I think it’s a really tough one. They’re under a lot of stress to react to market pressures regarding fees. Their market share could get eaten up as more and more people begin to understand how fees affect overall performance.
For me they’re an avoid for now. Be interesting to read others thoughts.
There’s an article in the FT Short sellers swarm around Hargreaves Lansdown and St James’s Place, essentially they’re expecting a further fall due to the Woodford failure. The removal of exit fees and rise of commission free alternatives may mean they start to lose some clients
They might see some short-term AUM losses, but HL is a juggernaut. Media reacts very harshly to anything even slightly involving them, but I’d expect to see the price recover eventually. Earnings days for HL often move the price significantly.
£730m wiped off value of Hargreaves Lansdown over Woodford scandal
I just saw the wind down share price on my son’s JISA, it’s 59 pence on Woodford Equity Income Accumulate Fund Z. That’s a 40% reduction from his average price. Thankfully, he’s got other funds on his account that negated this loss. Diversification (by provider, Vanguard, Blackrock etc.) is also important when it comes to MFs and ETFs.
It’s impressive they still managed to add 50,000 clients in the last 6 months. Clearly people are willing to pay for quality.
Nice recent article about Peter Hargreaves.
Interesting bits for me
Hargreaves determinedly pays his taxes in the UK, and is scornful of his fellow super-rich who stash their fortunes in Monaco or the Caymans.
Hargreaves is not just fond of donating to charities. In 2016 he made the single biggest donation to the Brexit campaign, handing £3.2m to the Leave.EU group.
Frugal billionaire:
He may have the low-end Land Rover – but he also owns an Embraer Legacy 500 private jet, which can seat a dozen passengers in luxury and sells for about £15m.
On Woodford:
He stepped down as chief executive in 2010 and left the board in 2015, but bemoans the scandal that has engulfed it since the suspension of the Woodford funds last June, which were heavily promoted on the Hargreaves platform. “There was never any scandal at Hargreaves Lansdown. Well, at least not when I was there.”
Last year he accused fund manager Neil Woodford of appearing not to be “truthful” but also said he was “annoyed that they [Hargreaves Lansdown] let it go on so long.”
But while Woodford investors are nursing losses of 40%, it has had little impact on Hargreaves’s own personal fortune
Just a wide-open thought of mine. I’d really love HL to cut commission to zero, and change their pricing structure to a subscription type model. They can still make money from cash interest and platform fee which I think are their main source of revenue (profits) anyway.
Seeing what happened in the US, is it just a matter of time that HL will follow to be free commission?
What will you do if that happens one day?
What happened in the US?
They might reduce them, but arguably they have a more diverse platform which many see as worth the cost over a free but far more restrictive platform in terms of investment opportunity
Price war in the US (due to Robinhood) means commission free is the new norm.
Which didn’t really matter to the incumbents like Schwab because they make way more money on interest on idle cash. But with interest rates and asset prices falling, and likely to fall further, their stocks are getting hammered right now.
HL could go commission free, because they make more money on just taking a percentage account fee on funds held.
I love HL’s offering & app. Hargreaves Lansdown are probably content with their client base, i’d imagine they are watching what their competitors are doing and holding tight. It is hard to imagine they would like to attract 500,000 small investors who are just starting out.
If they dropped their £11.95 dealing fee their business may not be able to support an influx of investors flying in. Possibly more likely they ease steps in slowly to what the industry itself does in the UK. America is dropping fees, the uk is currently not. Is this due to more people in the USA so easier to profit smaller amounts?
I reeeeeeeaaaaaaalllllly want to support FreeTrade. At the moment the only reason I do not use HL is the £11.95 barrier and the only reason I tried out FreeTrade is because of no £11.95 barrier.
That seems to go against the suggestion above. And one I agree with.
Commission free might be the new norm for start up apps. But it’s not the norm yet.
How many of the commission free companies are actually profitable? While I can see there being a reduction in fees across the board commission free will end up having a caveat, and I except that might be features behind a paid barrier for Freetrade and the like when their investors start depending some return on their investment.
In America it’s quickly becoming the norm. TD Ameritrade, Schwab, and interactive brokers all went commission free late last year. The U.K. is just slower as trading / investing isn’t as culturally accepted and less the norm.
There are other ways to make money. As of October 2018 RobinHood was generating nearly half of its revenue from payments for order flow, a ubiquitous, although controversial, practice whereby a brokerage firm receives compensation and other benefits for directing orders to different parties for trade execution. This is illegal in the U.K., as we are governed by Best Execution.
Other ways are by catering to investment advisers, loaning customers cash to buy stocks on margin, and lending out securities to short sellers hoping to profit on a decline in prices.
All this requires scale though. Zero commission therefore is a freemium model, get them in with zero commission trades, and then then other services for small slivers of revenue. Hence why FreeTrade needs to scale up across Europe.
The problem for the startups is that incumbents can use trading as a tool to up sell people into more profitable products, trading thus becomes a feature or gateway to their broader proposition, whilst for startups it may be their whole business model.
I think it’s really down to what senior management at HL is thinking about. Are they being “old school” and laugh at what FT is doing, or are they watching closely with the fear of being disrupted. US brokers are definitely the latter, whereas HL may well be content and even complacent. Never know.
I don’t think they’re complacent. Like the big banks they have the move to move quickly and the time to get it right. There’s no need to compete against Freetrade just like Barclays has no need to compete against Starling.
How well they execute any future moves is different, but they definitely don’t need to rush.
Further to the announcement on 6 February 2020, Peter Hargreaves (the “Vendor”) announces that due to strong investor demand he has decided to increase the size of the Placing and has completed the sale of 34,375,000 ordinary shares in Hargreaves Lansdown plc (“Hargreaves Lansdown” or the “Company”) at a price of £16 per share (the “Offering”), raising gross proceeds of £550 million.
Peter Hargreaves said, “The sale of some of my shares in Hargreaves Lansdown is part of a process of long-term financial planning to diversify my assets. I remain, and will continue to be, a substantial shareholder in Hargreaves Lansdown. I am very proud of the business that I co-founded and helped build.”
Following the Offering, Peter Hargreaves owns approximately 24.3% of the outstanding ordinary share capital of the Company.
Happened in February 2020 but the timing on this was decent 
Senior management at HL will have clever models. Do nothing and our profits will be X for 2020 and beyond. Reduce our fees and our profits will be this. While they are still gaining users and funds pour in they will not reduce their fees. Once users and funds start to dry out then they’ll take a hit and lift fees.
Freetrade isn’t a threat yet, but with other low cost brokers starting up and entering the market collectively they are a big threat. I give it 2 to 5 years and HL will drop their share price fees either altogether or right down to say a £1.
He’s a clever man. the raising of the finance would have been planned a long time ago and he got lucky there on timing. However, he is well aware of the threat posed by low cost brokers. Now is a good time to “diversify his assets” 
would be good to have him as Freetrade Chairman!
