In a results statement earlier this month (February 15), Hargreaves Lansdown reported its revenue on cash rising from £11.3mn to £121.6mn between December 2021 and 2022.
Cash held by consumers on its platform rose from 9.3 per cent of overall holdings to 11.1 per cent between the end of 2021 and last year.
Part of the profit Hargreaves Lansdown has made has come from Sipp holders’ cash.
The reasons for holding cash in a Sipp can vary, with most advising against big cash positions in the long term because the interest rates offered tend to be low.
Cash can provide security amid volatile markets as well as liquidity if consumers are looking to adjust their asset allocation.
You can't really blame Hargreaves LansdownKarl Pemberton, Active Financial Planners
Last year, a number of IFAs were advising clients to hold more cash in their portfolios in anticipation of a redeployment at the end of 2022.
Most of those will no longer be holding much cash in their Sipps, though a number will keep cash back to cover fees and charges for the next year or two.
There are downsides to big cash holdings in Sipps particularly, as many providers offer lower interest rates on these products.
This is a particular problem at the moment with inflation sitting in double digits which erodes the value of these cash savings.
The longer you are invested in cash, the bigger that risk becomes.
What should Hargreaves Lansdown be offering?
Some think Hargreaves Lansdown should be passing on interest rates to customers, as the company is not providing an increase in service for these customers.
“Market average rates should be the minimum,” said Robert Reid, director at Syndaxi Financial Planning.
However, not all IFAs agree.
We ensure that we offer security to protect clients, while offering a great serviceHargreaves Lansdown
A lot, if not the majority, of Hargreaves Lansdown’s Sipp clients will be non-advised, and so the responsibility lies with them to ensure they are in the best position, said Karl Pemberton, managing director at Active Financial Planners.
“It is a very cheap, transactional service, and that is one of the risks the client takes.
“You can't really blame Hargreaves Lansdown for that.”
Hargreaves Lansdown pays a minimum of 1 per cent on all accounts, and up to 2.4 per cent on cash in Sipp drawdown.
At the beginning of February, the Bank of England raised the base rate of interest to 4 per cent, a 15-year high.
