Having looked at adviser platforms over recent weeks, our focus now turns to direct-to-consumer platforms, kicking off with the undisputed heavyweight champion.
Hargreaves Lansdown is the DIY investing market leader, with over 30 years of experience and assets under administration approaching £50bn. Moving from being a broker to a platform with the launch of Vantage in 2002 enabled Hargreaves to know what assets its clients were holding and pass back some of the trail commission in the form of the “loyalty bonus”. Now of course that is ancient history after the FCA’s platform policy forced the company to launch a new business model at the beginning of the year.
Since then they’ve made some adjustments including reversing their earlier decision to treat investment trusts as a separate asset class to other listed securities. More recent changes include lowering minimum investment levels and access to live share prices.
At 45 basis points it is at the more expensive end of the pricing spectrum but that has not stopped it from accelerating its client acquisition and asset gathering. Currently it is outstripping rivals and increasing its market share. Why? The way Hargreaves has built its proposition also gives it a number of strategic advantages over newer rivals.
First, the platform is built entirely across Hargreaves’ own proprietary technology which means clients see a seamless integration of funds, shares and tax wrappers. Second, customer service is consistently strong. Graduates learn the ropes on the helpdesks so that everyone in the business is aware of what is important to clients.
Third, the well-oiled marketing machine presents a substantial media presence online, in print, via video and through several high profile PR heads. It has significant marketing budgets driving customer acquisition and everything contributes to brand stature which is a top priority for consumers.
While the focus is very much on self-directed investors, Hargreaves Lansdown also has a successful advised business. However the clear emphasis for the business is on getting clients set up on a one-off basis and then having them self-administer their investments on an ongoing basis through Vantage. Clients are given the option of an advised annual review but the majority do not opt to take it. Some Vantage clients are referred to an adviser if they contact customer support requesting assistance beyond information-only or require support on a transaction which the FCA insists must be advised.
Full year results were announced this week and those hoping for a dramatic reversal of the fortunes of Hargreaves Lansdown have been disappointed again by a surge in client acquisition and £10bn AUA growth on Vantage over the year.
On the other hand, asset growth since March has been a modest £1.1bn and retention rates have nudged down, bringing CEO Ian Gorham’s view that the “Retail Distribution Review has had very little effect on our business” into question. Across the sector competition is getting hotter and margins are getting tighter but this business is growing and they remain the one to beat.
Jeremy Fawcett is head of direct at The Platforum
Philip Milton, managing director, Philip J Milton and Company
We can’t compete with the marketing spend of someone like Hargreaves but its competitive advantage is waning as there is increasing competition from other platforms. It has also benefited because in a falling market lots of people lose money and they don’t like paying someone to advise them for that. Under normal market conditions people are more likely to recognise the value of advice.