The last 18 months have been a period of strong growth for investment platforms and businesses within financial services particularly those that meet the needs of retail clients. Or so we thought because, despite headlines about sharply increased online trading activity and thousands of new accounts being opened, that hasn’t translated into increased profitability at one of Britain’s largest retail stockbrokers and investment platforms, Hargreaves Lansdown.
Read our Hargreaves Lansdown review and interviews here
Hargreaves Lansdown published FY 2021 results in early August and the numbers disappointed the market, with the firm reporting flows and revenues below forecast and costs that were above expectations.
Hargreaves Lansdown’s stock price has fallen by more than 8.0% since the figures causing analysts and commentators to question whether the business is in danger of losing its number one position in what is a highly competitive and dynamic sector.
How do Hargreaves Lansdown’s costs compare to cheaper alternatives?
Hargreaves Lansdown is a low-cost execution-only business with share dealing commissions that start at £11.95 per trade, and then reduce based on a clients trading activity in the previous month.
For example, if you traded 20 times through the company last month, then your commission rate falls to £5.95 per trade for the current month.
That compares to a £9.99 per month membership fee (much of which is rebated as a credit against commission charges) and £7.99 per trade at Interactive Investors, and a commission of £9.95 per trade at AJ Bell. Though if you were active in the previous month, with AJ Bell, and traded 10 times, then that figure falls to £4.95 per deal.
Low cost of course is not the same as no-cost and competitors such as Freetrade offer their customers the chance to trade stocks and shares commission-free, though there are compromises attached to that offer.
Is Hargreaves good for young investors?
Millennials, Gen X and GenZ investors are where the future of all financial service businesses are to be found. Hargreaves Lansdown‘s CEO Chris Hill was quick to highlight that the average age of the company’s client base was falling and that 83% of its customers were now below 55.
On the face of it that seems like good news for the business, however, it’s a trend that raises several issues. Firstly younger investors tend to have smaller portfolios as they are building their wealth and secondly younger investors and traders have very different expectations compared to clients in older generations.
We like the Hargreaves Lansdown trading platform and apps, and think they are some of the best out there, but younger demographics have become used to the gamification of investing and trading, and to features such as social trading and fractional share ownership, services that Hargreaves Lansdown don’t currently offer.
Are cheaper brokers better than Hargreaves Lansdown?
Hargreaves Lansdown is in our opinion still one of the best overall investment and trading platforms out there, for UK execution-only retail investors and traders.
We base that view on their breadth of market coverage, and the number of instruments and products that you can access through them added to the quality of and depth of information available on their trading platforms.
However, this is an ecosystem that is constantly evolving and their competitors are always looking for ways to take market share from them.
If you are looking for a broker and make a choice based solely on cost, you will find cheaper alternatives to Hargreaves Lansdown and their peers. However, the less you pay for a service, the less likely it is to have other features attached to it.
This is why we encourage Good Money Guide users to view things holistically rather than just based on one variable such as costs.
For more information on stockbrokers you can compare investment accounts here.
With over 35 years of finance experience, Darren is a highly respected and knowledgeable industry expert. With an extensive career covering trading, sales, analytics and research, he has a vast knowledge covering every aspect of the financial markets.
During his career, Darren has acted for and advised major hedge funds and investment banks such as GLG, Thames River, Ruby Capital and CQS, Dresdner Kleinwort and HSBC.
In addition to the financial analysis and commentary he provides as an editor at GoodMoneyGuide.com, his work has been featured in publications including Fool.co.uk.
As well as extensive experience of writing financial commentary, he previously worked as a Market Research & Client Relationships Manager at Admiral Markets UK Ltd, before providing expert insights as a market analyst at Pepperstone.
Darren is an expert in areas like currency, CFDs, equities and derivatives and has authored over 260 guides on GoodMoneyGuide.com.
He has an aptitude for explaining trading concepts in a way that newcomers can understand, such as this guide to day trading Forex at Pepperstone.com
Darren has done interviews and analysis for companies like Queso, including an interview on technical trading levels.
A well known authority in the industry, he has provided interviews on Bloomberg (UK), CNBC (UK) Reuters (UK), Tiptv (UK), BNN (Canada) and Asharq Bloomberg Arabia.
