Hargreaves Lansdown’s profit before tax for the year to the end of June was £199m, a fall of 5 per cent on the previous year’s £209.8m, something which the stockbroking group blamed on a variety of headwinds.
Its decision to reduce charges for clients led to reduced revenue by about £20m compared with 2014, lower interest margins on client cash reduced revenue by about £17m against 2014, and a charge for a contribution to the Financial Services Compensation Scheme “to cover the failings of less reputable companies” led to a cost of £4.4m versus £800,000 in 2014.
Net new business was £6.1bn during the 12 month period, representing organic growth in assets under administration of 13 per cent, the same percentage of net new clients - 84,000 during the year, up to a new total of 736,000.
Chief executive Ian Gorham commented that as the interest rate environment remains depressed, income from cash balances remained low.
“However, in April 2015 we completed changes to our Sipp which allowed us to place client money on term deposit, a significant development as over 50 per cent of client cash is held in the Sipp.”
Interest income should further recover when interest rates increase, he explained, adding that in the short term “we continue to experience subdued margins on cash balances”.
Hargreaves Lansdown’s preparations for the pension freedoms did pay dividends though, with £1.6bn of net new pension business in the six months to 30 June 2015, up by a third on the same period for 2014.
In June, the group launched HL Portfolio Plus, a new investing service based around multi-manager funds and a simple online selection process.
Mr Gorham stated that once it has sufficient track record to evaluate the success of the service, “we will consider whether to further expand our stable of simple online investing tools, sometimes referred to as ‘robo-advice’.”
He also promised further fund launches on the back of success in the fund management business, alongside “a number of other improvements” to the services offered within the group.
As for potential headwinds in the future, Mr Gorham noted that increasing regulation, technology and servicing expectations, are factors that post an increasing challenge for firms in the industry.
“Regulation is a continuous theme in financial services, and addressing regulatory change continues to take up a considerable amount of our time and resources.
“However, Hargreaves Lansdown is well-placed to address these challenges and whilst there are always further regulatory changes coming down the track, we do not expect them to have as material an impact as those of the last 18 months.”
peter.walker@ft.com
