The D2C platform’s half-year results outlined a £175m ($237.2m, €209.1m) plan to “redefine wealth management” and increase its client base around 50% to 2.6 million by 2026, as well as deliver £20bn in net new business by the same year.

It will seek to have over 20% of assets under administration run in-house to help deliver total revenue margins of 42-44 basis points.

The proposals would come at a cost of £175m over the five years up to the 2026 financial year, with cost savings over that period funding approximately 80% of the investment spend. There will be an additional £50m cost in the period up to 2025 as it shifts from legacy tech to new systems.

Hargreaves Lansdown shares slumped over 21% at one point following the announcement, before rising slightly to end the morning down 14%.

‘Hargreaves Lansdown was the original disruptor’

In his prelude to revealing the new strategy, Hill said the UK wealth management industry was at a key inflection point, but that incumbents in the market were “failing” customers. “The size of the market opportunity has never been this significant.”

He listed five key drivers of the opportunity:

• The pandemic reminding households of the importance of financial resilience;
• Clients seeking the “Amazon” experience of digital, personalised and on-demand technologies;
• “Expensive adviser fees and confusing, time-consuming and jargon heavy investment providers and services”;
• Growing competition pushing Hargreaves to invest in order to keep its market-leading position; and
• The regulator’s support for long-term investing, which targets a “20% reduction in the number of consumers with higher risk tolerance holding over £10,000 in cash by 2025”.

Hill added: “Hargreaves Lansdown was the original disruptor and successfully established the D2C market. The evolvement of our proposition and strategy means now is the right time to target the broader wealth management market and rethink how we set a new standard for how the UK saves and invests.”

Under its new strategy, Hargreaves would present clients more investment solutions and digital tools to manage and monitor wealth.

Hill detailed five core elements of the strategy:

• Investing in digital capabilities such as data analytics and transferring data to the cloud;
• Leveraging data insights to build new products and services faster;
• Launching 19 new funds by 2024 with ESG funds representing a critical part of this;
• Growing its Active Savings business on the back of rising UK interest rates; and
• The new HL Advice offering bridging the gap from D2C to advice

Hargreaves assets rise to over £140bn

For the half-year results, Hargreaves Lansdown brought in net new business of £2.3bn in the period to 31 December 2021 taking AuA to £141.2bn.

It now has 1,693,000 active clients, up 48,000 since 30 June 2021.

“In the first half of this financial year, we saw a gradual return to the office and calmer markets which led to more normalised share trading levels, albeit still higher than before the pandemic,” Hill said.

But the period since has been more volatile. Hill said it is not currently clear how significant levels of inflation and geopolitical tension would impact on markets and investor confidence in the coming months.

For more insight on UK wealth management, please click on www.portfolio-adviser.com

SJP revealed its new look via its website last week. A spokesperson told our sister publication Portfolio Adviser the makeover is a brand “refresh” rather than a rebrand “meaning it’s an evolution of our visual identity”. That means new logos, colours, imagery and content.

The SJP spokesperson says the term wealth management can be off putting for some clients.

“SJP and our partnership represent a broad range of clients and our research showed that whilst many of our partner brands and their clients identified with and understood the term wealth management, there were an equal number that preferred less exclusive terms such as financial planner or adviser.”

It is not the first time the FTSE 100 advice giant has changed its name. It started its life in 1992 as J Rothschild Assurance Group and only became St James’s Place Capital in 2001 and then St James’s Place Wealth Management in 2006.

‘Wealth management is a dated term’

Bear Content chief executive and founder Martin Bamford, a chartered financial planner and content creator, says dropping wealth management “modernises the otherwise traditional SJP branding”.

SJP’s famous lion and topiary gardens are among the imagery on its website that might be associated with an outdated image of the industry. Although the lion exists in the new branding, its dominance has been reduced to a watermark, and the imagery has been updated to focus on people from a diverse range of backgrounds.

“‘Wealth management’ is a dated term that places emphasis on the money rather than the client,” Bamford said. “While arguably their current brand does what it says on the tin, as SJP is very much about managing wealth, the modern narrative is around financial planning and wellbeing.”

Others argue they don’t see SJP as a wealth manager.

CWC Research director Clive Waller says he considers wealth managers to be the likes of UBS, Barclays and Rathbones where clients typically have upwards of £1m ($1.38m, €1.17m).

Nevertheless, Waller thought many SJP clients might appreciate having a “wealth manager”.

SJP partners may still use wealth management in branding

Although SJP’s name is being changed at the corporate level, partners will be able to choose the term that best suits their brand and business.

SJP says despite the name change and brand refresh there will not be changes at an operational level.

“Clients will still meet with their partner face-to-face whenever possible, and continue to access the information they need, including their investments, in exactly the same way as before,” the spokesperson says.

But Bamford says it is a shame SJP didn’t use the brand refresh as an opportunity “to shift their focus away from selling financial products and towards a more holistic approach”.

