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Hargreaves' fund rebates to clients rise 187% post-RDR pricing

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Hargreaves' fund rebates to clients rise 187% post-RDR pricing

Hargreaves Lansdown paid out £43.3 million more to its clients via rebates on fund holdings over the year to July, as the group adjusted to post-RDR pricing.

The move to clean pricing did not stall Hargreaves’ momentum, however. The UK’s largest direct-to-consumer platform posted a 29% rise in assets under administration to £46.9 billion over the year to the end of June. Net revenue rose 8% to £291.9 million over the same period, while operating profit was also 8% higher. Hargreaves has increased its dividend by 8% to 32 pence per share.

The operating profit margin on net revenue was down 0.2% to 71.3% over the year.

At 8:35 the FTSE 100 stock was down 1.6%, trading at 1,120p.

After introducing a new RDR pricing structure in March, Hargreaves paid out 187% more via commission and ‘loyalty bonuses’ to clients with fund holdings, with a total of £66.5 million rebated year-on-year.

It said funds on average represented 54% of Vantage’s assets under administration, with the net revenue margin earned down 6 bps over the year to 56 bps. Across the business it said the pre-RDR net margin on funds was 60bps, while post RDR it was 49bps. Looking ahead it expects this figure to fall to 44 basis points.

Hargreaves paid out £0.8 million in FSCS costs over the year to July, up from a £0.5 million credit the previous year after the platform made a successful challenge to the basis of the levy’s calculation. It was refunded some of its payments relating to earlier years. 

Discretionary growth

The firm also benefited from its growing discretionary division, which includes the group’s multi-manager funds, posting a 32% rise in revenues to £44.9 million over the year. Meanwhile, assets in Hargreave’s multi-manager funds and portfolio management service rose by 39% to £4.6 billion at the end of June.

Revenue generated by Vantage rose 8% to £221 million over the year to July, buoyed by average asset levels rising by 36% in the division.

Hargreaves was hit by a fall in annuity volumes as a result of pension reforms announced in the Budget, which it attributed to a 16% fall in revenue earned from third parties to £26 million over the year. Annuity income fell £3 million to £4.7 million this year.

In the short term the group saw a reduction in annuity business of around 41% year-on-year, but said this has been counteracted by a substantial shift to drawdown arrangements. New assets into pensions drawdown arrangements were up 35% on the year.

Commenting on the results, chief executive Ian Gorham (pictured) commented: ‘Hargreaves Lansdown has not only retained but furthered its market leading position. Our clients have entrusted a further £6.4 billion to us such that we now administer £46.9 billion of assets.

‘We have also welcomed 144,000 new clients during the year, with clients now totalling 652,000.  This has led to an 8% increase in net revenues and 7% growth in profits.  We thank our diligent staff for their efforts and our clients for their continued loyalty.’

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