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Hargreaves Lansdown, launched in 1981, has reached middle age. The financial services company has no fashionable credentials to appeal to the online warriors piling into heavily-shorted stocks. Even so, it has been boosted by a rush of younger investors on to its platform. They helped push its pre-tax profits for the six months to December up by a tenth.
Recent conditions have been exceptional and investors, reasonably, are not getting carried away. Although the results were better than expected, the shares edged down 3 per cent. They are priced at 30 times forward earnings, in line with their 10-year average.
With a record 84,000 new clients, the average age of new joiners has dropped to 37, from 45 in 2012. For many, it might be just a lockdown fad. But Hargreaves maintains that the behaviour of its coronavirus-era clients is little different to rest. Younger people are getting more focused on managing their financial futures.
Newbie investors are always advised to keep costs down. Hargreaves is far from the cheapest. Indeed online investment service Interactive Investor claims the average ISA investors can save £30,000 in costs over 30 years by switching to it from Hargreaves.
There must be a risk that Hargreaves’ juicy operating profit margins come under pressure. It has been forced to lower the annual management charge on some of its funds. But the client retention rate remains high at about 93 per cent, despite complaints about its cheerleading for the doomed Woodford Equity Income Fund. It is a hassle changing investment platforms and customers appear happy with the services and investment options they receive.
Hargreaves is a steady prospect, when judged by its hefty share — 42.5 per cent — of the direct-to-consumer fund market. But rock-bottom interest rates are encouraging more people to move money out of cash into other investment products. It has just 5 per cent of a £2.4tn savings market. Judged by that yardstick, it has plenty of room to grow.
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