Hargreaves Lansdown PLC (OTCPK:HRGLF) Q4 2020 Earnings Conference Call August 7, 2020 5:00 AM ET

Company Participants

Christopher Hill – CEO

Philip Johnson – CFO

Conference Call Participants

Andrew Sinclair – Bank of America Merrill Lynch

Haley Tam – Crédit Suisse

Charles Bendit – Redburn

Andrew Crean – Autonomous Research

Gregory Simpson – Exane BNP Paribas

Paul McGinnis – Shore Capital Group

Rahim Karim – Liberum Capital Limited

Melwin Mehta – Sterling Investments

Shamoli Ravishanker – Morgan Stanley

Operator

Ladies and gentlemen, welcome to the Hargreaves Lansdown Full Year Results Presentation. My name is Katelyn, and I’ll be coordinating today’s call. [Operator Instructions]

I will now hand you over to your host, Chris Hill, Chief Executive of Hargreaves Lansdown, to begin. Chris, please go ahead.

Christopher Hill

Thank you, Katelyn. And good morning, and welcome to the Hargreaves Lansdown annual results presentation for our 2020 financial year. This year, the session is a bit different with everyone joining over the phone. But nonetheless, thank you very much for joining us today. I am Chris Hill, Chief Executive. I’m joined by Philip Johnson, Chief Financial Officer.

I’d like to open with some highlights from a year where we saw significant growth despite a unique and incredibly challenging external environment.

My theme for this page is on the importance of service, of resilience and a clear payback from disciplined investment. The 2020 financial year saw Brexit uncertainty, a general election, low investor confidence and then the onset of a global pandemic. Our strong delivery during this time was a resilient performance, which highlighted the importance of the investment that we made in our client-focused strategy. Because by maintaining our service and providing the support that clients needed during this difficult time, we’ve been able to deliver a record performance.

The scalability that we’ve built into the platform has meant that we’ve been able to welcome and service a record number of new clients in the year, increase our market share, deliver record net new business flows and support record trading volumes. Despite the challenges of this year and the new ways of working we’ve all needed to embrace, we’ve continued to develop both our proposition and our service. Within that, completing the sale of our business-to-business service, FundsLibrary, because it was no longer aligned with our wider strategy. And earlier this summer, we relaunched our Wealth Shortlist and Fund Finder tool.

Through the right investment choices and a clear strategy, we continue to deliver the scalability, proposition and resilience to enable continued growth over the long term. Our total dividend for the year is 54.9p, up 31%, reflecting our confidence and balance sheet discipline, and we’re returning those FundsLibrary proceeds to shareholders.

So the year has been challenging, but we have delivered. And I want to take this moment to thank my colleagues for making this possible. Their hard work, commitment and ingenuity in managing the tremendous change that COVID-19 has brought has been inspiring, and it’s allowed us to deliver the right outcomes for our clients and wider stakeholders during this period.

So I’m going to hand over to Philip now to take you through the financials. And then I’ll come back and I’ll speak a bit more about how we continue to develop as a business, with client outcomes right at the very heart.

Philip Johnson

Good morning, everyone. I’m sorry we can’t all be with you [indiscernible] here, but I hope you and your families are well wherever you are.

As Chris said, 2020 was a year of record growth at Hargreaves Lansdown. In financial terms, revenues grew 15% to £551 million, despite lower average market levels and challenging conditions at various points during the year. This was due to higher stock broking activity, the tailwind from continued net new business, our diversified revenue streams and the resilient nature of our service.

Underlying profit before tax, before the gain on our disposal of our stake in funds library, grew to almost £340 million, and statutory profits before tax to £378 million. Most importantly, this record growth, however, defined by a net new finance, net new business or profit was delivered whilst being there for our clients through it all. We have not had state government assistance nor have we had to furlough any employees or enact any redundancies. We have a robust balance sheet, and the Board remains confident in our prospects. It has therefore operated our dividend policy as usual this year, end of [Technical Difficulty] increasing the ordinary dividend in line with underlying profits and declaring a special dividends generated from earnings and the one-off disposal proceeds from FundsLibrary, resulting in the total dividend, you can see on the slide, at 54.9p per share.

So looking at the numbers in more detail, starting with revenues. The Hargreaves Lansdown offers funds, shares and cash products directly to retail clients. Our clients have the ability to invest, hold and trade in these asset classes within their chosen route on a resilient secure platform. Our ability to support and service our clients through all environments enables them to diversify their savings and their investments and gives us a diversified revenue stream. You can clearly see the benefit of this diversification in our 2020 results, enabling us to grow overall despite different market conditions and activity levels at different times in the year.

2020 revenue was £551 million, 15% ahead of last year, as stockbroking and commercial uplift, with increased trading volume in the second half, and we benefited from higher interest rate margin, mostly prior to the COVID-19 rate cut. The fund revenue is in line with average assets, once you look through the £3 million of waived platform fees on Woodford, the majority of which fell in the first half. Shares revenue grew 72% to £149 million, as transaction volumes and our market share spiked through COVID-19. I’ll come back to this and our forward guidance in a moment.

Cash revenue rose 24% to £91 million, in line with previous guidance. HL Funds, premium assets broadly moved in line with markets, as guided, as strong select performance and underperformance in the Multi-Manager Funds offset each other. And other income fell due to the abolition of exit fees and ancillary charges and the disposal of FundsLibrary. As I said in January, abolishing fees, simplifying our charging structure, negotiating the best rates on our clients’ behalf, not ours, is all part of our clients — our continual drive to improve the value and experience we provide to clients.

On FundsLibrary, revenue was £6 million prior to its disposal, hence, you should expect this line to be lower again next year. But as promised, looking to shares in more detail.

So focus then on the marketplace business. We have our traditional funds platform, originally called Vantage, where clients buy mutual funds run by third-party manufacturers. We have our new cash platform, Active Savings, where clients place deposits across a range of third-party banks and on a variety of firms. And we have our shares platform, stockbroking, where clients buy and hold shares across the world. We have a market-leading position here built around ease of use, resilience of service and quality of execution.

The two charts here are part of our standard disclosure normally in our data pack. The left-hand side shows we have grown our retail stockbroking market share to nearly 40% at the last point of measurement. And on the right, how we see and cope with a massive and unprecedented increase in transaction volumes over the past four months. This results have not combined with them. This is why we’ve been investing in the scalability and efficiency of our platform, upgrading our technology, processes and controls. The benefits of these investments are often hidden behind the scenes, until we have these moments, moments that show why we have done it. We’ve coped with elevated activity, frequent their new daily records up to even 6x. Monthly volumes doubled, tripled we’d ever seen before in a different working configuration. Our clients really value this resilience and the service we offer.

To put this into context, since the start of the calendar year, we’ve welcomed 130,000 net new clients, delivered £5.4 billion of net new business and processed 6.5 million deals, more deals in the last 3 months than we did in the whole of 2016. This is why reinvesting the rewards of growth in our business is both necessary and worthwhile.

