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Hargreaves' shares hit but JPM Caz backs ‘eye-catching’ pricing

by Dylan Lobo on Jan 15, 2014 at 10:20

Hargreaves' shares hit but JPM Caz backs ‘eye-catching’ pricing

JP Morgan Cazenove believes Hargreaves Lansdown’s RDR pricing structure and competitive fund deals reinforce its competitive position, although the firm's market value has slipped on the news.

Hargreaves, led by chief executive Ian Gorham (pictured), unveiled its eagerly anticipated new unbundled four-tiered pricing structure for its Vantage platform early on Wednesday.  

The charges range from 0.45% for those investing up to £250,000 to 0.1% for investments between £1 million and £2 million.  

Hargreaves has also selected 27 funds from its Wealth 150 list, which will make up a new list called the Wealth 150+ where the average AMC will be 0.54%. 

While shares in Hargreaves had dipped by 3.9% to 1,449 pence by 9.50am, the news prompted JP Morgan Cazenove to repeat its overweight stance on Hargreaves, describing the new pricing structure as ‘eye-catching’.     

In a note to clients analyst Edward Morris said: ‘In our view the headline rates will further enhance Hargreaves’ reputation for offering customer value, and we believe that the eye-catching 45bps charge for the first £250,000 of assets under administration will be difficult for the competition to match profitably.’

Morris also expects growth in assets under administration (AUA) to offset the £9 million loss in revenue plus an additional £8 million cost to transition to the new tariff structure, which Hargreaves indicated by in its announcement to the stock exchange.

‘The required increase in AUA of £3.5 billion to offset the total estimated revenue impact indicated by the company of £17 million looks eminently achievable in our view.

‘The shares have performed strongly, and it may take some time for the market to fully understand and model the financial impact of the changes on Hargreaves’ business but we believe that today’s announcement will reinforce Hargreaves competitive position.’

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