UK financial services company Hargreaves Lansdown is looking to proceed into the peer-to-peer lending space, as part of plans to develop the business following the Retail Distribution Review (RDR), according to Mortgage Strategy.
The RDR “is intended to remove the risk of ‘commission bias,’ whereby supposedly independent financial advisers, and fund platforms, push those products that earn them the most commission, irrespective of suitability,” writes the Financial Times. However, Julia Groves, founding chair of the UK Crowdfunding Association and director of Trillion Fund, noted, “There are now 5.5 million people in the UK without access to advice since the Retail Distribution Review (RDR) was implemented.”
In the second half of next year, Hargreaves plans to launch peer-to-peer lending and cash management services, a bid to appeal to investors seeking better returns on cash than the ones currently available. After its Portfolio + multi-manager service rolls out in June, the company will also consider “further expanding our stable of simple online investing tools, sometimes referred to as ‘robo-advice’.”
This year, Hargreaves posted a pre-tax profit of £199m for the year, down 5 percent from £209.8m at the same time in 2014. The decrease in profits is partly due to lower margins, Hargreaves says. Mortgage Strategy notes,
[Hargreaves] says reduced client charges pushed down revenue by £20m year-on-year, while lower margins on client cash cost £17m.
Profits have also been impacted by stockmarket falls and the jump in Hargreaves’ Financial Services Compensation Scheme levy from £800,000 to £4.4m.
Total assets under administration have passed the £55bn mark, an increase of 18 per cent from £46.9bn as at 30 June 2014.
The company has also benefitted from pension freedoms, £1.6bn in net new pension business in the six months to 30 June, up 33 per cent from the same time last year.
Ian Gorham, Hargreaves’ chief executive, said,
Whilst clients and assets again grew substantially, profit faced several headwinds – our decision to reduce charges for clients; lower interest margins on client cash; lower stock markets as the FTSE All Share fell 0.8 per cent in the year; an unexpected temporary hiatus in foreign exchange trading income; and a charge for a contribution to the FSCS to cover the failings of less reputable companies. … The impact of these headwinds will be less pronounced, or in the case of the foreign exchange trading income will not be repeated at all, in 2016.