On the right-hand side, you can see the volumes and how they remained high through June, although they’ve now retreated slightly to more like 35,000 to 40,000 of working day. To be honest, giving you shares margin guidance right now is a bit of a CFO market game. Last time I stood up, I thought it reasonable to suggest they’d be in the blue box range of 24 to 28 basis points, given historic trading volumes. Pretty much as soon as I sat down, you can see what happens, so probably not my best guidance ever. This time, I’m showing you what the margin would be at different levels of trading volume, assuming assets remained flat at 30 June levels. I hope it’s useful and suggests that 30 to 50 basis points range is a good place to start given the current run rate we’re seeing.

So just coming back to our other asset classes. As usual, there’s little really to say about funds and HL Fund margins, which have remained stable over what’s now 6 years since RDR. I’ve just covered shares margins, which leaves cash. I said last August that I expected net interest margins on cash to be higher in the first half than in the second, and in both halves, we performed better than we had expected, as the interest we earned fell back less than the yield curve implied. This was true in the initial period after base rates were reduced to 10 basis points as well. Looking forward, the way we place the SIPP money on rolling 13-month deposits means that NIM will take time to grade down to new levels. Hence, our 2021 guidance is 40 to 50 basis points, and you should again expect second half margins to be lower than in the third.

So moving on to costs. 2020 operating costs before the levy were up 17% to £201 million. This increase, again, in line with the growth of client numbers, a link that has been in place for 12 years now. Our strategy is a cycle of turning our market opportunity into growth, reinvesting the awards of this growth to manage the scale that this growth brings and extend our capabilities. Capabilities such as client service, proposition, efficiency, resilience, and of course, compliance with an ever-changing regulatory environment, capabilities that maintain our competitive advantage. Then turning this competitive advantage into ways of better accessing our market opportunity, and hence, growing further, reinvesting, et cetera, et cetera. This strategy is — this cycle is integral to our strategy and our business model.

So after managing costs tightly for the last 24 months, during often challenging market conditions, we saw just such an opportunity to reinvest and accelerate our growth in the second half, and we took it. In areas like marketing, where we had expected costs to return to a normalized level in 2020 anyway, and also in revenue-related areas such as dealing. I’ll come back to this theme shortly and how it drove the positive outcomes that you can see.

Before we move on the FSCS levy, in common with other providers in our space, we are bearing more costs since the fee loss restructure, exacerbated by our fees growing faster and the money raised by the FSCS increasing as well. This fueled our levy double this year to £14 million. This is quadruple the level of just 2 years ago and represents nearly 1/5 of our total expense increase over the period. As a result, overall costs rose 20% to £215 million.

Times are uncertain right now, but we believe we have the right strategy, focused on the right opportunity and the right growth/reinvestment cycle aligned with delivering it. I’ll therefore repeat my usual long-term cost guidance today of cost growth aligned with client growth, with the usual provider that we’ll manage them in the short term, mindful of our growth opportunities and market conditions at the time.

So just looking at 2020 costs in more detail. So our approach to costs is to reinvest where and when appropriate, but at the same time, control other spend around that. We do this to create capacity when conditions are right to accelerate growth, service, proposition, technology, all the capabilities integral to our strategy. So where have we focused that investment in 2020? Primarily in areas that delivered revenues this year or in the future. The first area, in the section shade of mint, is mostly dealing costs linked to the £62 million of additional share revenues that we booked this year. I’d like to think this is a good return on an ex £7 million of 2020 costs.

Secondly, in the light blue, marketing. This has 2 parts to it. Digital marketing is a crucial element of new customer acquisition, and the record levels of new clients we won in the second half of the year brought additional costs with it. But marketing is not just new client acquisition related. It is core to the engagement with our existing client base, too. This engagement, through tailored communication, research and tools, generates flows. It encourages subscription light use of profits, tax allowances, transfers and cash contributions onto our platform. And this engagement is key to our growth. In fact, our existing customer base contributed 70% of our gross flows this year, even higher than normal. These new clients — these clients, new and existing, and their contributions are the future revenue growth of our business.

To put a few — another crude financial quantification on it. We spent £24 million this year on marketing to increase our annual revenue stream by some £40 million, and with the potential for our new clients to contribute even more in the future as we build a lifelong relationship with them. I’d like to think against the good rate of return. And then, of course, the FSCS cost which we can’t control but is linked to the confidence with investors in financial services, the confidence which empowers clients to save and invest over time as we state in our purpose. These 3 areas represent 70% of our 2020 cost increase, but are only 1/4 of our cost base. The remaining 3/4, some £160 million, only increased by £10 million. This control creates the capacity to invest and allowed us to capture the extraordinary opportunities of the last 6 months. So steering our strategic cycle, spending the rewards of growth in ways that increase our capacity to access further growth in the future.

And moving on. It’s easy to forget when you were living through a global pandemic, that the first half of the year was full of difficult market conditions. So given this, we’re proud of how Hargreaves Lansdown has performed this year, how our colleagues stepped up, embraced new ways of working and were committed to our clients’ interest throughout. Our client focus, operational resilience, diversified revenue stream and strategic reinvestments in growth have again delivered a robust set of financial numbers.

On the left, strong growth in second half revenues. And although costs were up £17 million after the extra £25 million of costs, will create good costs in the marketing and activity areas I’ve just described. The right-hand growth shows how over the last 5 years we’ve almost doubled client numbers, at consistent revenues per client while maintaining unit costs at similar levels. Client growth is at the heart of our profit growth, driving profits in 2020 that are bigger than revenues were in 2016, because adding clients and building a lifelong relationship with them is key: key to executing our strategy, key to delivering continued long-term profit expansion and key to rewarding all our stakeholders.

Moving on. The table here shows you profit before tax and earnings per share, statutory numbers in black, and the underlying numbers, excluding the £38.8 million profit from the disposal of FundsLibrary in blue. These show the underlying profit and EPS numbers, both up 11%, and the statutory numbers up in the mid- to high 20s.

Next slide, please. This slide shows our balance sheet and continued healthy surplus over regulatory capital requirements after the final and special dividends, which I’ll come to in a moment to pay.

A robust, resilient balance sheet is important to all our stakeholders, clients, shareholders and our regulator. It funds our growth, provides security and allows us to manage through unexpected events, and at the same time, deliver an attractive income stream to shareholders.

So looking at our dividends, just to end. Again, the table here shows the statutory numbers and ratios in black and the underlying ratios in blue. Although this table looks complicated, think of it as a dividend as usual approach. On underlying earnings, we followed our normal policy, an ordinary dividend based off our usual 65% payout ratio, topped up by a special generated from underlying earnings, resulting in a total dividend payout ratio on underlying earnings of 81%. Then again, following our policy of distributing excess cash whilst taking account of group’s regulatory capital, investment and growth requirements, and of course, market conditions at the time, a full distribution of the FundsLibrary proceeds as a second element of our special dividend. You can see the consequent dividends on the page. A final ordinary dividend of 26.3p per share, resulting in a total ordinary for 2020 of 37.5p, up 11%, in line with underlying earnings. A special dividend of 17.4p per share, with its 2 subsidiary components broken out here, and the total dividend for 2020 of 54.9p per share, up 31%. These dividends and our dividend as usual approach show the Board’s confidence in our market position and the robust nature of our balance sheet.

