HL sees record profit despite fee

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hargreaves lansdown saw its revenue, profit and assets under management reach record levels in the last 12 months, despite regulatory changes impacting fee income.

Revenue at the retail investment business reached £291.9m in the six months to June, up 8%. Profit before tax climbed 7% to £209.8m for the period. Assets under management rose 29% to £49.5bn.

Despite marking an all-time high for the company, the figures showed slowing growth compared to the 29% leap in pre-tax profit recorded in 2013.

The results are the first since Hargreaves Lansdown introduced its new charging model to meet regulatory changes.

Chief executive Ian Gorham said: ‘During the year we have continued to expand and improve the services we provide to our clients while also dealing with major regulatory change.

‘Hargreaves Lansdown has not only retained but furthered its market-leading position.’

Net new business inflows rose by 25%, to £6.4bn. An additional 144,000 clients used the company in the last 12 months.

Much of the new business was driven by the sale of Royal Mail shares. Around 118,000 people who invested in the floatation did so through Hargreaves Lansdown. This represented almost a fifth (18.5%) of all UK investors in the former public sector company.

As many as 60,000 people a day attempted to call Hargreaves Lansdown in this period, while its website received 3.5 million hits during the two-week floatation, Mr Gorham said.

Regulatory changes have ‘substantially’ impacted revenue from cash in terms of interest margins, Mr Gorham said. The company is looking at a number of mitigating strategies, he said, but the business expects any future interest rate rises to have a positive impact on revenue.

Hargreaves Lansdown head of financial planning Danny Cox said that the changes to fee structure implemented in April this year have led to positive feedback from clients.

‘Clients are happy, the changes we have made are instilling competition in the investment market and bringing investment charges down,’ he said.

The announcements made by George Osborne in this year’s Budget have also seen a major shift in Hargreaves Lansdown’s at-retirement business.

Following the Chancellor’s commitment to extending pension freedoms and removing the need to purchase an annuity, the company saw a 41% reduction in annuity sales. This was offset by a 29% increase in the uptake of drawdown products.

Mr Cox said the drop in sales reflected levels of contraction in the wider market, at around 40%.

The changes announced in the Budget present a ‘huge opportunity’ for the business, Mr Cox said.

‘As more people expect personal freedom in managing their finances, more people are looking to options such as Self Invested Personal Pensions and new ISAs,’ he said.

While the government is yet to finalise delivering free guidance for those approaching retirement, companies like Hargreaves Lansdown have been ‘providing advice and helping people make successful choices for years’, Mr Cox added.

‘The at-retirement market is an important area for us,’ he said.