Road to El Dorado
The co-founders of Hargreaves Landsdown have proved many of their critics wrong and offered the rest of the financial services community an incentive to focus on long-term customer service
I am a great fan of the TV show The Apprentice with Lord Sugar – which is back on our screens this week – but as the noble lord prepares to say “you’re fired” to yet more hapless apprentices, it is worth bearing in mind that even his impressive wealth has been eclipsed by the owner of a once humble IFA firm, Peter Hargreaves.
Mr Hargreaves, co-founder of the Bristol-based investment firm Hargreaves Lansdown (along with his business partner Stephen Lansdown), has “soared” 46 places on the 2011 Sunday Times Rich List.
The list now places him ahead of Lord Andrew Lloyd Webber, Lord Alan Sugar and easyJet’s Sir Stelios Haji-Ionannu, FTAdviser reported this week.
In fact, Mr Hargreaves’ wealth puts him at number 65 in the Rich List, after his wealth increased by 79 per cent in a year from £570m to £1.02bn, thanks to strong performance from the listed shares he owns in his business.
This is a remarkable thing and it has me wondering how many IFAs want to be seriously wealthy like Mr Hargreaves? I know many do not, and are perfectly happy providing professional financial services to a relatively small number of clients, but I suspect rather more than a few would love to emulate his success. It is often forgotten that IFAs are first and foremost business owners. Unless they make a profit there is no advice business.
Like many IFAs, of course, Peter Hargreaves and Mr Lansdown – both chartered accountants by profession – started very small. In their case nearly 30 years ago when they set up their one-room business in 1981 with little more than two heads to rub together and a decent idea.
They struck gold by coming up with a solid and scalable business model, offering clients a cut price route to investing, mostly done by post to begin with to keep costs down, keeping a small part of the annual management fee as an incentive to provide continuing service.
As their clients’ investments have grown they have prospered too. If their clients’ investments grow, so do Hargreaves Lansdown’s profits. It is a great incentive to focus on long-term customer service and keeping clients happy. Hargreaves Lansdown has proved above all that client loyalty is a major spur to business growth and, of course, loyal clients are only too happy to refer friends and family, spurring further growth.
The net result is that Hargreaves Lansdown has a lot of clients. According to its website, during its 29 years in business it has placed investments for over half a million clients.
As at 31 December last year, its Vantage investment service alone had over 346,000 clients holding £20.9bn of assets. In total, it had £22.3bn under administration or management on behalf of private investors. I imagine the figures are a bit higher now.
I have met or interviewed the founders a number of times over the years. They are very different characters but there is an undeniable business chemistry that works. They have always known each other’s strengths and weaknesses and avoided stepping on each other’s toes, carefully handling different parts of the business. Mr Hargreaves is the more upfront showman looking after the shop window and Mr Lansdown is the more considered backroom manager making sure the shop had everything in stock and suppliers and customers were kept happy.