Hargreaves profits fall 5% amid lower margins and stockmarket falls

Hargreaves Lansdown pre-tax profits fell 5 per cent to £199m for the year, pushed down by lower margins and stockmarket falls.

Its preliminary results to the year ending 30 June, published today, showed pre-tax profits at the firm were down from £209.8m at the same time last year.

Hargreaves partly attributes the fall in profits to lower margins. It says reduced client charges pushed down revenue by £20m year-on-year, while lower margins on client cash cost £17m.

Profits have also been impacted by stockmarket falls and the jump in Hargreaves’ Financial Services Compensation Scheme levy from £800,000 to £4.4m.

Total assets under administration have passed the £55bn mark, an increase of 18 per cent from £46.9bn as at 30 June 2014.

The company has also benefitted from pension freedoms, with £1.6bn in net new pension business in the six months to 30 June, up 33 per cent from the same time last year.

Chief executive Ian Gorham says: “Whilst clients and assets again grew substantially, profit faced several headwinds – our decision to reduce charges for clients; lower interest margins on client cash; lower stock markets as the FTSE All Share fell 0.8 per cent in the year; an unexpected temporary hiatus in foreign exchange trading income; and a charge for a contribution to the FSCS to cover the failings of less reputable companies.

“The impact of these headwinds will be less pronounced, or in the case of the foreign exchange trading income will not be repeated at all, in 2016.”

Hargreaves Lansdown is also looking to build on its robo-advice offering and move into peer-to-peer lending as part of plans to develop the business post-RDR.

Following the launch of its Portfolio + multi-manager service in June, Hargreaves says if this is successful it will also consider “further expanding our stable of simple online investing tools, sometimes referred to as ‘robo-advice’.”

It expects to roll out peer-to-peer lending and cash management services in the second half of next year in a bid to attract investors looking for better returns on cash than are currently available.