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Hargreaves slams regulatory burdens despite post-RDR benefit

Peter Hargreaves says regulatory environment is “completely mad” but admits “surprising” increase in client numbers due to RDR fallout.

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Hargreaves Lansdown co-founder and executive director Peter Hargreaves has slammed the regulatory burdens on the fund management industry while admitting the platform’s ”surprising” increase in client numbers is due to the fallout of the RDR.

Speaking to Money Marketing following the company’s annual results last week, Hargreaves says the regulatory environment facing the investment industry has “gone completely mad” over the past 15 years and has heaped an unacceptable level of burdens on firms.

He says: “For every single fund we suggest in our Investment Times, we have got to send the full key facts literature. That is two sides of stuff which no investor will ever read but we have to send it out.”

However, Hargreaves says the increase in new clients on the platform, reported in its preliminary results for the year ending 30 June 2013, has been driven by regulatory change. Over the year the firm won 76,000 new clients taking the total to 507,000.

“Even we were surprised by the number of new clients we recruited. To recruit 76,000 clients in one year is beyond belief. Many of them are orphans because their IFA has ceased to trade and many are people that have realised they are their own best adviser.”

Hargreaves also gave further details of the platform’s pricing plans as part of the move to clean share classes. Some 68 per cent of the preferential share classes already negotiated for its Wealth 150 list of favourite funds offer a better deal than the standard unbundled share classes and he says more products could be added to the list if they offer a good deal to the platform.

He stressed performance will remain the “number one” criteria for funds’ inclusion on its list of preferred products but says pricing is a factor that could “swing [a fund] onto the list”.

“A fund that charges a lot will see an impact on its performance. Clearly we will look at each fund based on what price we can buy it for and our view of how well it will perform.

“Since some funds will have better charges than others, it may be that a couple of funds – because they have a very good price on them – look a lot more attractive than before when they were charging the same as everyone else.”

Writing in the group’s results last week, Hargreaves Lansdown chief executive Ian Gorham echoed Hargreaves’ thoughts on the “madness” of regulation. Gorham says: “It is easier to promote gambling, alcohol or payday loans to the UK public than the concept of investing in reputable investments or financing British companies to support our economy. That needs to change.

“The FCA, working with the Treasury, has the opportunity to take a fresh look at achieving sensible regulation and make it easier to encourage the UK public to invest.”

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