The investment adviser's new lower charges won't change the fact that it lacks the serious competitor the market really needs
There was something a little odd in Hargreaves Lansdown's announcement this week of its new, supposedly super-low charges.
Take a look at last year's accounts. Hargreaves's main Vantage platform – its so-called funds supermarket – had an average of £31bn under administration (the midpoint between the opening position of £26.3bn and the closing position of £36.4bn). Hargreaves earned £227m in revenues as fees. That's a rate of 0.73%, and Vantage made operating profits of £150m, a more-than-healthy profit margin of 66%.
In the new world, in which platforms have been ordered by regulators to disclose their fees explicitly, Hargreaves this week trumpeted a figure of 0.45% for administering a client's portfolio. A drop from 0.73% to 0.45% sounds like a mighty fall. So you would assume profits would take a big hit. But no. Hargreaves says the changes will cost it only £8m in lost profit in the first year – or a mere 5% of the total for 2012-13.
What's going on? The official explanation is that a lot of ground can be regained by attracting more money to Vantage – volume gains, in other words. Really? Surely the gains would have to be stupendous to ensure the dent in profits was so slight.
One is left to conclude that, while the advertised rate of 0.45% is no doubt 100% accurate, Hargreaves expects to collect a lot of additional fees that fall outside that principal structure. Advice to clients: read that long list of other charges carefully.
In the meantime, forget any notion that Hargreaves has started a price war. The pips cannot be said to be squeaking at a company that starts with a 66% profit margin and expects only a modest hit to profits.
Indeed, the long-standing mystery about Hargreaves is why no competitor has been able to mount an effective assault. Maybe the implementation of the retail distribution review will change matters.
Hargreaves is undoubtedly superb at what it does – providing a reliable platform for DIY investors – but, at heart, it is merely a distributor and administrator of other people's products. It is extraordinary that of the total 1.1% fees for investors owning funds via Hargreaves, two-fifths will go to Hargreaves itself. In no other market does a distributor enjoy such a juicy cut.
Yes, Hargreaves deserves plaudits for using its clout to force lower fees from several big fund management houses. But what this market also needs is somebody capable of putting a competitive bite on Hargreaves.
*Time to rethink Shell's reassuringly boring image*
You can rely on Shell. That, at least, has been the theory for years. Shell was viewed as a model of quiet efficiency, controlled spending and disciplined allocation of capital. The company, ran the theory, had become reassuringly boring after the scandal in 2004 in which reserves were overbooked.
It may be time for a rethink. Shell revealed on Friday that its fourth-quarter numbers will be "significantly lower" than recent levels and the newly promoted chief executive, Ben van Beurden, said the 2013 performance was "not what I expect from Shell".
Investors' expectations were clearly more finely tuned – the share price was down only 1% by close of play. The market may suspect that Van Beurden was indulging the prerogative of new bosses and pointing out the blemishes in his inheritance.
Many play the "kitchen-sinking" game, of course, but Shell looks to face genuine challenges in achieving its astonishing target of generating $200bn of cash in the 2012-15 period. As Neill Morton, Investec's analyst, points out, at the halfway mark, the company is only 40% there.
Nor do any of the factors behind the profit warning look likely to evaporate instantly. The US shale revolution will continue to depress gas prices in the US. Over-capacity in refining seems to have become a semi-permanent state of affairs. The same could be said of sabotage at Shell's operations in Nigeria.
Investment in new projects can, of course, be trimmed, but oil and gas exploration and production is a long-term business. Budgets are set years in advance and Shell may have stepped too hard on the accelerator at the wrong moment.
A rise in oil price would make Van Beurden and Shell shareholders feel much better. But the nagging worry for everybody is that softer numbers from a global energy giant might imply that the global economy is not growing as fast as assumed.
*Roulette's a surefire bet for William Hill
*
After his angry exchange on Twitter this week with an anti-gambling campaigner, William Hill's chief executive, Ralph Topping, played it straight on the subject of electronic roulette wheels, aka gaming machines.
