Pandemic trading boom is fading, says Hargreaves

Alert wipes as much as £200m off fortunes of founders of the investment platform after profits slip

HARGREAVES Lansdown has warned that the pandemic-induced trading boom will not last, sending its shares tumbling by a tenth and wiping more than £200m off its founders’ fortunes.

The FTSE 100 investment platform said that while trading volumes were exceptional in the year to June 30, it did not expect volumes to remain at similarly high levels.

The chief executive, Chris Hill, said: “As we have eased out of lockdown and entered the summer months, we have seen a slowdown in dealing volumes and client activity versus the elevated levels this time last year.”

Shares plunged by almost 13pc at one point before regaining some ground to close at £14.55, down 186p yesterday, valuing the company at £7bn.

The drop slashed about £170m off the fortune of the company’s co-founder Peter Hargreaves, the Brexit supporting billionaire who still holds a 20pc stake.

Stephen Lansdown, the company’s other co-founder who has 5.7pc of the shares, suffered a decline of almost £50m.

The fall came after the Bristol-based fund supermarket said annual pre-tax profits fell 3 pc to £366 mon the back of higher costs. That was despite revenues rising 15pc to £631m, driven by a wave of new retail investors playing the markets during the pandemic.

The UK’S biggest investment platform hailed a generational shift in investing and said younger investors were here to stay.

More than four in five of the company’s record 233,000 new clients during the year were under 55, while the average customer age is now 46, compared with 58 in 2007.

Mr Hill said: “There has been a permanent shift in consumer behaviour in areas from groceries to health services, from online investing to wealth management … younger people now have a greater appetite for investment.”

He added: “The pandemic has accelerated two trends that were already evident to us: a permanent shift to digital; and a change in the demographic mix.”

In March, the City watchdog sounded the alarm on “financially vulnerable” and overconfident young investors taking punts on speculative assets, such as cryptocurrencies, without understanding the risks involved.

Like other investment platforms, Hargreaves was boosted by bored Britons trading volatile stocks during lockdown. Wild market swings during the crisis prompted an army of retail investors to mobilise on the social media platform Reddit and pile into so-called “meme stocks” such as Gamestop, the US retailer, and AMC, the Odeon owner.

However, the rise in customer numbers was somewhat soured by a 24pc

‘More than four in five of the company’s record 233,000 new clients during the year were under 55’

increase in costs to £266m. Servicing its new customer base and investing in technology accounted for a significant portion of the cost hit.

Analysts at Jefferies said Hargreaves would continue to struggle with falling revenue margins due to increased competition and higher costs this financial year.

“Despite strong client recruitment and retention and clear market leadership, we think Hargreaves Lansdown may be vulnerable,” they wrote.

Total assets under administration rose by nearly a third to £135.5bn, while the company’s dividend fell by 8pc to 50.5p.

Analysts at RBC said the company was well positioned to “capitalise on cash hoarding of wealthy households as well as the potential upside from a legacy of client interest in investments post Covid-19. It remains a quality operation.”