Hargreaves Lansdown (HL.) has positioned itself well to provide easy access to a range of investment instruments for ordinary investors, covering most requirements from a personal pension fund through to buying shares in Royal Mail. Its success can be measured by the fact that total net new business inflows in the six months to December rose 70 per cent to £2.8bn, boosting assets under administration by 43 per cent from a year earlier to £43.4bn. Customer numbers, meanwhile, grew by 77,000 - easily the best six months ever and enough to push profits and turnover to record highs.
However, administrative expenses rose by 17 per cent to £55.2m after the group's implementation of the Retail Distribution Review, and the operating margin fell marginally to 65 per cent. Lower cash deposit rates meant that income derived from client money held on deposit almost halved to £17.7m, and assuming the Bank of England base rate stays the same, margins are expected to contract further in the second half. This explains the imbalance between the 43 per cent rise in assets under administration and the 11 per cent rise in profits.