In the fourth-quarter trading update, Hills said it will look at "additional harm reduction measures", such as "responsible gambling messaging in advertising".
Here's a suggestion for just such a responsible message, to be displayed on-screen: "William Hill's machines each collect, on average, a gross win of £920 every week.
"We've got 9,327 of the things in our shops. Do the maths: even after paying gaming tax at 20% plus royalties, the net win is almost £1m a day for us.
"And these machines can't fail to win. That's the nature of roulette. The house has an unbeatable edge. Let us tell you, roulette is a lot less hassle than offering odds on Premier League football matches.
"Did you see what happened the other weekend? The top seven clubs all won and the punters backed 'em. That cost us £13m.
"Frankly, roulette is a godsend. Or, more accurately, it was New Labour that let us take roulette out of casinos and on to the high street.
"To think, some people thought the luvvies wanted to run a nanny state! Ho, ho. Press the buttons and have a spin if you wish – but you'll never get as lucky as us."
OK, it's a little wordy for a proper advert. But if the current government really is too feeble to return roulette to casinos where it belongs (see last week's column), it should at least keep the bookies' dead hands well away from the copywriting.
*Mining companies the big holdout on boardroom equality*
That's 98 down, two to go. We're talking FTSE 100 companies with female directors. The London Stock Exchange, which for a long time had Dame Clara Furse as CEO, on Friday appointed Joanna Shields and Sherry Coutu as non-executive directors.
The move coincided with news this week that women on boards of FTSE 100 firms now total 20%.
"The UK can and is succeeding in appointing women without quotas," said Helena Morrissey, the chief executive of Newton Investment Management and founder of the 30% Club. The two blue-chip laggards? No surprise that both live in the world of big mining: Antofagasta, in Chile, and Glencore Xstrata, the Swiss group that does things its own way.
A full-house of FTSE 100 companies with female directors may still be some way off. Reported by guardian.co.uk 4 days ago.
There was something a little odd in Hargreaves Lansdown's announcement this week of its new, supposedly super-low charges.
Take a look at last year's accounts. Hargreaves's main Vantage platform – its so-called funds supermarket – had an average of £31bn under administration (the midpoint between the opening position of £26.3bn and the closing position of £36.4bn). Hargreaves earned £227m in revenues as fees. That's a rate of 0.73%, and Vantage made operating profits of £150m, a more-than-healthy profit margin of 66%.
In the new world, in which platforms have been ordered by regulators to disclose their fees explicitly, Hargreaves this week trumpeted a figure of 0.45% for administering a client's portfolio. A drop from 0.73% to 0.45% sounds like a mighty fall. So you would assume profits would take a big hit. But no. Hargreaves says the changes will cost it only £8m in lost profit in the first year – or a mere 5% of the total for 2012-13.
What's going on? The official explanation is that a lot of ground can be regained by attracting more money to Vantage – volume gains, in other words. Really? Surely the gains would have to be stupendous to ensure the dent in profits was so slight.
One is left to conclude that, while the advertised rate of 0.45% is no doubt 100% accurate, Hargreaves expects to collect a lot of additional fees that fall outside that principal structure. Advice to clients: read that long list of other charges carefully.
In the meantime, forget any notion that Hargreaves has started a price war. The pips cannot be said to be squeaking at a company that starts with a 66% profit margin and expects only a modest hit to profits.
Indeed, the long-standing mystery about Hargreaves is why no competitor has been able to mount an effective assault. Maybe the implementation of the retail distribution review will change matters.
Hargreaves is undoubtedly superb at what it does – providing a reliable platform for DIY investors – but, at heart, it is merely a distributor and administrator of other people's products. It is extraordinary that of the total 1.1% fees for investors owning funds via Hargreaves, two-fifths will go to Hargreaves itself. In no other market does a distributor enjoy such a juicy cut.
