Hargreaves Lansdown lost about £2.6m in revenue as a result of waiving its platform fees on the Woodford Equity Income fund and the Woodford Income Focus fund.
But despite this the FTSE 100 company still posted record inflows and increased profits and revenues in its end of year results, published today (August 7).
Revenue from funds increased by 2 per cent to £210.6m due to assets under administration growth - primarily from net new business - but the company acknowledged this had been impacted by its waiver of Woodford fees.
Revenues from its in-house fund range - which includes 10 multi-manager funds, six of which held Woodford Equity Income - fell 7 per cent to £63.6m due to the fact Hargreaves had not actively marketed the multi-manager funds while the Woodford fund was suspended, combined with lower market valuations resulting from Covid-19.
The investment giant vowed it would learn “from the experience surrounding the Woodford issue last year” as it revealed remedial action had hit its profits and impacted its fund margin.
Following the suspension of these two funds, Hargreaves waived its platform administration fee on direct holdings and called on Woodford Investment Management to suspend collecting its fees while investors could not access their cash- which Woodford declined to do.
The Woodford Equity Income, which is now in the process of being wound down, featured on Hargreaves' Wealth 50 buy list right up until the day it was suspended in June last year.
Hargreaves has since overhauled the list, renaming it the Wealth Shortlist and pledging an “enhanced selection criteria”, “further risk monitoring and control” and “enhanced governance oversight”.
The Woodford Equity Income fund also featured in six of Hargreaves’ own multi-manager funds, making up between 2 and 11 per cent of each portfolio.
Hargreaves Lansdown stated: “These changes have been underpinned by changes to governance processes to raise the level of rigour and challenge to decisions that we make.
“These developments will ensure that not only our Wealth Shortlist and Fund Finder tool, but also future investment propositions and wider developments, will also have a robust, thorough and transparent governance structure behind them.
“We recognise how evolving the role of governance provides additional rigour and challenge to our decisions and results in better outcomes.”
Revenue for the year was £550m, up 15 per cent, driven by higher asset levels and record share dealing volumes.
The company said that this “more than offset a fall in annual management charges on the HL Funds” which fell in line with their lower average asset values seen this year.
Profit before tax also increased by 24 per cent to £378.3m while assets under administration rose by 5 per cent to £104bn.
In addition, Hargreaves Lansdown saw net new inflows hit a record £7.7bn as well as a record 188,000 net new clients, bringing total active clients to over 1.4m.
Chris Hill, chief executive at Hargreaves Lansdown, said: “We have completed significant strategic initiatives including launching our new Wealth Shortlist and Fund Finder, as well as completing further work to enhance governance, scalability and resilience in our service to clients.
“Our priority has remained our colleagues and clients throughout this challenging period and I am proud of how we have responded. We have not furloughed our employees, enacted any redundancy programmes or sought any government assistance.
“The acute challenges of this year have reinforced the importance of resilience for us all and we will continue to have a key role in helping our clients build resilience into their savings and investments to enable themselves to be confident to manage through difficult periods and events.”
amy.austin@ft.com
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