Stepping into Peter Hargreaves’ shoes at Hargreaves Lansdown was like following in the footsteps of that big man of English football, Sir Alex Ferguson.
But that’s where the comparison ends because Ian Gorham, who announced his decision to step down as chief executive of the FTSE100 company two weeks ago, has done a much better job than David Moyes at Manchester United.
Mr Gorham joined the business seven years ago as chief operating officer, and was promoted to chief executive in 2010 when co-founder Mr Hargreaves decided to take a step back.
Since then, the share price has trebled, with pre-tax profits more doubling. After six years in the role, at age 44, the assumption is that Mr Gorham has simply decided to do something different with his life.
The arrangement is that he will leave Hargreaves by September 2017, at which point the newly promoted finance director Chris Hill, now deputy chief executive, is slated to take over.
Stuart Duncan, financials analyst at Peel Hunt, said: “When you take over the job after the founder steps down, and with someone with as big a personality and as big a shareholding as Peter Hargreaves, looking back, I think he’s done a very good job of managing that.”
Mr Gorham has a background as a chartered accountant. After qualifying, he worked for big accountancy firms, where he became an expert in financial businesses.
Keith Carby, chairman and chief executive of Caerus Group, worked with him in connection with audits at some of Mr Carby’s other businesses.
He said: “He’s a very good professional accountant, and he’s obviously a very good manager. I’m sure he’s going to be a tough act to follow.”
During his tenure, Mr Gorham oversaw an increase in profits from £86.3m in 2010 to £219m for 2016. Six months after he formally took over, the firm entered the FTSE 100.
Peter Hargreaves is still a presence, in that he holds 31 per cent of the company, but retired from the business in October last year – although he still drops in on occasion.
Despite Mr Hargreaves’ close association with the firm he founded, the company pointedly distanced itself from his view on Brexit earlier this year. “We are not taking a position and will remain neutral in this debate,” said a company statement, while Mr Hargreaves was busy leafletting the population about the benefits of leaving the EU.
So what has been Mr Gorham’s legacy? Mr Duncan said: “I think it has been well managed, in terms of AUM growth, profits growth, all these metrics – the business has done well over a long period of time. “In terms of what they do – the D2C platform, Vantage – it is very difficult to see a competitor that has as much clout as they have in the market. They are well-positioned in terms of growth of people investing assets on the platforms. He’s done a good job in terms of leading people through that evolution.”
Vantage is by far the most significant part of the HL business; it generates 75 per cent of net revenue and 76 per cent of operating profit, and as of 31 March 2016, held £56.6bn of retail assets – 37 per cent of the total held on retail platforms.
The key to Hargreaves Lansdown’s success lies in the launch of this platform in 2001, and in spotting the importance of Sipps, which could be managed on the Vantage platform.
The main ethos of Vantage was that it enabled clients to control their investments themselves, and to have direct access to funds at discounted prices, as well as giving them an easy way to manage their tax wrappers.
The company spotted the benefits of Sipps early – again, more control for the client over their pension assets – and in 2003, launched the Vantage Sipp account.
The strategy has been a huge success: as of 2016, Sipp assets amount to £19.3bn on Vantage, with over a quarter of a million accounts, taking an estimated 11 per cent market share.
At the time of the Sipp launch, no one knew that pension freedoms would come along, and the platform was busy selling annuities.
But, according to some experts, it was this dominance of the Sipp market, and its usefulness in income drawdown, that put Hargreaves in pole position when these pension freedoms came along two years ago.
Jeremy Fawcett, head of direct at platform consultancy Platforum, said: “If you buy an annuity, the assets go off the platform. Ian has said that four years in drawdown, they have made as much money as they would have made in initial commission on an annuity.
“As long as the assets stay on the platform, then Hargreaves Lansdown will make more money than selling them an annuity. The strategy around this was thought up before pension freedoms arrived, but it just meant they were well placed to use it.”
Clearly the strategy of relying on Sipps was in place before Mr Gorham came along, but he has been astute in assessing the right way to steer the company and to capitalise on the changing regulatory climate, according to Mr Fawcett.
He said: “Ian has helped to professionalise some areas of the business but his impact has been in terms of competently picking some of the emerging trends and aligning some of the company strategy with that.”
Another development driven by Mr Gorham is the launch of a platform for people with fewer assets, who are more likely to want to save, with the aim of tapping into a new customer stream.
Due to be launched this calendar year, and currently called HL Savings, the service will allow customers to move their savings around different banks, mindful of the best rates and most suitable account.
Mr Fawcett said: “This potentially is very significant in bringing a different type of customer into the investing arena. HL is a plc, it needs to keep growing, so how are you going to do that?”
The official intention is to offer a service to existing customers who want to do something with their cash savings, as well as new customers who do not ordinarily invest.
However, Mr Fawcett said: “This will give the number of people who are cash savers a way to get them into investing; it is potentially significant, and that’s something that’s possible through a savings platform.”
This could be Mr Gorham’s final legacy with the company he joined seven years ago. Mr Fawcett said: “He’s put heart and soul into running a FTSE100 plc, and you can’t do that indefinitely. He’s said he’s interested in running a business himself, it will be interesting to see what area he does it in.”
Melanie Tringham is features editor of Financial Adviser