RDR is top of Hargreaves' risk register
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Hargreaves Lansdown co-founder Peter Hargreaves has labelled the RDR as the biggest risk facing retail investors.
He says it is top of his firm’s risk register and warns that small investors may find it harder to get sound advice following the RDR.
He says: “We think firms that depend on sales commission, which is 95 per cent of the industry, will struggle the most and the fact that we do not is a massive relief for us.
“I would be surprised if the whole industry does not have to make cutbacks following the RDR and smaller investors may suffer in terms of getting sound advice.”
Hargreaves was speaking after the firm revealed an 18 per cent jump in profits for the 12 months to the end of June. The group made a profit of £86.3m for the last financial year compared with £73.1m for the previous year.
Net business flows rose by 65 per cent to £3.3bn while revenue rose by 20 per cent to £159m, with the proportion of recurring revenue standing at
72 per cent. The total dividend payment rose 18 per cent to 11.88p per share.
Total assets under administration increased by 47 per cent to £17.5bn.
Hargreaves says the highlight of the results is the increase of 48,000 active clients on its Vantage platform to a total of 330,000.
He says: “The more clients you have the more difficult it is to increase by the same percentage.
“This year, not only did we increase by greater numbers than ever before but also by a greater percentage than ever before.
“The year we floated and attracted a record number of clients was very important to us as it saw more people prepared to do business with us.
That has continued and, at £4 a share, our market cap is close to £2bn.”
“Even though we continue to face economic uncertainty, I believe the company is extremely well placed to build on the momentum that has been generated so far.
“We will continue to deliver the excellent service our clients want, which will help maintain profitable growth and generate value for our shareholders.”
Hargreaves says he will continue to adopt his “pessimists will prevail” attitude, warning that a double dip is still a strong possibility and that the firm will remain cautious.
He says: “I am reserved about the economy and my view is that the outlook is still bleak. The economy is laden with overhead and the public sector is far too big and employs too many people who do nothing.
“The private debt is also large and the only people who have lowered their debt is corporate Britain. If the Government manages to reduce public sector borrowing by 25 per cent, it will be the best Government ever but I am dubious. Even if it does, I still do not believe that will be enough.
“My biggest worry is that the Government does nothing at all. A double dip is still a strong possibility.”
Hargreaves stepped down as chief executive on September 2, passing his responsibilities to Ian Gorham. The move was revealed by Moneymarketing.co.uk in April, when Gorham was appointed deputy chief executive with immediate effect.
It came a week after fellow founder Stephen Lansdown announced he was stepping down as executive director of the firm, moving into a non-executive director position.
Hargreaves says as long as the people running the business want him, he will be happy to come in and act as a sounding board.
He says: “I have got huge experience in business, which goes back to working with my father’s bakery shop, which I ultimately sold for him. I have worked at many businesses, both well run and badly run ones.
“I still hope that Hargreaves Lansdown will become a FTSE 100 company. The likes of Giles Hargreave and Harry Nimmo have said similar things. We need a £10 share price. It is a long way to go but to be 115th company by capitalisation is a huge achievement.”
Hargreaves says the company is focused on broadening its proposition into the corporate landscape.
He says: “That would get us to people we do not normally get to. If you work for a large company and have a good salary and pension scheme, then you probably look at personal investment less than if you were self-employed or in an industry where you were less secure.
“We would like to help them through our corporate Vantage system, which offers a full financial package.”
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Readers' comments (1)
Julian Stevens | 23 Sep 2010 8:26 am
Given that such a warning is made without any taint of vested self interest, one might reasonably expect the FSA to sit up and take notice. But we know that to be highly unlikely, as the FSA is hell bent on steamrollering the RDR through. Never mind the huge amount of collateral damage, the widespread cries of dissent, the fact that the Cost:Benefit Analysis on which the RDR was launched has been found now to have been massively skewed or that the RDR is very largely contrary to both the spirit and the letter of the Statutory Code of Practice For Regulators. The FSA has its own agenda and anyone who disagrees can basically either go along with it or jump off a cliff. Marvellous.
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