So thanks very much, everyone. I look forward to your virtual questions at the end. And I’ll pass to Chris.

Christopher Hill

Thank you, Philip. So 2020 has been a unique challenge for our business and also for the wider world. But throughout this, we’ve continued to execute our client-focused strategy and we’ve driven great success. The first half of the year was impacted by consistently low investor confidence, driven by the political uncertainty around Brexit and trade wars. When I spoke to you in January, I said that we were confident that any certainty provided by the election results would improve investor confidence and lead to a strong performance through the second half. Well, this is exactly what happened over the rest of the year, where, despite the ongoing pandemic and the significant challenge that this has brought to everyone, HL has delivered a performance of great strength. Throughout this time, we’ve listened carefully to our clients, delivering changes based on their feedback, in particular, with our new Wealth Shortlist and Fund Finder tool. And we’ve also used our insights to support them in the right ways to manage their finances during the difficulties of COVID-19. And it’s through this client’s first strategy and approach that we’ve been able to continue to drive growth across Hargreaves Lansdown.

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In 2020, we saw a record of 188,000 net new clients join our service. We delivered £7.7 billion of net new business and saw our stockbroking market share increased to 39.5%, driven by stockbroking volumes up 77% over the previous year. The continued high level of retention from delivery of our service saw active clients rise to over 1.4 million. As growth in our clients increases and expectations of service change over time, we see this reflected in the interaction with our platform. Over the last year, we’ve seen significant increases in how clients interact with us digitally. As we look ahead, we expect this to continue as clients embrace a more digital and connected service model. Just a couple of years ago, these volumes would have been difficult for us to manage. However, through the investment we’ve made in both our service and our technology during recent periods, we were able to ensure both the resilience and scalability of HL and to react to the ongoing uncertainty associated with the COVID-19 pandemic.

Clients need an investment and savings provider that is secure, consistent and resilient through difficult times. They need to be able to trust that their provider will be there to support them in fulfilling their financial needs and will deliver the right outcomes for them in times of difficulty. The resilient performance we’ve demonstrated this year has highlighted our ability to do this and to provide a lifelong service that can evolve with client needs.

It’s through the performance we’ve delivered this year and the clear strategy that we continue to follow that I can say I’m looking ahead with confidence despite the ongoing economic uncertainty that the next year may well bring. Our 3 fundamental drivers of growth have not changed: the market opportunity; the importance of our relationship with clients; and our client-focused strategy, which is embedded within our culture and values.

I’ve shown you this slide before, but it is absolutely fundamental to our approach, and this has not changed. I talked earlier about our response to the difficulties the world’s faced this year and how our clients remain at the center of everything that we do. At HL, we have a very clear purpose, to empower our clients to save and invest with confidence over the long term. And we enable this through a culture and a value set that are focused on ensuring we are helping our clients in the right ways to deliver the best outcomes for them. HL’s role as a lifelong partner for clients is growing, and we must continue to invest in and develop our proposition, capabilities and digital technology in line with our client-focused strategy. We must provide an experience for clients that is appropriate to their revolving life time savings and investment needs.

So it’s with this strategy, this culture and these values that we developed our approach to the COVID-19 pandemic. That approach delivered an outcome of resilience and strong results in dealing with record volumes. But our approach sets us up well for the future. From the outset, we had 2 clear aims: to ensure the availability of the core services that our clients need, whilst also prioritizing the safety and well-being of our colleagues. Our success here relied on the investment that we’ve made in recent years, which enabled us to swiftly move the majority of colleagues to work from home, adjust our approach to client contacts to manage demand, improve our digital journeys and adjust our marketing to provide the educational content that clients needed during the recent market volatility. We ensured that HL was always available, thinking about and communicating and engaging with clients on those matters where they needed support. In this too, we recognized how evolving the role of governance provides additional rigor and challenge to our decisions and results in better outcomes for all of our stakeholders. We’ve made development here that not only have allowed us to react quickly to evolving situations like the COVID-19 pandemic. In this case, strong governance allowed us to provide greater rigor and challenge to decisions, ensuring we’ve been able to act with certainty and deliver the right outcomes throughout this time.

But we’ve also implemented a number of changes in this part of the year that underpin and ensure transparency for our long-term proposition development such as the Wealth Shortlist and Fund Finder tool. By investing in the right ways and making the changes that clients want most, we build our relationship with clients through a service that delivers an outstanding experience no matter what the circumstances or their needs. That works both for the short term and over the long term.

The evolving nature of clients’ long-term needs continues to get more pressing every year. And more than anything, I think conditions like we’ve seen in 2020 have exacerbated this. We recognize how complex the U.K. wealth landscape has become and the challenge that this brings in supporting people. Financial requirements are becoming increasingly complicated as people live longer, as long-term savings obligations move from companies to individuals and the low interest rate environment persists, with added volatility and uncertainty. In short, the market opportunity remains significant.

We focused our investment on building scalability and capability, with a strong client service ethos at the center of it, all in order to capitalize on this market opportunity. One way we can see the payback of this investment is the growth in our market share. Since 2016, our share of the D2C market has grown from 37.5% to 41.1%. In our addressable wealth market, we’ve grown from a share of 6% in 2016 to 10% today. And if we include cash, we’ve doubled our share from 2% to 4%.

The complexity of the U.K. wealth landscape will continue over the long term. And we have an exciting opportunity to provide the service that our clients need in order to navigate this effectively.

And it’s through deep understanding of clients and their changing needs that we are consistently able to prioritize and respond and develop the capabilities that they most value and that can effectively address their financial needs over the long term.

There are three important points on this page. Firstly, the investment that we’ve made in our platform in the last three years has enabled us to service and interact with a volume of clients and client transactions that we were simply not able to do so prior to this investment. You can see that on the stats on this page, with 135% rise in digital visits on the platform, 116% rise in transactions executed on the platform and 154% increase in share trades, just to pick out a few stats.

Secondly, our understanding of client needs has increased significantly as a consequence of these interactions, which, given the trend of increasing expectations of the level of service clients expect and the speed of delivery of change therefore required of the wealth industry, that creates a key competitive strength for us.

Finally, as I’ve said, all of the stats on the page here are client engagement metrics. It is this core engagement that supports the subscription-like revenue that builds the lifetime value of clients and then positions us for attractive growth.

And we’ve used this insight to fuel the changes that we’ve made to our capabilities in 2020 across service, technology and marketing. Just picking a few from the list. We’ve expanded our Active Savings service to offer more banks and easy access products. We’ve developed our investment solutions with more segregated mandates, development of retirement solutions and the Wealth Shortlist. We’ve developed mobile app functionality. The popularity of our mobile app continues to significantly grow and represent an increasingly important feature for our clients. Of the 1.2 million clients who logged in online, 43% did so through the app, while 33% of online client-initiated share trades came by the app, more than double last year. Developing digital capabilities further remains a priority for us. And it’s important that we remain agile and are continually anticipating and responding to changes.

