The firm reported half-year figures late last week.

Bristol, UK-based wealth management firm Hargreaves Lansdown, a business hit by the spectacular collapse of star fund manager Neil Woodford, has managed to report a 12 per cent pre-tax profit rise in the six months to 31 December 2019 from the same period a year ago.

Reporting results on Friday last week, the firm said that total assets under management stood at £105.2 billion ($138.7 billion) at the end of last year, rising by 22 per cent over the year, and logged net new business of £2.3 billion in the six months to end-December. 

Chief executive Chris Hill made an optimistic statement about the results. 

“The first half of our financial year was another period of growth. Despite market challenges, the resilience of our business, continued execution of our strategy and our focus on ensuring the right outcomes for clients, means we have seen growth and increased market share through the period,” he said.   

The firm was hurt by last year by administrators shutting Woodford’s stricken LF Woodford Equity Income Fund, which had been closed to investor redemptions after a series of exits. Woodford was subsequently sacked as its manager, ending a saga that tarnished his stellar reputation. Hargreaves Lansdown had been a fan of the fund for months leading up to when the fund’s parlous situation became clear. Mark Dampier, head of research at Hargreaves Lansdown, has recently sold a large equity stake in Hargreaves Lansdown. Dampier, 62, had called Neil Woodford “one of the UK’s best fund managers” and the men have known each other for more than 25 years. Dampier and his wife Annette reportedly sold £5.6 million ($7.1 million) of shares in the business in May, avoiding a subsequent share slide that had hit Hargreaves Lansdown amid criticism of its stance over Woodford.

Paul Mumford, fund manager at Cavendish Asset Management, said of the HL results: “What price Neil Woodword? Well, so far the problems haven't revealed themselves. The loss of new business must be a worry, especially if it's linked to a loss of trust as a result of the company's role in the Woodford scandal. Unfortunately the post-mortem of that debacle has only just begun. With the Woodford fund distribution guidelines announced recently, they're back under the microscope.

"For Hargreaves you'd expect to see at least a fine from the FCA [Financial Conduct Authority], and perhaps even a class action lawsuit from shareholders. How that will affect their business remains to be seen. It could be a very long year ahead for the company,” Mumford said in a note.

HL’s Hill issued a lengthy explanation of the Woodford saga and how his firm has reacted in subsequent months.

“The Woodford fund suspensions were disappointing and frustrating for us and our clients, but their impact and the learnings have been incorporated into developments to our service,” he said. 

“The FCA’s 2017 review into best buy lists highlighted that they were a positive tool for investors and helped them to make decisions. Our clients agree with this. However, we have now carried out a thorough review of our Wealth 50, spoken to clients to ascertain their views about our favourite funds list, and sought other independent insights. As a result, we will be making changes over the coming months to incorporate what we have learned from this research, including a greater focus on transparency of process. This will include adding more detail, greater transparency and a new structure to our research notes, for those clients who want a deeper level of information, and new functionality on our platform to help those who want to follow a more independent path,” he continued. 

Hill referred to how he and some other senior colleagues, including Dampier, have waived bonus payments for the 2019 financial year and also waived platform fees for the Woodford Equity Income Fund and the Woodford Income Focus Fund. 

The external financial market environment last year was also tough at times, Hill said, citing political uncertainties, Brexit, the UK general election and US/China trade tariffs.

“As we have seen in previous unpredictable periods, client confidence and retail investment flows were affected. The Investment Association reported weak retail fund flows throughout and the suspension of the two Woodford funds also contributed to the general unease.