Yes, Hargreaves deserves plaudits for using its clout to force lower fees from several big fund management houses. But what this market also needs is somebody capable of putting a competitive bite on Hargreaves.
*Time to rethink Shell's reassuringly boring image*
You can rely on Shell. That, at least, has been the theory for years. Shell was viewed as a model of quiet efficiency, controlled spending and disciplined allocation of capital. The company, ran the theory, had become reassuringly boring after the scandal in 2004 in which reserves were overbooked.
It may be time for a rethink. Shell revealed on Friday that its fourth-quarter numbers will be "significantly lower" than recent levels and the newly promoted chief executive, Ben van Beurden, said the 2013 performance was "not what I expect from Shell".
Investors' expectations were clearly more finely tuned – the share price was down only 1% by close of play. The market may suspect that Van Beurden was indulging the prerogative of new bosses and pointing out the blemishes in his inheritance.
Many play the "kitchen-sinking" game, of course, but Shell looks to face genuine challenges in achieving its astonishing target of generating $200bn of cash in the 2012-15 period. As Neill Morton, Investec's analyst, points out, at the halfway mark, the company is only 40% there.
Nor do any of the factors behind the profit warning look likely to evaporate instantly. The US shale revolution will continue to depress gas prices in the US. Over-capacity in refining seems to have become a semi-permanent state of affairs. The same could be said of sabotage at Shell's operations in Nigeria.
Investment in new projects can, of course, be trimmed, but oil and gas exploration and production is a long-term business. Budgets are set years in advance and Shell may have stepped too hard on the accelerator at the wrong moment.
A rise in oil price would make Van Beurden and Shell shareholders feel much better. But the nagging worry for everybody is that softer numbers from a global energy giant might imply that the global economy is not growing as fast as assumed.
*Roulette's a surefire bet for William Hill
*
After his angry exchange on Twitter this week with an anti-gambling campaigner, William Hill's chief executive, Ralph Topping, played it straight on the subject of electronic roulette wheels, aka gaming machines.
In the fourth-quarter trading update, Hills said it will look at "additional harm reduction measures", such as "responsible gambling messaging in advertising".
Here's a suggestion for just such a responsible message, to be displayed on-screen: "William Hill's machines each collect, on average, a gross win of £920 every week.
"We've got 9,327 of the things in our shops. Do the maths: even after paying gaming tax at 20% plus royalties, the net win is almost £1m a day for us.
"And these machines can't fail to win. That's the nature of roulette. The house has an unbeatable edge. Let us tell you, roulette is a lot less hassle than offering odds on Premier League football matches.
"Did you see what happened the other weekend? The top seven clubs all won and the punters backed 'em. That cost us £13m.
"Frankly, roulette is a godsend. Or, more accurately, it was New Labour that let us take roulette out of casinos and on to the high street.
"To think, some people thought the luvvies wanted to run a nanny state! Ho, ho. Press the buttons and have a spin if you wish – but you'll never get as lucky as us."
OK, it's a little wordy for a proper advert. But if the current government really is too feeble to return roulette to casinos where it belongs (see last week's column), it should at least keep the bookies' dead hands well away from the copywriting.
*Mining companies the big holdout on boardroom equality*
That's 98 down, two to go. We're talking FTSE 100 companies with female directors. The London Stock Exchange, which for a long time had Dame Clara Furse as CEO, on Friday appointed Joanna Shields and Sherry Coutu as non-executive directors.
The move coincided with news this week that women on boards of FTSE 100 firms now total 20%.
"The UK can and is succeeding in appointing women without quotas," said Helena Morrissey, the chief executive of Newton Investment Management and founder of the 30% Club. The two blue-chip laggards? No surprise that both live in the world of big mining: Antofagasta, in Chile, and Glencore Xstrata, the Swiss group that does things its own way.
A full-house of FTSE 100 companies with female directors may still be some way off. Reported by guardian.co.uk 4 days ago.