PropertyJan 18 2016

Hargreaves Lansdown boss says forget buy-to-let

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Hargreaves Lansdown boss says forget buy-to-let

Buy-to-let investment is expensive and inconvenient and does not compare favourably with investing in funds, according to the chief executive of Hargreaves Lansdown.

Ian Gorham said while £100,000 worth of shares might cost about £300 a year to manage, the cost of maintaining a property would be more like £3,000.

Mr Gorham said there was far more liquidity and more reliable income in funds, whereas buy-to-let involved inconvenience such as finding renters.

He owns a villa in Portugal but said it is not an investment and he does not rent it out, instead describing it as a luxury.

Mr Gorham, a qualified accountant, joined Hargreaves Lansdown in 2009 as chief operating officer, before becoming chief executive in September 2010.

Previously he helped build Deloitte’s financial services operations and was head of Grant Thornton’s UK financial services business.

He has worked with many financial services companies on strategic and operational matters.

He is a member of the Financial Advice Market Review expert panel.

The 44-year-old, who earned £1.9m in salary and bonuses last year and £10.6m the previous year, uses HL Vantage for his pension and Isa savings, one of 760,000 Hargreaves Lansdown DIY investors to do so.

His company was the best-performing firm in the FTSE 100 last year, growing by 44.86 per cent between 1 January and 8 December 2015, and benefitting from the introduction of pension freedom legislation.

Darius McDermott, managing director of Chelsea Financial Services, said: “In the last 10 to 15 years buy-to-let has been seen as a key extension to your investment portfolio, whether for your Sipp or pension.

“This has happend at a time when we have been in a bull market for residential property. So I always think an individual’s asset is their own house in most instances. It is also your biggest debt.

“Hence as an investment people should consider other investments that are less correlated to residential property. Ian has made his comments but a lot of investors have made a lot of money out of buy-to-let so as long as the property boom continues that is OK.

“I don’t have a villa, I don’t do buy-to-let. My investments are equity-based becasue I have a decent-sized mortgage and I want diversification so I don’t want all my eggs in one basket.

“You can make more money in investing in property than in investing in funds but what happens if property goes down? Your house would be under threat, your buy-to-let would be under threat.

“We have had near-zero interest rates since 2009, but what happens if interest rates are 7 per cent? They went up to 16 per cent in the early 1990s. How are you going to pay? People need to bear history in mind. The current interest rate is not normal.”