Alongside this, we continue to invest in making core journeys easier. This year, we redesigned the user journey for online transfers to make it clearer and easier to use. And as we raise awareness, this year, we launched our first omnichannel advertising campaign.

As clients’ financial needs continue to evolve, so does the way they use our platform and service. And we must continue to ensure that our offering reflects their needs across their entire lifetime.

This slide perhaps brings it all together best. It gives you an insight into our strategic ambitions and the direction of travel. We’ve been focused on appealing to a broader demographic, including a younger demographic. We have been broadening our product range so that we can service this broader demographic across its needs, including from birth, all the way to later life. The consequence of all of this is that since 2016, we have seen a big increase in clients across demographics, and particularly in those age brackets that are still in the accumulation stage of their wealth journey. Put very simplistically, the clients are going to stay on our platform for longer. They are going to have a broader spectrum of product to meet their needs over their lifetime. And what that all means from a shareholder perspective is that the lifetime value of the client is increasing.

When we invest in the platform, products, service, regulation and governance, we do so with the lens of ensuring that we service these clients well throughout a lifetime. And ultimately, this leads to an increase in the lifetime value of each client on our platform. Looking at this year alone, we’ve welcomed a record 188,000 net new clients. Compared to previous years, these clients tended to be younger, joining us with slightly lower assets. So that has brought with it the opportunity for us to support them throughout their accumulation journey and into retirement. It’s the ability to support clients with the solutions and associated products they need along their journey and throughout each important life stage that underpins our continued growth, flows and earnings.

So the future opportunity for HL is clear. By having the infrastructure, governance and proposition and service to thrive at scale, we can support clients over the long term and through difficult market conditions, like the ones that we’ve seen this year. By using our scale and insights, we can gain an unparalleled understanding of investor behaviors and needs. That enables us to develop engagement with clients. And then by delivering the right combination of proposition and service, we can establish and maintain lifelong client relationships.

But we’re not stopping. We will continue to innovate and build a tailored, diverse and effective offering for clients that will ensure their financial resilience over the long term and deliver them the right outcomes. We have an opportunity to move our clients through a journey of first investing to transferring other assets to our service, ensuring that they are accessing their annual allowances, regularly saving into their accounts, and finally, to bringing more of their household saving all into one place with us. This strategy delivers retention and growth for the long term, and it’s how we deliver returns for all of our stakeholders.

We’re cognizant that in the near term, the U.K. economy continues to face a period of uncertainty as we work through the many issues arising from COVID-19. Unemployment levels have increased significantly, whilst economic growth has decreased. The near-term impacts on our clients and the wider investment community as a result is difficult to call. Client confidence may be impacted, and in turn, their investment decisions as well. And with interest rates at all-time lows, saving cash through Active Savings could also be unappealing. However, we will focus on maintaining our service and our engagement with clients and developing the breadth and strength of our offering. So if the landscape improves, we are well positioned.

It’s with this confidence in mind that I’m looking further ahead. And I’m focused on our plans to execute and deliver on the key opportunities that I’ve outlined today. Over the next few years, the wealth industry will continue to develop in response to the changing requirements and challenges that people have in saving and investing alongside the pressing demands of everyday life. We are thinking and planning ahead and responding to client feedback to ensure that we are leading the next phase of growth for Hargreaves Lansdown. This underpins why I sit here now with confidence. Current headwinds aside that will, quite frankly, impact everyone, but confident that we will emerge stronger and better positioned than the competition. We are confident in delivering strong growth and returns through the cycle because: firstly, the historic investment in our proposition and service has helped us build scale to service a growing client base, and you can see the benefits of that investment already; secondly, because we’re listening directly to client feedback for what we develop next; and in that light, thirdly, we are proactively developing our proposition to reflect the feedback that clients want, an outcomes-based interaction that provides them with an educated choice that reflects their own particular circumstances. And we’ve already started that journey.

We are thinking about multichannel development to create an unrivaled range of tools and solutions to help them to achieve better outcomes. And we are combining that with a continued intelligence and insight that we get from clients about what they need. And these all ensure not only the retention of existing clients, but the acquisition of more clients who realize the extent of our capabilities and how they provide outcomes that address their needs.

And I combine all of this with a simple fact. By taking on clients at an early stage and keeping them over a lifelong relationship, we enhance the delivery of value to them and to our shareholders.

So I’ll leave you on that confident note, and we’ll open the call up for some questions. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions]. We have a question from Andrew Sinclair of Bank of America.

Andrew Sinclair

Well done. Good numbers today. Three for me, if that’s okay. Firstly was just on marketing costs. As mentioned, up from a somewhat depressed level. Would you say we’re now at kind of a reasonable run rate? Or was this a slightly unusually high marketing cost number as you were taking advantage of the backdrop?

Secondly was just on active savings. Just wondered if you could give us an update on timing for launching Cash ISAs within Active Savings and just on the margins outlook for Active Savings in general.

And thirdly was just on the pipeline for any back-book transactions. Just wondered if there’s anything in the hopper at the moment.

Christopher Hill

Thank you. I note that’s three questions, but let’s go through it. Right. The first one, on marketing costs, and I think Philip has given you some pretty clear stats there in terms of when there is an opportunity, we will spend into that opportunity. That is the right thing to do. You spend on that marketing late point in the year, the future benefit comes through to that. Where we are focused is on growth in assets, revenues, earnings, and therefore, the dividend. That’s the growth that we’re focused on. And it’s not in 1 year for another. You have to look at it through the cycle. We are very mindful of costs. We’ve shown that cost discipline in that chart that Philip put up. But where there is an opportunity, we’re going to invest into that. And I think the results speak for themselves on that basis. With record levels of clients coming in, there was an opportunity. We talked about it at the half year and we did explain very clearly that we see activity levels pick up. We think that, that will lead to an increase in investor confidence, and those are exactly the right conditions for us to be going on to the front foot.

Second question was about active savings and the timing on the Cash ISA. I’m not going to say anything on timing. The Cash ISA is very nearly there. And you will see it when we roll it out to clients, but we have been working away on that.

And then I think the final comment on the — the final comment on — I think it was on the margin. And it’s a low interest rate environment so I think that’s a very tough environment for a cash savings platform. It does though provide a valuable service to clients. It makes their lives a lot easier and manageable online. The rates on offer are significantly higher than the big banks. And it’s a proposition that we continue to develop, and hence, the focus on the Cash ISA. And the feedback that we’ve had on the usability, the user experience on Active Savings has gone or continues to go really well. And I think it’s a very integral part of the service.

And then, I beg your pardon. Then you did have a third question. Sorry, that was a dramatic pause. So yes, you were asking about the pipeline back book. No, no, I’m sorry, I’ve got no comments to make. We haven’t got anything in the pipeline. At the moment, there is a little bit of a hiatus post the changes in regulation, and we’re clear that there are opportunities out there. And as and when they emerge, we will be ready for them.

Operator

We have a question from Haley Tam of Crédit Suisse.

