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A rival to Nutmeg? Under the bonnet of Hargreaves’ D2C discretionary service

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Written by:
03/09/2014
Hargreaves Lansdown is taking aim at the low-end direct-to-consumer (D2C) discretionary market after announcing plans to unveil a new discretionary portfolio management service in 2015 with a minimum investment of under £10,000.
A rival to Nutmeg? Under the bonnet of Hargreaves’ D2C discretionary service

Having received clarity from the FCA around what constitutes advice and what the regulator accepts as guidance, the D2C platform today said it will be launching a new ready-made investment portfolios for clients which it manages on their behalf.

The group already runs a full discretionary proposition for clients with over £150,000 but the new offering would be aimed at the vast majority of clients who hold less than this amount, and focus purely on the investment side without providing additional advice on other financial affairs.

“We’ve now got clarity from the FCA on what we can do, and clients have told us like having a discretionary portfolio without having to have advice,” Hargreaves’ head of financial planning Danny Cox (pictured) told Investment Week.

“We see it as adding an additional option for clients.”

Cox said the proposition – which is likely to have a minimum investment below £10,000 – would likely launch in the new year, with a price below its current, full discretionary service which has a TER of around 2%.

“Our current discretionary service has a TER of just over 2% so it will be under that,” he said.

The move would enable the group to help plug the growing advice gap as many advisers and wealth managers move away from lower net worth clients.

It will put them in competition with innovative low-cost providers such as Nutmeg, which currently offers a D2C discretionary service for customers with £1,000 or more.

Nutmeg’s exclusive use of passives, however, means its TERs come in at around the 1% mark, well below Hargreaves’ own. The D2C giant’s own proposition will invest in active managers rather than passive products.

Full year results

Earlier today Hargreaves reported a record pre-tax profit of £209.8m for the year to 30 June as it begins to deal with the initial impact of changes to its charging model and falling returns on cash.

In its first results since the shift to an RDR-friendly pricing model earlier this year, the group reported an 8% rise in net revenue to £291.9m for the year as a whole, as well as a 7% rise in pre-tax profit.

Both figures were broadly in line with expectations, but falling margins meant these figures were only achieved with much larger increases in assets under administration and client numbers.

Total assets under administration rose 29% to £46.9bn over the year to 30 June, the group said this morning. Client numbers also rose 29%: Hargreaves said it added 144,000 clients during the year, taking total numbers to 652,000.

Shares in the group are currently down 5% at £10.81.

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