Surging Hargreaves Lansdown shrugs off competitors

Hargreaves Lansdown’s co-founder has dismissed new platform Charles Stanley Direct as a strong rival as the firm reported pre-tax profits increased by 30 per cent in its interim results for the second half of 2012.

The Bristol-based firm recorded £93.7m of profit before tax and revenue of £140.3m compared with £72m and £113m in the same period of 2011. This equated to profit after tax of £71.2m compared with £52.9m the year before, a 35 per cent increase.

Meanwhile, total assets under management increased 30 per cent year-on-year by £7bn, to £30.4bn from £23.4bn. The firm also increased its dividend by 24 per cent, to 6.3 pence per share from 5.1p.

Hargreaves Lansdown’s results come just days after Charles Stanley launched a competing direct-to-consumer platform, Charles Stanley Direct.

But when speaking to Money Management, Peter Hargreaves, co-founder of Hargreaves Lansdown, said the new rival will not give his company much competition and, if anything, will expand the market further.

Mr Hargreaves said the most likely result will be more people turning to DIY investing as they are “orphaned” by financial advisers. “We think they’ll expand the market but we don’t think they’re fully committed and won’t take clients away from us,” he said.

He also said stockbrokers are not necessarily the best companies to operate in the investment platform market. “Stockbrokers have always been very keen on stocks and shares,” Mr Hargreaves said, adding that they take less interest in funds and felt they were less important for their clients. “We’re solely in business to service clients and give them exactly what they want.”

Charles Stanley Direct launched its DIY platform at the end of January after an extended period of development that saw the firm take on former Hargreaves Lansdown investment specialist, Ben Yearsley, as its head of investment research.

Mr Yearsley told MM that his plan for the new platform is to become the number-two player in the direct market behind Hargreaves Lansdown, adding that he did not believe it possible to unseat the behemoth company.

Mr Hargreaves said the most surprising result for 2012 was the record number of new clients his firm attracted, which he attributed to a shrinking financial advice sector.

“This is the biggest surprise to us. When you have the biggest market share you’d think the number of people signing up would be reducing, but it’s going the other way,” he said.

In the interim report, Hargreaves Lansdown reported that 21,000 new clients signed up to its service in the second half of 2012, up from 16,000 in the same period in 2011. Chief executive Ian Gorham said, “We note that (net) over 1,200 financial advisers left FSA authorisation in the 18 months to 31 December 2012, over 4 per cent of the entire industry. We remain of the view that a general trend towards DIY investing is likely.”

Hargreaves Lansdown also reported it paid a levy of £4.8m for all of 2012 to the Financial Services Compensation Scheme compared to £3m in 2011.