Hargreaves Lansdown is set to announce a tiered pricing structure and offer commission-free units in autumn, according to chief executive Ian Gorham.
Speaking to Wealth Manager following the FCA's long awaited publication of a policy statement on the platform industry, Gorham said he did not anticipate the rules, which include the banning of payments from product providers on an ongoing and historic basis from 2016, would materially impact the company's revenues or profitability. He said there were no surprises in the rules and welcomed the two-year sunset clause.
'What we have said for a while is what we are interested to do is replace revenues from commission and replace with revenues from fee-charging. This will definitely be our primary source of revenue in the future and will obviously have quite big implications for where our revenue comes from. I don't expect it will have a material effect on revenue and profitability.'
While Gorham (pictured) was unable to confirm whether Hargreaves would opt to price itself around the 25 basis point mark, he said the firm was planning to come out with a charging structure around autumn time that would be 'competitive but not crazy'.
'What I would say is we want to be competitive but not ridiculous. You have to take into account that we believe that as a platform company we are doing our job properly, offering a great service, information and we want to have enough profit to re-invest in service because that is fundamentally important,' he said.
Gorham said the business will look to come up with a charging structure that represents what the he describes as a 'good deal for both small and large investors'. 'We certainly won't penalise small investors,' Gorham added.
As a result, he said a tiered percentage base was likely to form the basis of its new charging structure. He said the regulation, coupled with the retail distribution review (RDR) had eaten up resource and management time, estimating that around 30-40% of his time had been spent on regulation.
However, he was unable to estimate how much compliance with the rules had cost the company. Having had time to prepare, he said most of the costs had already been absorbed, with client communication and some IT development work still left to implement now the rules have come out.
Hargreaves said it will also now seek to reclaim costs from fund management groups and investment providers, which the business may formerly have absorbed. These include pricing errors, communication regarding mergers and acquisitions of fund business and subsequent mergers.
Speaking about the longer term implications for the platform market, he said he now views the environment as a 'brave new world'. 'It means we have got consistency across the piste.
Everyone is going to move towards a charging structure, which is a good thing from a consumer perspective as they are only going to pay if they are receiving a good service, which makes us confident, as we provide people with a super service,' he added.
Gorham said he was surprised that the FCA had not opted to introduce a blanket ban on legacy trail commission for advisers, adding: 'Our view is this is probably inappropriate.'
At 10:15 Hargreaves was trading at 960p, down 12.12p or 1.26% on the day.