Haley Tam

Congratulations on a strong set of results. If I can ask 3 as well, please. I’ll be greedy. First of all, on Slide 24, you do set out the client retention rate being stable for us over the last 6 years. But it did drop from a peak, I think, in 2017 of 94.7% to the 92.8% this year. And I just wondered if you can give us any color on the reasons for that fall. And I guess linked to that, I’d be interested to know what you expect the retention rates to be for the predominantly stockbroking client wins, I think it was, that you had in the second half of this year. I guess that was probably 2 questions.

So then I guess my third question would therefore be about the volume of transfers that you’ve actually seen during the second half. I noticed that transfers in and out, I think you said before, were dampened by COVID-19 constraints. I just wanted to get any update on that.

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Christopher Hill

Haley, thank you. I’m going to let Philip talk to the retention point and perhaps also to the transfers, too. And then I’ll come back on the other one.

Philip Johnson

Yes. So you’re asking a question about retention rate. If you — when we look into the retention rate this year, there’s a couple of interesting factors. 1.5 years that we spoke about was in order to get the back-book transactions that we did right at the start of our financial year, we are willing to take on a number of clients that were in flights to other places. So that’s made a little bit of a flip down.

The other factor is, again, quite technical, which is we have a definition of active clients, those with over £100 in their accounts. That’s the definition that we’ve used ever since float and so you can see a consistent ratio. But what happens when you have a really severe market drawdown, some of the clients who are in relatively earlier stages of their investments, particularly regular savings clients, fell down under £100 of assets in their portfolio just because the market movements so that flipped the ratio down. And that’s part of it. And then you’ll also see thus far, what we’ve done is as more companies have listed, we’ve noted that people have different retention rate measures. And we’ve, therefore, provided our retention rate on a similar basis, just a comparability with our companies. And when you look in that, you’ll see that the retention rate has actually been rock solid stable over the last 3 years. 95.7%, I think it was this year.

On the transfer side of it, no penetrating insight here to say that getting transfers done generally is pretty painful. Getting transfers done with anybody requires both back offices to be working effectively. And it’s no penetrating insight to say in COVID-19, that’s been pretty tricky for a number of providers. We think we’ve held our end up pretty well and held the service together. But they have other people, for example, have closed all their phone lines or, actually, I have one recently that said we’ll be back in August. I don’t think that’s a client service any of the industry should aspire to, frankly, but it does come up transfers. And therefore, we’ve seen more contributions on the cash side in the most recent period. That’s part of what drove the activity cost that we were talking about, just the physical cost of taking those on, the couple of pence per debit card transaction add up when you have a lot of them.

Christopher Hill

Thanks, Philip. So then, Haley, your other question, I think then, was about the clients that we brought on recently and sort of any thoughts about that. So I think that the first thing I would say is, I think unlike some platforms who might have picked up new clients who are perhaps more akin to day traders or gamblers, you can’t bet on sports events, well, we see our clients who are more engaged with investing for specific financial objectives and using their tax allowances. And that’s how we then subsequently go on to engage with them. It’s fairly early days to determine whether they are transitory. But we’ve got a specific focus on these new clients on on-boarding them with the aim of building up that long-term client relationship. And we watch their activity. We watch their interaction with us extremely carefully. And there are times that they start to diversify. Look, I think through COVID, I think one of the important lessons for all of us is about resilience. Now I say that with — from a Hargreaves Lansdown perspective because we’ve invested significantly in technology in order to provide that resilience and that scalability. But I also think that people themselves through this period have spent a lot more time thinking about their own financial resilience. That is exactly where Hargreaves Lansdown is positioned, with the breadth of offering that we’ve got, the level of insights, the level of engagement that we have with our clients. And we’re absolutely focused on helping them to save and invest over the long term.

Operator

We have another question from Charles Bendit from Redburn.

Charles Bendit

Yes, a couple of questions from me. So the first one on market share. The Platforum market share metric that you recall has decreased for the first time, I think, or certainly in a long time. Can you help us understand the dynamics behind that and which types of models are taking that incremental share?

Then my second question is on the share margin guidance. You mentioned this as a bit of a CFO mugs game. And clearly, you’ve given quite a wide range. But can you clarify why you’ve chosen to lower bound of 30? Just based on the denominator of shares that you own, what are you inferring high levels of volumes by comparison to the 3 halves preceding this latest one?

Christopher Hill

I didn’t hear everything that you said about the market share. So I will — I’ll do my best to answer it. So you were asking about the slight dip in the 6-month numbers on Platforum market share from — I think it was 41.7 to 41.1. Look, in that period, we’ve got a significant market drop and that’s really how I’m looking at those numbers. So it’s a change in — a changing asset value through that time where that’s changed that position slightly.

When I look at the level of client takeup, the new client acquisition that we’ve had, I’m very confident in the strength of the offering that we’ve got. We had 94,000 net new clients for the record 4 months through April, I think. We still saw a strong May and June with a further 44,000 net new clients added. So I think we’ve had a strong performance through the period. And I go back to the point that I was making about the — we’ve had a — we continue to have a very broad mix in the demographics of the clients that we take on. But we have got an increasing mix or an increased mix, and you can see that from the chart that we put up, in that stage of accumulating wealth. And the key thing here is us continuing to invest in the breadth of proposition that we’ve got and in the high-quality service that we’re providing because that’s how we can service these clients, develop an engagement with them and build that lifelong relationship. And as they accumulate wealth, obviously, their lifetime value is growing.

Philip Johnson

Okay. And then just to your question on share margin guidance, the sort of why, I think, it’s so wide and why it has such a low end. I mean I was thinking that this is a CFO’s mug’s game. But when I give out guidance, clearly, I want to give you helpful guidance as much as possible. Last time, that wasn’t great guidance just because of what happened subsequently that’s so dramatically different. We’ve had 3.5 years of running in the range that I gave out last time. We’ve had 5 months of running outside it. So what I’m trying to do is not just give you guidance for you to look like [indiscernible], but to try and give you a bit of information so you can look at trading levels in the market and stay up with actually what’s happening out there without me having to kind of stand up every month and put an RNS out. So hopefully, this is more helpful and useful than the previous one where I just gave you a narrow band. It’s a wide band because, at the moment, it’s quite hard to anticipate what clients might do post summer in times of more volatility given their own financial circumstances.

Charles Bendit

That’s useful. Actually, I was wondering if the 30 basis point slowdown was potentially quite a high lower band because the 3 previous halves have been around 27, 26. And I just wondered whether — we’re only 1 month into the year, whether you’re inferring the volumes are sort of structurally potentially a bit higher than they have been.

Philip Johnson

Well, I don’t know. I mean, I said in my speech earlier that it was running at about 35,000, 40,000 a day right now. That’s clearly showing that it’s coming down off the peak that it’s been at. But it is a little bit of who knows, frankly.

Operator

We have a question from Andrew Crean of Autonomous.

Andrew Crean

A couple of questions, if I can. Could you talk about HL Funds, the net flows into HL Funds or outflows from HL Funds? I know that the investment performance has been pretty poor. And whether we should continue to expect further outflows from that over time.

