Hargreaves Lansdown said it would reduce its interest share from the balances of customers to avoid a regulatory crackdown. However, it did not indicate that it would be making a big sacrifice.
The concessions on cash windfalls were made when Britain’s largest investment platform reported declining new customer numbers as well as a slowdown of the rate at which new business was won.
The shares of the former FTSE 100 firm were down 58 1/4p or 7.2 percent to close at 747 1/2p. This was due to the first-half earnings, which showed a pre-tax profit that fell 8 percent to £182.5million.
Hargreaves has revealed that it retained £132.8million of the interest earned by clients in the six-month period ending December 31, which is 9 per cent more than the last time.
After raising interest rates last week, the company said that it would reduce the share of its total interest windfall, from 41 percent in the first half, to 36 percent in the current quarter.
The Financial Conduct Authority has sent a letter to all chief executives of investment platforms, “Dear CEO”, saying that they are not meeting their expectations as outlined in the duty they owe to consumers.
Amy Stirling said that the group has raised its rates on a number of occasions in the last 12 months. “The consumer duty” is a new concept. The FCA is also working through the process.
The Dear CEO letter did not change her policy, she said. She increased the guidance for the net interest margin from 1.8 to 2 percentage points and “to the top end” to that range.
Hargreaves sources claimed that the company had reduced its interest take to a greater extent than other competitors. Barclays charges 3 percentage points in interest on its “smart investors” balances.
Hargreaves gained 20,000 new net clients during the period. This brought its total customer base up to 1,82 million. This was a decrease from the 31,000 clients attracted during the same period in 2022.
Clients added £1 billion in new money to their accounts compared to the £1.6 billion they won last time.
Hargreaves stated that, while gross inflows were strong, the company was more affected by clients withdrawing money to pay household bills and reduce mortgages. Client retention fell from 92.7 to 91.6 percent.
The strong markets of the first half of this year have added £7.2 billion in customer portfolios. This has pushed total assets under management to £142.2 Billion.
Hargreaves, based in Bristol, has experienced a turbulent period recently. was targeted by hedge funds that short-sell. Peter Hargreaves – its cofounder – pushed to have Deanna Oppenheimer resign as chairwoman. Alison Platt was appointed this month.
Dan Olley, chief executive who replaced Chris Hill as of August, stated that he saw “tangible progress”, however, he acknowledged there was more work to be done to improve the customer service and implement strategy.
The average age of the new customers has dropped below 30 years old for the first ever. Hargreaves is traditionally used by older demographics. The average customer age is 45.
Olley stated that customers continue to invest their savings in overseas shares, despite the push from ministers and City officials to encourage investments in London-listed stocks.
Jupiter Fund Management announced a higher-than-expected profit for the year yesterday. This was due to strong institutional client demand. Investors were also more open to riskier investments.
Matthew Beesley, the chief executive of the company, stated that there has been a “very marked shift in the tone” by clients who want to examine risk assets since the start of the year.
In recent years, active asset managers have suffered after the bull market ended that had boosted their investments for over a decade.
Investors also prefer cheaper passive index tracking funds. Market volatility due to geopolitical conflict, and the high UK inflation rate has made retail investors avoid “risk assets” and opt for the relatively high returns available on cash or cash-like instruments.
Jupiter reported net outflows for the year ending December of £2.2 billion. The steady institutional demand was a bright spot with £1.8 billion in inflows.
The company reported a profit of £105.2 millions, which is 36 percent higher than analysts’ estimates of £91.5 Million.
The share price closed at 90 3/4p, up by 8 3/4p or 10.7 percent.