FSA platform rules to force new business model: Hargreaves
Founder says Hargreaves Lansdown still to confirm plans for platform under new regulations as it announces surging profits
Regulatory changes to the way platforms charge clients and handle fee rebates from fund managers have been a “nightmare” to adjust to, says Peter Hargreaves, founder of Hargreaves Lansdown.
Speaking to Money Management following the firm releasing its preliminary results for the year to 30 June, Hargreaves said the stockbroker will need to make big changes to its service once the new rules on platform fund rebates come into effect at the end of 2013, but would not be drawn on how this would look.
“It’s going to have an impact on how we receive our revenue,” he said, adding,“Operationally it’s been a nightmare for us because we have to change our business model.” He said the firm had ideas of how to make it work “on the drawing board” but so far nothing has been confirmed and will choose the one that works best for the company and its clients.
Hargreaves Lansdown reported a 21 per cent increase in profit before tax, to £152.8m from £126m the previous year. Revenue was up 15 per cent year on year, to £238.7m from £207.9m.
The firm saw the number of active clients on its Vantage platform increase by 45,000 in the past year, bringing the total to 425,000 and saw increased revenue from its stockbroking business even though it had lowered its prices.
“We reduced our stockbroking tariff but we ended up doing more deals,” Hargreaves said. “It didn’t cost us as much as we thought.”
Hargreaves said his firm had worked hard in the past to keep its operational costs as low as possible and as a result has not had to cut staff in order to improve its profits.
In addition to the FTSE 100 company releasing its results, it also announced founder and executive director Stephen Lansdown would step down in November this year. He will continue to be a major shareholder in the firm, having a 20 per cent stake worth £600m.
Asked if Lansdown is leaving his position to retire, Hargreaves said, “I think so. I think he has other interests; he has always had more interests outside the business than me and wants to enjoy that.”
Meanwhile, Hargreaves himself hinted he may step down sooner than later, although stopped short of saying if this would be any time soon.
“I love eating and drinking and I fear if I gave up working I would become a fatty,” he joked. However, he added, “I’m slowing down and I work fewer days now. I don’t have the drive I used to have.”