And then secondly, you’ve given us some guidance on the cash margin for this year at 40 to 50. If current base rates, sort of 10 basis points, plus 12-month money at 30 basis points, was around this time next year, what would the cash margin be — guidance be then? I mean we’re in a transitionary phase when you’re giving the 40 to 50. What I really want to understand is what the end point is given current levels. And then could you actually tell us what the margin that you take on Active Savings? Is it 0, 5, 10 basis points?

Philip Johnson

No. Andrew, I think I’ve got a clean sweep of those. So I’ll just take them in order. On the HL Funds side of it, I’ll start with the investment performance, if I may reverse order to what you said. There was underperformance in the first half of financial year. If you actually look at the performance of the Multi-Manager Fund range since January, which is when the first big slab of Woodward income — equity income was returned, it’s rock solid in line with the sector. Problem with an investment like we had is it will stick in the track record for a long period of time. We can’t control that. What we control is what goes in the front end of the investment performance track record. Therefore, we’re thinking really hard about how the portfolio construct will we do. For the last 5, 6 months, I think, 6 months now have actually been boringly in line with the sector. However, there is a bit of a rump of Woodford still left in some of those funds. That does make it a little bit difficult for us to go out and actively market. They are under 2% now in the largest holding of two, and it’s more in line with the rest. And as we’ve said before, when they first gated, there was a — sorry, when the Woodford fund first gated back in last June, there was a bit of a spike of outflows. When the market went for the COVID burden in early March, in common with nearly every other fund, there was a bit of an out. But otherwise, it’s incredibly boring. There’s a couple of million outflow a day. If I was the CFO of an asset management company, I just really wouldn’t be interested in that £8 billion book moving like that.

On the other hand, select funds had absolutely outstanding performance since January, really amazing, and seeing interest on things like the global fund as a result right up there. And if you were a client on the Board, you’d be extremely happy with its performance. So there’s things in both of those. But it’s only a part of our investment solution. We break it out to help you on the modeling. But from a client perspective, it’s just one of the things they can buy, and we are acutely conscious that it’s for clients to be in the investments that are right for them, not right for us. That’s why we have a lifelong relationship with them. On the cash margin …

Andrew Crean

Sorry. Philip, what was the net outflows from HL Funds?

Philip Johnson

Sorry?

Andrew Crean

What was the outflows? I mean the question was, what was the level of outflow?

Philip Johnson

Probably a couple of million a day apart from those couples of sites, Andrew. And I think we can talk off-line about it because it’s really not big deal at all.

On the cash margin side, and I think you’re asking a question actually about financial year 2022. I mean it’s a bit like asking what the dividend is going to be for next year. I can’t tell you that now. It’s a question of where we’ll be when we get there. I’ve told you 40 to 50, I’ve told you, is trading down. You could see these two halves of the year that we just come out, so we’re 18.60. So it’s grading down, as you’d expect. And if I renew, I would assume that it would be under the 40 to 50 basis points next year, but I can’t tell you where yet.

And then on Active Savings, we said low single-digit margins. To be honest with you, nothing changes in — from previous results with the current interest rate environment.

Operator

We have a question from Greg Simpson from Exane BNP Paribas.

Gregory Simpson

Firstly, you mentioned complexity in the U.K. financial landscape and also thinking of multichannel development. I’m wondering, is it of interest for HL to build out the advice business in terms of having more advisers at some point? I’m thinking presumably quite a big part of the £1 trillion addressable wealth market you mentioned is intermediated with an adviser today. So just looking for some color how you’re thinking about advice.

And then secondly, just a few questions around the cost base for next year, hopefully, simple. Firstly, the quantum of FundsLibrary costs that come out of the cost base next year, just to think about. And then secondly, the £6.8 million of incremental dealing costs relative to £62 million of higher dealing revenues. Is that kind of 11% ratio? A good guide to thinking about how HL’s incremental cost margin is on trading fees, which, as you say, are pretty hard to predict where they go from here.

Christopher Hill

Thank you, Greg. Right. The first one on the complexity of the savings investment landscape in the U.K. and you refer to it as being channel development. So the point that I’m making is, over the next few years, the wealth industry is going to continue to develop to the changing requirements that people have got. And you can see perhaps an accelerant of that coming through the last few months, how you manage the savings investments along the pressing demands of everyday life, because the responsibility has quite clearly shifted on to the individual.

And I believe that what — and I can see this through the interaction that we have. I can see what clients are looking to get. And I talk about this outcomes-based interaction that provides them with an educated choice that reflects their own particular circumstances. So — and as I’ve said before, I think if you were to describe the investment market as advised versus non-advised, I think that’s — and I’m not directing it at you, Greg.

But I think that that’s actually now is an increasingly old-fashioned way of looking at what’s out there, because people have a range of different situations that for themselves change over time. People have a different level of sophistication depending on their particular circumstances. With the advent of auto enrollment, the 30-year-olds in 10 years’ time, they’re going to have a meaningful sum of money that they’re going to have to think about how to manage and how to invest. And they’re going to need an interaction with a provider that is able to give them the knowledge, insights, guidance, and yes, maybe advice, but the support to be able to understand, what are the decisions that I need to make, and how — what is my relative confident in being able to make that decision? And then having made that decision, can it just be really easy for me to do? And then can it be really transparent in terms of how it’s performing and how I’m paying for it? So that’s why important when — over the last 12 months or so, we’ve taken out about 9 different types of fee. We have a very transparent pricing structure. We think very carefully about how we manage our engagement with clients. And the advice model that we have, which is relatively unique, I think, is that if you want to interact and engage with an adviser, then you only pay for that as and when you need it and as and when you use it. And I think that is an important way of bringing that capability across the broader client base. I mean I think now the metric is just over 70% of our fee income from advice is from that one-off interaction. And I think that is great value for people. And you’re right, within that broader landscape, I think there are people that use advisers on an ongoing basis. And you’ve got to ask the question. As people take responsibility, and as people learn more, and as people see actually what it’s costing, and people think very, very clearly about value, but actually, you’ve got — if you’ve got a service that provides you with all the information that you need, it gives you the tools, information and insights and can help you all the way along that range, from very happy execution-only investment solution that helps me get to the outcome that I want, helping me with guidance, and actually, if I need to get advice, it’s all there, and I can manage my cash alongside my investment, and it’s all integrated, that’s really what the powerful proposition truly is. And that’s how we’re thinking about this. It’s continuing to develop the breadth of the proposition and that level of service.

Philip Johnson

On your questions on the cost side. FundsLibrary at the half year, if you remember, we said it made a £3 million annual contribution, so that would imply the cost for about £4 million. However, remember that we’re not trying to manage on a micro kind of basis. As we’ve talked about, it’s about investing in opportunities. We didn’t see the opportunity in FundsLibrary. So we’re thinking about wider opportunities from the business. It’s a great business. It’s just not for us.

On your dealing cost points and the margin. I suppose, well, first thing I’d say is the margin is a number of deals that we did last year, go to some margin about 43 basis points. We’ve got a 30 to 50 range, so that would imply something similar on a REIT across basis. Don’t be too cute because the drivers on this are numbers of trades rather than anything else. And some of the overseas versus U.K. complexities because they have different trading costs, as you might imagine. And within that line as well, as I called out in the slide, there’s been some debit cards kind of related things. So I suppose the long and short of that is that, that would imply something similar for next year with the guidance range that we’re talking about.

