Interest on client cash behind third of Hargreaves' profits

Interest on client cash behind third of Hargreaves' profits

Hargreaves Lansdown posted a pre-tax profit of £305.8m in the year to the end of June 2019, with 30 per of that coming from the interest it earned on client cash. 

The firm's annual results published yesterday (August 8) showed the company received £73.2m of interest on the cash customers have in their accounts.

This cash is placed on deposit by Hargreaves Lansdown, and any interest earned is split between the client and Hargreaves.

The cash comes from dividends paid into client accounts from investments, or change left over when an investment is made.

For example, a client could have a regular savings plan to invest £25 a month in a particular fund but the units of the fund are priced at £22, so once the investment is made there is a £3 surplus. 

Hargreaves Lansdown has 1.2m clients, according to the latest results, which cover the year to June 30, 2019.

The company does not disclose the interest rate it receives from banks, or what the split is with clients, though it did disclose the margin it received was 0.72 per cent.

There was cash of £10.2bn, with Hargreaves receiving interest of £73.2m.

Hargreaves Lansdown is relatively unusual in that it passes cash on.

FTAdviser has previously reported how, while some platforms do this, some others pass no interest on and also charge the platform fee on the cash holding, so are profiting twice.   

Hargreaves Lansdown does not charge the platform fee on cash holdings. 

The accounts also revealed that the company’s founders Peter Hargreaves and Steve Lansdown, split £82m in dividends for the year.

Neither man is a director of the company they founded, but both remain significant shareholders. 

Mr Hargreaves is the largest individual shareholder, with a 32 per cent stake.

The accounts showed that his self-invested personal pension (Sipp) also receives rental income from Hargreaves Lansdown for office space that Mr Hargreaves personally owns. 

Mr Hargreaves has in recent years invested in fund management business Blue Whale Capital. The one fund run by this company, Blue Whale Growth, recently went above £100m in size. 

Mr Lansdown has reduced his holdings in the company in recent years, and instead invested in wealth management firm Ravenscroft, and he also owns Bristol City Football Club and Bristol Rugby Club.