforms over to Hargreaves and that the company was benefiting from re-registration.
Hargreaves Lansdown previously said it would unveil its new charging structure this month but has decided to postpone this to next year.
Hargreaves said: ‘We don’t know how investors will respond to the new pricing structure,’ adding: ‘There’s no advantage in being a first mover.’
‘We’re going to be sensible and wait to see what everybody else does,’ he said.
The company said it had secured preferential clean share classes from 68% of the fund groups on its Wealth 150 list but Hargreaves acknowledged that not every fund group would offer the Bristol-based broker the best deals.
‘Some of the [remaining] 32% we might not get a deal with but we’re still negotiating. I have no idea [how many won’t] but some groups will be stupid enough not to do a deal with us,’ he said.
‘[It is stupid] because being on the Wealth 150 is a licence for them to do a lot of business, a huge number of our competitors, small brokerages use the Wealth 150 as research so not only do the groups get our business but loads of business from brokers who can’t afford a research department.’
Hargreaves also revealed more details of possible overseas expansion.
Hargreaves said: ‘We will have to [go international] one day but there is still a lot of fish to catch in the UK pond. When we’ve caught all the ones we think we can catch or the fishing has become less good then we will cast our net wider.
‘We probably not want to go too far afield, I think the first thing we’ll look at is servicing expats in Spain and South of France and places like that who aren’t terribly well serviced. But in order to talk to those people you have to obey the regulation of the country in which they reside which is another set of compliance and regulation to deal with.’