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Operator

We have a question from Paul McGinnis from Shore Capital.

Paul McGinnis

A couple of questions on revenue yields. Just first of all, in respect of shares, I’m just wondering, just tying it into the slide that you have in terms of the overall demographic becoming younger, and it’s seemingly been the case during lockdown that that’s where some of the additional share-dealing volumes have come from. Just wondering therefore whether you expect there to be perhaps a degree of permanence to the revenue yield increase within that area, if indeed the demographic continues to sort of move in the way that you expect. And I’m just — just tied into that. I’m just interested in the fact of how many of those new younger clients. Like was it — was there use of wrappers as opposed to just opening a fund and share account? Was there any difference of the existing base in terms of their use of wrappers during that period?

And then second question was just returning to Andrew’s question in terms of the run rate or cash revenue margins. Rather than sort of asking you to predict what the June 22 revenue yield will be in that asset class; it was more a case of what is it as of right now in terms of the blended rate that you’re actually having? If you’re putting on new term deposits today, what sort of rate are you getting on those, accepting that you have a lot of old stuff still to roll off?

Christopher Hill

Okay. All right, Paul. Thank you for those. I’ll go first, just talking about the mix in the net new clients that we’ve seen. And we have seen a — as I said, an increase in the breadth of the mix, which means that we’ve seen those with a younger average age. But when I say younger average age, I’m talking late 30s. Now they are most certainly much more engaged with share trading than average clients. And some of them have opened fund and share accounts. Some of them have opened ISAs.

But the way that we then seek to engage with them is to engage with them on their — what they’re investing in and supporting them in their managing their investments over a longer period of time. And there are early signs of — as they start to diversify. And that’s really, I think, where we — how we approach it, because you bring a client on board, you understand how they want to engage with the service. So you support them with knowledge, insight, direction to the tools that they can use around that. And you start developing that relationship. And then that’s when they start to — if they’re in one type of account, they’ll start going to another account. If they are investing in shares, they start to diversify into funds. That’s the way that we manage the engagement. I think it’s fairly early days to see exactly how that’s going to go, but we are specifically focused on them and on that on-boarding, with the aim of building up a long-term client relationship.

Philip Johnson

Okay. On your question about run rates and things like that. I’m just going to tell you what the market is right now. The general premium for a 1-year deposit over the prevailing overnight equivalent is about 40 basis points. The market is still working out how price on your base, LIBOR, et cetera, and all the transitions. We’ll do then the best job that we can with our client base. I can’t really do anything more than that. I mean this is all publicly available market information. Hopefully, we’ve given you enough insight as to the shape of our cash flow produced and transfer modeling within the guidance range that we’ve given you.

Paul McGinnis

Okay. Did you say one year was around about 40 for that? So on the three months, that would be obviously quite a bit lower than that?

Philip Johnson

Yes. I mean I don’t have that on hand. But remember, the SIPP money is on the 13-month rolling deposit base within [indiscernible] too much cash is in the SIPP, but there should be enough information to help you.

Paul McGinnis

Right. So just from memory, is it around 50% of that cash would be in SIPP and 50% ISA, roughly? Or is it more of a skew?

Philip Johnson

I think at the moment, it’s like 45. But do you know what, you’re probably better off looking it up than me making it up.

Operator

We have a question from Rahim Karim from Liberum.

Rahim Karim

Congratulations on a strong set of numbers. Two questions, if I may. One was just on the useful kind of anecdote you’ve given with respect to the incremental revenue from — associated with the higher levels of marketing spend. Can I just check whether that run rate include any back-book transfers or benefits from those? And what proportion of income was seen in FY ’20, i.e., what rolls into FY ’21?

And then the second question was just about Active Savings. Obviously, [indiscernible] kind of announced that they’re going to move into this space later in the current calendar year. I was just wondering if that had any impact on you, guys, whether you’re seeing any kind of response from the banks or any pressure on kind of the margins that you might be able to achieve as a result of that? Or if it’s kind of completely separate? Any color there would be great.

Philip Johnson

The first one. Now you weren’t terribly clear on the line, and I would try and answer your question so I get wrong, apologies. But I think you were just interested in the run rate of the revenues that we got from the £7.7 billion of net new business to be written this year. It was about — and how much of that came from back books. We disclosed it was all in the first quarter. It was about £0.9 billion. All that calculation does is there’s a myriad of sins in revenue margins and things like that. So just to exclude the other income, you got about 50 basis points of revenue on the £100 billion of assets that we had over the full year, times 7.7, you get about 40. It’s just illustrative. The payback on the marketing cost is high. But remember, those are future revenues. And the benefit of future clients is just they become existing clients and most of our flows in the future. Most of the flows we get come from our existing client base. It’s just about increasing the demographic chart that Chris showed you earlier.

Christopher Hill

Thanks, Philip. And Rahim, so then your question around Active Savings. So I mean, yes, I’ve seen a competitor talk about launching later on in the year. So therefore, I can’t say I’ve seen an impact from the competition yet. We are seeing an impact, however, from the rates that are being offered by national savings and investments on a huge scale. So I think — as I’ve said before, I do think these are really challenging times for Active Savings. I mean we are still offering rates ahead of the banks. The user experience, which enables you to manage across the financial services compensation scheme, 85,000 per account, that is all a good service to provide. But from a rate perspective, I think it’s difficult. And when I look at some of the other competition who offered sort of a cash service alongside, if they partner with someone else, there’s obviously another mouth to feed in that supply chain. Obviously, we’ve developed all of this ourselves. And I think it’s going to be — it will be tough for Active Savings in the short term. But I do think it’s a very attractive option for people to be able to manage cash savings alongside their investments over the longer term. And certainly, as I’ve talked about before, particularly when you have an aging demographic who wants to be able to manage their cash and liquidity alongside their investment and income. And again, that’s why I think it’s important to have a breadth of service. There may well be people who are — given the volatility are not keen on accessing or investing their money in the markets at the moment, but they need to have somewhere to manage their liquidity, and they need to have instant access to liquidity. And I’ve certainly seen the headlines where other places have not been able to cope with the volume of demand. Again, I come back to the importance of resilience and scalability and the investment that we put in to ensure that we are able to cope with these extremely busy periods.

And with the reduction in interest rates as well, I think everybody is going through somewhat of a reset in terms of the return that they’ll get on cash. But there’s another factor to that, which is through COVID-19, people have recognized the importance of financial resilience, and a key element of that is to make sure that you’ve got cash readily available. And again, Active Savings, I think, positions itself really well with that.

Operator

We have a question from Melwin Mehta from Sterling Investments.

Melwin Mehta

Good numbers there. Three questions, if I may. Number one is, why was FundsLibrary sold? And what was the thinking behind it?

Christopher Hill

Melwin, can I take all your three questions up front, please? Then we will — I think we’ve done — I mean it’s all an interesting experience for us, virtually, socially distancing, handling questions between us. But if you just let me have them first, and then we’ll come back. Don’t worry. We will cover them.

