Bristol-based financial services giant Hargreaves Lansdown said it had maintained profit growth despite having to deal with strenuous new rules resulting in a major shake-up of its fee structure.
The company, one of the West's biggest, sells funds and shares to retail investors, reported pre-tax profits up 7 per cent to £209.8 million for the year to June 30, a slowdown on the previous year’s 28 per cent increase.
Chief executive Ian Gorham said resources had been taken up by the impact of regulatory change for the best part of 18 months but would now be re-deployed to improve the business.
Anchor Road-based Hargreaves said assets under administration grew 29 per cent to £46.9 billion while net revenue was up 8 per cent to £291.9 million and total clients increased by 144,000 to 652,000.
Mr Gorham said: “During the year we have continued to expand and improve the services we provide to clients whilst also dealing with major regulatory change.”
Earlier this year, the group said it had cut costs for DIY investors - introducing a new charge for its Vantage fund supermarket arm, but negotiating a cut in the cost of a raft of top funds to bring down overall fees for investors by £8 million in the first year.
The move came in response to the City regulator’s Retail Distribution Review, designed to make the breakdown of payments, between platform and fund manager, more transparent.
Mr Gorham said: “The delivery of the changes required by the Retail Distribution Review engaged company resources and time for the best part of 18 months.
“Whilst regulatory intervention across the financial services industry shows no signs of reducing, with the Retail Distribution Review having been delivered successfully we are now able to re-deploy staff and resources on improving the business.”
The chief executive said Hargreaves had been buoyed by a busy year of stock market activity, as the FTSE 100 Index advanced 9.4 per cent over the period.
He said 118,000 investors used the firm to pick up shares in the Royal Mail flotation, representing 18.5 per cent of the public take-up of the offer.
The impact – as up to 60,000 people a day tried to contact Hargreaves and its website saw 3.5 million hits over two weeks – “put pressure on service levels” resulting in changes which were in place for the TSB float later in the year.
Elsewhere, rule changes freeing up the use of pension funds saw the group’s annuity business fall by 50%, but new assets into pension drawdown arrangements were up 35 per cent on the year.
Mr Gorham said: “As we are a major provider of both independent annuity broking and drawdown services in the UK, we are planning a range of enhancements to our pension services to reflect the opportunities offered by the new regime.”
Meanwhile, the low interest rates which helped spur stock markets squeezed income from cash balances – expected to recover when rates go up.
Mr Gorham said there were welcome signs of a return to stronger trading conditions with banks shoring up their balance sheets serving to enhance stability.
He added: “Whether this will translate into stronger stock markets remains to be seen.
“In particular markets are likely to be influenced by the performance of Asian economies, particularly China, and markets generally remain subject to the influence of geopolitical events.”