One billion reasons to launch an execution-only service

Every month seems to bring with it more news of advisers wanting to 'do a Hargreaves' and crack the execution-only space. The latest firm to emerge with such bold intentions is Close Asset Management, which has announced the launch of platforms serving both the advisory and direct-to-consumer (D2C) sectors.

A number of other firms have made a nod to the Hargreaves model when launching such services. Charles Stanley said its launch of a D2C platform would allow it to offer a joint offering 'à la Hargreaves Lansdown', while JPMorgan explicitly targeted Hargreaves' dominance when it explained the rationale for a revamp of its execution-only platform.

A glance at the Sunday Times Rich List published at the weekend tells you why so many are keen to muscle in on the now-FTSE 100 listed discount broker's sector of the market. Peter Hargreaves has almost doubled his wealth in one year to amass £1 billion, placing him at number 65 in the list, closely followed by co-founder Stephen Lansdown, who has £750 million, placing him at number 90. Even lesser-known names connected to Hargreaves, like Adam Norris, former managing director of its advisory and corporate business, is at 807 with a stake worth around £89 million in the company. Mary Theresa Barry, group marketing director, has a £83 million stake that places her at 856.

But while the prizes for success are glittering, the barriers to enjoying anything like Hargreaves' success are set pretty high. Hargreaves controls a whopping 28.5% of the market, with £18.5 billion under administration. Look at the next biggest players, and you'll see names like Barclays and Fidelity, with 15.4% and 10.8% of the market respectively. Buidling up a brand that can challenge them represents a steep task.

So is it a path worth investigating for advisers? Some, like Paul Richardson at Concept Financial Planning and Barry Mumford, at Commfreefunds.com, are trying to establish execution-only offerings, and consultants like Holly MacKay of The Platforum has said there is a large opporunity for advisers to grow their businesses by entering the space. Does that mean we might start to see new model advisers appearing in the Rich List in the coming few years?