Melwin Mehta

Sure. So number one is, why was FundsLibrary sold? Second is, given your U.K. market share, any thoughts kind of to cede other geographies and go outside the U.K.? And the third one was, given the retention rates, obviously, assuming kind of taking a reverse of that, we are losing roughly 6%, 7% of our clients. Why are we losing them and where are they going?

Christopher Hill

Right. Okay. Melwin, thank you. Got those 3. Right. So first one, why was FundsLibrary sold? And well, I made a comment earlier on, we — FundsLibrary is a business-to-business service and it doesn’t — didn’t fit with our overall core strategy, which is absolutely focused on clients. I think it’s a great business. And it’s — I think it’s got absolute opportunity in its space. But we’re very disciplined in our approach to investments. We’re very clear in where we are investing, and we have a very clear strategy. And that is one that’s focused on our clients. And when you look at it from that perspective, FundsLibrary wasn’t going to get the sort of the enthusiastic shareholder backing that we as the shareholder has. So it made the right sense to let that go elsewhere. It’s a great business. I wish it really well. But we are very, very focused in what we’re doing.

So second thing. Given the U.K. market share, any thoughts to go elsewhere? Well, look, I think that’s why I always make this point because there’s a lot made of the share that we have in the direct-to-consumer market, and that’s the 41% share, which has increased, obviously, significantly, as I said, since 2016. But you know what, we only have a 10% market share in the U.K. And actually, when you include cash within that, we only have a 4% market share. So there is clearly a significant growth opportunity, which I’m talking about. There’s a structural opportunity. But the way in which the people manage their money is shifting gradually, and Hargreaves Lansdown is right at the forefront of that. That’s where we are investing. So our focus remains with the U.K.

Then your final point, which is about retention rates. And you know what, if I got a business that’s got a 93% or Philip gave you some interesting stats there, a 95% retention rate, I think that’s pretty special, quite frankly. And I don’t — — certainly, I’m not complacent. Certainly, I don’t take it for granted. Absolutely recognize the need to continue to invest in our service and invest in our proposition. But clear answer, okay, so where do those clients go? Well, part of the answer is people take money off the platform because they saved. They’ve got to the state — the life stage that they wanted. It’s got them to the outcome that they wanted, and they want to spend that money. And I’m delighted that they’re able to do that.

Second one is, sadly, people die, and therefore, the money moves off the platform. That, again, is a fact of life. And that leaves you then a very small proportion, which is transfers elsewhere, where they will go to a provider based upon the particular needs. And in one aspect, people do to go to advice in that instance. And that’s why when I talk about a multichannel capability and making sure that the proposition is broad and understood to be as broad as it should be. In the past, the advice business was very, very separate to the Vantage platform. Well, you’ll note we don’t talk about the business in that way. And I talk about the overall breadth and range of service that we provide to people. And we want to be able to tailor that to their individual needs, particular circumstances, which evolve and develop over different times. And it helps to, sometimes, for people to be able to talk to an adviser. Sometimes, that leads to something. Sometimes, it doesn’t. But I’m absolutely fine with that because it’s all part of developing that lifelong relationship that we have with our clients. And I think that’s the most important thing. And I think in terms of — there’s a number of pages that we’ve stuck in here that I think demonstrate that really well.

Melwin Mehta

And if I may squeeze one, a very small one. Is there an opportunity for us to cater to the IFA market because we have the technology?

Christopher Hill

I’m sorry, Melwin. That was a little bit unclear. Can you…

Melwin Mehta

For example, I mean a platform like TRANZACT getting to the IFA market, so one step away from the real customer or if I may say that. Since we have the technology, is that a possibility, opportunity for us staying within the U.K. market?

Christopher Hill

Well, I see your point. I actually think the opportunity is far greater in developing the breadth of the proposition such that we have. I think there’s a — when I talk about — just be careful how you think about the advice business model when you look at the proposition that we actually provide, which will provide you all of your administration. There are plenty of places you can go to look at performing funds.

There are fewer places where you can go where you’ve got the breadth of that. You then have the opportunity to be able to invest in shares, manage your cash, all of that. And then also, you’ve got the insight, knowledge, guidance, support and advice as you need it. And actually, if you’re at Hargreaves — a client of Hargreaves Lansdown where the pricing structure is so transparent, we’ve taken away all of those nuisance fees. You’re only paying 45 basis points if you’re investing funds, but that changes as the amount increases. And you’re getting all of the support and all the breadth that you’re getting from us. And if you need to have advice, you’re only paying when you use it. I mean, quite frankly, I think that is a much, much stronger proposition, and that’s where we’re focused. Because we’re focused on developing to the needs of clients and supporting them through a range of their needs. That’s where we are very disciplined in our focus.

Operator

We have a question from Shamoli Ravishanker from Morgan Stanley.

Shamoli Ravishanker

I have a couple of questions. Firstly, on the pricing strategy in both the platform and stockbroking business. Your pricing has been quite resilient since RDR. As you mentioned, it was driven by service levels, quality, brand, et cetera. How do you see these factors changing in the outlook given increased competition in the industry? What kind of catalysts would you need to see to reassess your pricing, both in the 2 different businesses, platform and stockbroking?

And second question is just on the recent press around potential legal case against Hargreaves related to the Woodford case. If you had any comments on this and if you have made any provisions as such.

Christopher Hill

Right. Thanks. Thank you. So question one, I think was about pricing in relation to share trading. And look, I think the numbers speak very clearly for themselves. And if you look at that market share increase, the investment that we’ve made in scalability and resilience, making sure that we’re always there, making sure that as the market evolves, you’re always able to trade, quality of execution, all of those things. That is actually what clients really look for. And I think as I’ve said before, about 75% of the share trades are executed within wrappers. So again, I come back to the importance of the breadth of the proposition. So I think we’re clear in our transparent pricing structure. We’re clear in ensuring that we continue to invest in scalability, resilience and the breadth of that proposition.

Second — your second question, you asked about provisions, which normally, I would — I’d let Philip go for, but I think we both come back with a very clear no.

And then, obviously, I’ve seen those — I’ve seen the press, too. But I’ve really got nothing more to say on that. I’ve seen those articles, too, because that’s all that there’s been, quite frankly.

And if your question really is about what am I focused on, and I think that’s really what I’ve taken you through today. Right now, I’m absolutely focused on — I’ve got just over 250 people, socially distanced, spread across 3 sites down in Bristol. I’ve got just over 1,200 people working remotely. I am focused on their safety, their well-being. And we are all absolutely focused on delivering the service that we want to provide and we think that our clients should expect.

So look, everybody, thank you very much. Thank you for your questions. I’m sure it’s getting a little bit hot in this room now. I’m sure the temperature is somewhere up wherever you are. Thanks very much for dialing in today. We will end there. And any further questions, James, Danny and the team will be available for the rest of the day. Thanks very much, everybody. Katelyn, can I hand back to you?

Operator

Of course. Ladies and gentlemen, this concludes today’s call. Thank you for joining. You may now disconnect your lines.



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