15th Jan 2014 15:18
LONDON (Alliance News) - Hargreaves Lansdown PLC Wednesday saw its shares decline as it warned that it will have to seek billions of pounds in new assets over the next three years to offset lower prices and the commission it will charge clients for investing with it.
In a statement, the stockbroker said the lower pricing is expected to reduce client charges by GBP8 million over a year, while it is also predicting a revenue hit of about GBP9 million from enforced changes to the amount of commission it will be able to charge on its products from April 2016. It said it will have to gather about GBP3.5 billion of new assets over the next three years to offset the overall impact of the pricing changes.
Its net new business in its last financial year was GBP5.1 billion, while new business was GBP1.26 billion in the first quarter of the current year.
The stockbroker will now charge 0.45% a year for fund investments of up to GBP250,000, while clients with more funds managed by the stockbroker will pay less on a tiered basis on amounts held above that amount. There will be no charges on amounts above GBP2 million.
Hargreaves Lansdown, which has had to revise its charges ahead of the second round of the regulator's Retail Distribution Review, said it has negotiated with fund management groups to offer lower fund annual management charges to its clients. The average fund annual management charge for a fund on its Wealth 150 list will fall to about 0.65%, with an even lower average charge of about 0.54% on its 27 favourite funds on the list.
The first round of the Retail Distribution review meant clients would no longer pay commission to financial advisors, while the second round has moved to "unbundle" platform charges. The so-called second round, set to come into place in April, targets payments to platform service providers, such as Hargreaves Lansdown, by fund managers. The regulator wants to make the pricing system more transparent for customers, so that they know what they are paying for and to whom.
"Management notes that previous historical reinvestment in pricing improvements has driven increased business volumes which have more than offset any revenue impact," it said in a statement.
Hargreaves Lansdown shares were down 4.4% at 1,441 pence Wednesday afternoon.
By Samuel Agini; [email protected]; @samuelagini
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