Hargreaves Lansdown founders in line for £50m windfall
The founders of Hargreaves Lansdown are in line for a windfall of almost £50million after the retail investment broker managed to buck the recent turbulence on financial markets.
Despite the savage downturn on the stock exchange, the wealth manager said it has been signing up more new customers since the end of June than it achieved in the same period last summer.
Inflows of new cash are running 30 per cent ahead of last year as investors brave the treacherous equity markets, said the company, which makes its money from dealing fees and other commissions.
Flourishing: Company bosses continue to pocket millions despite the stock market turmoil
Its reassuring comments sent shares in Hargreaves Lansdown soaring 76.5p or 18pc to 508.5p – their biggest rise in three years.
After profits leapt to £126million in the year to the end of June, the group lifted its total dividend for the period from 11.88p to 18.87p, including a special pay-out of 5.96p.
This will trigger bonanzas of £28.9million and £17.9million for founders Peter Hargreaves and Stephen Lansdown, who own stakes of 32 per cent and 20 per cent in the company.
Other City bigwigs such as Michael Spencer at Icap and Admiral chief Henry Engelhardt have also enjoyed huge dividend pay-outs.
Hargreaves, who started the business in his spare bedroom 30 years ago, said the board had decided to ramp up the dividend as it had no intention of ‘doing anything silly like making an acquisition’. He added: ‘We may return (our profits) to shareholders – it’s better than having it sitting around.’
His clients, too, had been anxious to put their spare capital to work rather than leave it earning a paltry return at the bank.
Hargreaves told the Daily Mail: ‘It looks as though rates won’t go up for some considerable time and people are looking at the income they can get by investing in equities. They can get great compensation for the volatility in the market.’ Investors have been busy seeking out bargains since the market ‘fell off a cliff’ in late July, with a lot of clients ‘bottom fishing’, he added.
Despite yesterday’s rally, the Hargreaves Lansdown share price is down 15 per cent from a month ago on concerns over a possible ban on lucrative commissions it receives from fund management firms.
Last month the City watchdog announced proposals to outlay the opaque fees paid by the big investment groups to brokers that promote their products, such as Hargreaves Lansdown.
Such income accounts for 25 per cent of the company’s entire turnover.
Hargreaves said that if the proposals come into force many of the firm’s customers could be hit with more ‘explicit charges’.
If the Financial Services Authority does come down hard but chooses to leave other corners of the fund industry untouched, the competitive playing field would be like the ‘north face of the Eiger’, said Hargreaves.
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