The Hargreaves giving tree
PLanS by Hargreaves Lansdown founder and Brexit supporter peter Hargreaves to set up a £100m charitable foundation to support under-privileged children is a tremendous act of generosity in the tradition of the nation’s Victorian forbears.
Many of the wonderful northern city halls and much of the infrastructure is testimony to philanthropy.
Hargreaves’ gift is all the more laudable in that there is a tendency among modern British benefactors to do the obvious things, such as endowing ever more chairs and faculties at Oxford or cambridge. that is enormously valuable for a science and research-based economy.
But addressing social gaps, such as domestic child poverty in the post-austerity era, is a braver thing to do because it is so much harder.
Hargreaves is a very rich person with a fortune valued at £3.2bn by the Sunday times Rich List. One imagines that the first £100m might be a down payment on more to come. Big american benefactors, including Bill Gates of Microsoft and octogenarian investment guru Warren Buffett, have publicly committed to giving away all their wealth amounting to the many tens of billions of dollars. What is good about the Hargreaves endowment is that it is being organised in a public way so there is proper scrutiny of the way he is giving funds, which will qualify for considerable tax relief.
the Hargreaves approach, and that of other large British benefactors such as hedge fund billionaire David Harding and David Sainsbury, is to be transparent.
it is much easier to view what these benefactors are up to than the former chief executive of housebuilder persimmon, Jeff Fairburn. He has chosen a less open structure, ‘a donor advised fund,’ to distribute some of his £82m bonus to good causes.
the generosity of peter Hargreaves, however, raises questions as to how a Bristolbased stockbroker became so wealthy.
He and his former colleague Stephen Lansdown rode a wave of pension and savings freedoms to create a share and fund dealing and holding platform which is highly regarded for ease of use, customer service and low-cost trades.
Rightly, the whole Hargreaves Lansdown (HL) model is now under intense scrutiny as a result of the scandal surrounding the implosion inside neil Woodford’s investment empire, which exposes 300,000 HL clients, either directly or indirectly, to losses.
THIS calamity was no accident. it will be no surprise if the HL model is heavily criticised when the Financial conduct authority investigation is published. the inquiry will want to know how big a role the discount offered by Woodford to HL clients played in his funds being so prominently promoted on the HL Wealth List of top 50 funds.
it also needs to examine how much of the discount was then clawed back by HL in its own management fees and whether there is any conflict of interest. trade group the investment association deplores the lack of transparency around platform and trust fees and would like to see costs broken out and prominently displayed. as worrying for savers who use the HL platform is the lack of due diligence. trusting in Woodford’s past record might have seemed good enough. However, it should have been obvious that here was a fund manager where there was no investment committee and wafer-thin independent scrutiny. Yet HL was willing to trust it with savers’ money by the truckload.
HL may think that it has suffered enough by waiving its own charges on Woodford funds and through chief executive chris Hill sacrificing a bonus.
But what is often missed in all of this is that compared with most publicly quoted firms in Britain, the profit margins at HL are supercharged.
the HL website writes favourably of returns at soft-drink disrupter Fever-tree with margins at 30pc. Hargreaves’ own margins are closer to 50pc. that makes HL more than three times more profitable than Goldman Sachs, where the net margin in 2019 was in the order of 15.7pc. in other words HL clients are being ripped off by the platform operators which is how the founders came to join the super-rich, collect fat dividends and are able to afford charitable giving.
it is high time that HL behaved correctly and considered making good on the losses of clients who have paid so dearly for following its guidance on Woodford.