Broker snap: Hargreaves Lansdown to take hit for fee shake-up

15th Jan 2014 11:51

Broker Canacccord Genuity reduced its profit forecast for stockbroker Hargreaves Lansdown after it said an overhaul of rules on fees could cost it up to 17m pounds, although it said it would lead to lower charges for most customers.Canaccord said it expected Hargreaves' pre-tax profit this year to fall by 3% after Hargreaves said it may face the bill from a ban on fund managers paying commissions to advisers and other distributors used by retail investors.Canaccord's Robin Savage said: "The impact on revenue will flow through to profit."Hargreaves insisted, however, that the new rules on mutual fund sales imposed as part of the UK Retail Distribution Review (RDR) would leave most clients paying less while it would easily absorb the revenue impact at its current growth rate.Numis Securities said: "We expect to adjust our forecasts accordingly but we had already forecast that RDR II would result in customers getting a better deal and consequently we do not expect to dramatically change our forecasts."The new rules due in April will force an £8m investment and could hit revenue by £9m in the first year, Hargreaves said.Regulators hope RDR will ensure investors get a better deal as firms offer them more appropriate products than those which pay sales or distributors the highest commissions.Hargreaves Lansdown said it would need to make £3.5bn in new assets over three years to make up for the financial hit from the new rules, but said it was well short of the £5.1bn net new business it achieved last year.Clients will pay an annual charge for investing in funds through Hargreaves Lansdown's 'Vantage' service, but that would be offset by relatively low management fees for mutual funds."Most investors will be better off," the company said.PW