Younger customers unable to save Hargreaves Lansdown from higher costs
9 August 2021, 08:44
The business said that more than 230,000 new clients have joined its ranks.
Fund manager Hargreaves Lansdown attracted a record number of new customers last year as younger investors searched for places to keep their money.
Despite that, the company was unable to meet profit expectations and its shares dropped heavily on Monday morning.
The business reported an increase of 233,000 active clients over the 12 months to the end of June.
It means it now manages 30% more money – £136 billion – for around 1.6 million customers.
These customers are also getting younger, Hargreaves said on Monday.
Around 83% of the 233,000 new clients that joined Hargreaves during the year were under 55, the company said.
Chief executive Chris Hill said: “This demographic change has been under way for some time across the industry but has become more noticeable through the pandemic.
“We are seeing younger clients show an interest in – and willingness to learn about – investing, prioritising financial resilience and saving. They are starting to benefit from the transition of wealth from older generations.”
He added that the median age of the company’s clients had dropped from 58 in 2007 to 54 in 2014 to 46 over the past year.
Nearly half of all clients who joined last year were between 30 and 54, Mr Hill said.
The new clients helped bring in more money, increasing revenue by 15% to £631 million. However, this failed to feed into an increased pre-tax profit, which fell 3% to £366 million.
Analysts had expected pre-tax profit to reach £383 million.
Shares in the business fell early trading on Monday following the update. A little after opening they were down more than 10%.
Analysts at Jefferies said that profit had come in below expectations due to a 4% increase in costs.
They added: “The problem of having more, less profitable, clients is emerging. With new and aggressive competitors joining the UK market, revenue margins falling and costs rising, the 2022 financial year will see these trends continue.
“Despite strong client recruitment and retention and clear market leadership, we think Hargreaves Lansdown may be vulnerable.”
