Hargreaves Lansdown hit with £3m FSCS levy bill
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Hargreaves Lansdown chief executive Ian Gorham has called for a review of the Financial Services Compensation Scheme after it was hit with a £3m levy bill.
Last month, the Financial Services Compensation Scheme announced a £93m interim levy on advisers. The levy, first revealed by Money Marketing, includes FSCS compensation costs of £86m, mainly to compensate Lifemark investors, and management expenses of £7m.
Gorham says: “It is disappointing that shareholders in a reputable firm such as Hargreaves Lansdown must foot the bill for the incompetence of others. We have made our feelings on the matter known and believe the way the FSCS is funded and operates needs to be reviewed.”
Gorham’s comments come as the firm posted a 38 per cent increase in underlying profit before tax in the six months to December 31, 2010. Profit before tax stood at £59.3m in the last six months of 2010, compared to £39.8m in 2009. However, the £3m levy has reduced that figure to £56.3m.
Total assets under administration rose by 27 per cent to £22.3bn in the second half of 2010 while revenue increased by 30 per cent to £97m. The group also saw total net business inflows of £1.34bn for the six months to the end of 2010. HL is paying a total interim dividend of 4.5 pence per share.
Gorham says: “I am pleased to report that for the six months to December 31, 2010 we have achieved record revenue, profits and total assets under administration . This has been achieved with a backdrop of continuing economic uncertainties both at home and abroad. Stock markets have risen and net business inflows have virtually matched last year’s record amounts, resulting in a significant increase in our assets under administration of £4.8 billion in just 6 months.
“Despite increased costs relating to our new office building, continued investment in IT systems, increased loyalty bonus payments to clients and most notably the FSCS additional levy of £3million, our costs have been tightly controlled. This prudence, allied to income from assets and an enhanced cash management strategy have delivered a 41 per cent rise in profit before tax and an associated increased profit margin.”
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Readers' comments (9)
Kevin Archer | 10 Feb 2011 9:22 am
This Levy is getting out of hand, almost akin to having a thug do material damage then asking all the residence of the street in which he lives to pay for his damage
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Tom Scott | 10 Feb 2011 9:25 am
IFA's that do not hold client money should have a category to themselves. We present very little risk.
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Anonymous | 10 Feb 2011 9:33 am
£3million may be small change for HL but it is still an outrageous sum to levy on any firm, regardless of their profits and turnover.
The fact is that everyone is having to pay for the incompetence of the FSA. Forget IFAs who might have sold these products in good faith (I didn't). It was the FSA who were sleeping on the job and the ridiculous court rulings that followed that have produced this iniquitous levy.
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Dominic Thomas | 10 Feb 2011 10:07 am
I was under the impression that the levy relates to declared revenue on the Gabriel RMAR and therefore applied fairly to all firms proportionally.
Whilst £3m is more than most of us minnows could obviously stomach, presumably there is a direct correlation for HL and it's effectively the same as the bill the rest of us got? Or have I completely misunderstood the equations used?
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David IFA | 10 Feb 2011 11:21 am
It seems to me that the FSCS is little more than a legalised protection racket.
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Julian Stevens | 10 Feb 2011 9:22 pm
The FSA is a protection racket operating under a phoney banner of legitimacy. Don't argue ~ just pay what we're demanding or we'll break your business and take away your livelihood.
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Anonymous | 11 Feb 2011 8:13 am
And how much did Hargreaves and other such firms pay to the FSCS before this year. Barely anything if that. They make massive profits and sing the blues when lots of others are falling. Please do jump on the bandwagon.
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Anonymous | 12 Feb 2011 6:52 pm
Hargreaves Lansdown are greedy and mega rich and this is a mere pinprick in their exorbitant profits. We need companies like this to help smaller IFA's who struggle out.
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Harry | 14 Feb 2011 10:45 am
@Anonymous 12/02 - 6.52pm
HL greedy and mega rich huh? Might be the latter but only a loser will accuse them of being greedy.
Just accept when others are better than you and get on with it.
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