For more insight on UK wealth management, please click on www.portfolio-adviser.com

The retail banking group is due to complete its £390m ($537m, €462m) acquisition of Embark before the year’s end, seeing the group bring on £35bn of assets under administration run on behalf of 410,000 clients.

In a regulatory filing from July 2021, when Lloyds announced the planned acquisition, the retail banking group said it wants to cater to the broader financial needs of its customers and retain “more of the circa £10bn assets under administration which customers invest with third parties each year”.

Lloyds vs Hargreaves Lansdown

Lloyds’ wealth and insurance chief executive Antonio Lorenzo said he wants to use the Embark acquisition as a springboard to rival Hargreaves Lansdown. “Our ambition is to be north of £100bn in the near term.”

Lloyds can corral assets totalling £60bn, including the AUA from Embark plus some existing business.

Hargreaves Lansdown currently has £138bn in AUA. In the last financial year, for the period ended 30 June, it raked in £8.7bn and landed 233,000 net new clients.

Lloyds is aiming to more than triple its market share in D2C pensions and investments from 3% to 10%, Lorenzo said. That compares to the retail bank’s 26% market share in credit cards, 23% in current accounts and 19% in mortgages. 

Hargreaves Lansdown’s UK D2C market share is 42.9%. It has a 43.3% market share of retail stockbroking.

Client retention

The challenge is creating a proposition that would be enticing enough for a Hargreaves customer to make a switch, said Lang Cat consultant Mike Barrett.

“Embark’s a really good platform, with great technology and would be able to support the type of thing Lloyds is looking to do really, really effectively. But in terms of the strategy, that seems to me to be the easy part,” Barrett says.

“Those Lloyds Banking customers who are sending their direct debits to Hargreaves every single month are by definition Hargreaves customers already,” he says.

“If you look at Hargreaves retention rates, they’re consistently above 90%. Hargreaves are really good at acquiring new customers, but once they get hold of customers, they stick with them for the long term.”

Hargreaves’ latest annual report showed its client retention rate sat at 92.1%.

Copy and paste not a winning strategy

Boring Money chief executive Holly McKay agrees that Lloyds faces difficulties in luring away Hargreaves’ existing customers.

“It is the less confident investor and the underserved who are the potential – and you can’t win them over by copying Hargreaves. You will win them over with content, communication, simplicity and trust.”

Over the last 20 years, McKay has heard a number of companies saying they want to be the next Hargreaves.

“It’s easy to convince yourself that distribution plus product capabilities equals billions of pounds of AUA and world domination,” she says. “But none of this really gets close to the barriers of building a successful consumer-facing investment and pensions business.”

Altus platforms director Ben Hammond suggested Lloyds could tap into its existing clients early in their investing journey, when they are investing their first £10,000 or so. He added that passive portfolios could be useful for these type of investors and Lorenzo said that he wants to the bank to get into robo-advice.

But Lloyds still faces a challenge because Hargreaves is nabbing customers at a younger age. In its full-year results for 2021, the firm said nearly half the clients joining its platform were in the 30-54 age bracket and the median age of its clients dropped from 58 years old in 2007 to 46 years old today.

This younger mix of customers underpins the platform’s future growth, said Hargreaves chief executive Chris Hill in the annual results. “We know what they need from our 40-year track record of supporting clients through their financial lives. As we work with these new clients on similar paths, the lifetime value of our overall client base will increase.”

Why banks struggle to take on D2C platforms

History shows banks struggle to integrate investing and online banking, says Jeremy Fawcett, head of Platforum.

“Barclays have been most ambitious by building Barclays Smart Investor onto their online banking platform but there is room for improvement around usability,” Fawcett says. “Getting everything to work together successfully is no trivial task and Lloyds have got their work cut out to reach their ambitions.”

Hammond said that although Lloyds has a large captive audience in its millions of customers, the business doesn’t have the focus on Hargreaves. Lloyds had 17.4 million digitally active customers in 2020, according to its latest annual results, over 10 times higher the 1.6 million active clients Hargreaves currently boasts.

Even though both are large companies, Hargreaves is based in one office in Bristol, where D2C investing is its bread and butter, whereas Lloyds is a more complicated disparate business, Hammond said.

Nevertheless, he added that Lloyds is a trusted brand, “everyone knows its horses galloping across the sand” and there is opportunity for cross-selling.

For more insight on UK wealth management, please click on www.portfolio-adviser.com

In a regulatory filing at midday, the Edinburgh-based company said it had received separate proposals from both Integrafin and James Hay, which is working in partnership with its associate Epiris on the potential deal.

Additionally, Nucleus is in preliminary discussions with Allfunds and Aquiline Capital Partners regarding potential offers.

The filing said Nucleus’s majority shareholder, Sanlam UK, is “understood” to be supportive of the discussions. Sanlam UK owns 52% of the platform.

Nucleus said a further announcement will be made in due course, as and when appropriate.

For more insight on UK wealth management, please click on www.portfolio-adviser.com