Chairman of investment manager Hargreaves Lansdown, Peter Hargreaves, says he expects an "inferior" ISA season this year after the firm today announced a 58% jump in first-half profits.
The co-founder of Hargreaves Lansdown says there is “no doubt” less cash will be put into the tax-free savings accounts, which represent a quarter of the company’s assets under management (AUM), as the credit crunch takes hold.
However, he adds he expects pensions to be less affected by investor caution and is confident in the firm’s growing SIPPs business.
“There is no doubt in my mind that this will be an inferior ISA season to last year,” he says.
“There will be less money put into ISAs and I’m not sure what sort of an impact that will have. It is always difficult to predict.
“I don’t think pensions will be hit quite so hard and our SIPPs business is very healthy; we actually did more in SIPPs than ISAs last year.
“They [SIPPs] have already passed ISAs as far as new business is concerned, but they are yet to catch up on the total amount [invested] in them as ISAs have been available for longer.”
Hargreaves Lansdown reported a 58% rise from £17.2m to £27.2m in underlying operating profit for the six months to 31 December 2007.
It says the improvement reflected client recruitment and inflows of new money from existing customers, with total AUM rising 7% to £10.9bn between June 30 and December 31, despite a 3.4% decline in the FTSE All Share index over the same period.
Hargreaves Lansdown shares, which were first offered on the London Stock Exchange in May last year, have fallen 32% in the past three months but are climbing today on the back of the profits results.
Hargreaves says there is a straightforward reason why the firm had a successful 2007.
“This is a well-run business; it’s as simple as that,” he says. “We have easily the most sustainable business model in our sector because the income we have coming in is much, much greater than our outgoings. I think the results were in line with expectations.”
However, on top of the pressure he expects on ISAs, Hargreaves also hints at a lower profit forecast for 2008.
“The only thing that affects us is the level of the market,” he says. “We earn our money mainly from the assets under management. If they go down in value it will affect our income.”
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