Tech Review: Hargreaves Lansdown

Mark Loosmore of AT8 asks if the Hargreaves Lansdown platform has an ‘advantage’ over others?

The leading self-service/execution only brand in the market by a country mile is Hargreaves Lansdown with its Vantage Platform Solution. This week we decided to take a closer look at the Vantage Solution to see how it may be an appropriate choice to support an IFA model.

Hargreaves Lansdown was established in 1981 by Peter Hargreaves and Stephen Lansdown with the mission to help investors make more of their investments by providing the best information, the best service and the best prices. It now has £18.5bn of assets under management, employs over 600 people and has 337,000 Vantage clients – making it a major force in the market.

To get a closer understanding of the Hargreaves proposition we spoke to Danny Cox who also was kind enough to demonstrate the system’s capability.

Hargreaves Lansdown has a clear vision of where it fits and doesn’t view its self-serve strategy as directly competitive to the advice market. Interestingly, it sees that there are three different segments of clients; segment one is the DIY investor – these investors, rightly or wrongly, will act with no advice and are seeking an efficient means of transacting their business – a clear target of Hargreaves Lansdown.

At the other end of the spectrum is a segment which Danny called the ‘Delegators’. The Delegators see the need for advice, either because they have large complex portfolios and needs or maybe they are busy individuals and want someone to take the task off their hands, it could also be that they simply recognise their limitations and know that in financial matters they need professional help.

The Delegators that need advice are not the primary target of the Vantage Platform, however as Hargreaves Lansdown does have an advice capability and can address the needs of this segment via its IFA arm.

The third segment is the ‘Collaborators’, who are individuals that are happy transacting simple products themselves (such as an ISA) but recognise that they need help in addressing their more complicated needs. This is an area where Vantage can work in partnership with advice firms.

We will state up front this looks like an impressive solution. The site is professional but accessible and its usability is excellent. I frequently complain about usability in these articles but Vantage has all the usability features I would expect, including ‘breadcrumb’ trails, easy tabular format, quick links on most pages, access to the home page at all times and a search facility.

It sounds basic, but few financial systems and Platforms address this aspect of usability well. Hargreaves Lansdown’s years of operating directly with the consumer have clearly had an impact and it is by far the most user friendly system I have seen for a long time.

After a few minutes I was in no doubt that consumers will be attracted to the site, but I challenged Danny to explain why the consumer finally engages to transact using the site. Danny responded with three fundamental reasons he believes consumers use the site:

• Open Architecture – ensuring the consumer can buy any fund, share, ETF, Investment Trust etc;
  
• Pricing – Due to bulk trading, Hargreaves Lansdown believes it has saved clients £120m in fund charges over the past 12 months;
  
• Service – The choice to trade online, by phone or by post (interestingly 60% is now traded online) and to provide the supporting services such as tax certificates, investment and tax summaries.
  

Sitting behind the service is Hargreaves Lansdown’s marketing mantra of ‘Best Information, Best Service and Best Prices’ and it has to be said there is a wealth of information on this site to keep investors informed and to help them make decisions.

In some ways there is too much and there is a risk that investors will make decisions on written information which they don’t fully understand. However, it is undeniable that a financially aware investor will be able to use the information to self-serve on some of the less complex products.

Three thousand of the funds have accompanying factsheets accessible through Funds Library (a business owned by Hargreaves Lansdown but also used by other platforms including Cofunds). In addition, it provides charts of performance data which can be explored interactively, and provides fund analysis.

There is a specific funds list called ‘Mark Dampier’s Wealth 150’. The ‘Wealth 150’ are funds Hargreaves Lansdown believes to be the best funds across all the major sectors. Vantage does not try to enter the advice space. There are one or two simple calculators such as an investment calculator but there is no attempt yet at asset allocation or cash-flow planning (there are plans for asset allocation for 2011.)

They do have an interesting capability to create a ‘virtual portfolio’ to watch stocks that are being considered by the customer and to provide an ‘X-ray’ analysis of the fund breakdown.

So can Vantage coexist with an advised process within an IFA business model? To be clear, if an adviser passes simple business to the Vantage site, or clients that don’t fit their business model in a fee-based world, there is no direct financial reward to the adviser. Other ‘execution only’ sites do provide such incentives and even post RDR, commission can be accepted on execution only business.

Clearly there will also be some nervousness that Hargreaves Lansdown will up-sell its own advice services to the client. However, if the client is not going to be efficiently serviced by the IFA because they are in an uneconomic segment of the adviser firm, it is important that these clients are not abandoned – both morally and for good business reasons.

Some clients that are perceived to have low value may have relatives and friends that use the IFA firm and where the inter connection may have wider value. It may be that some clients are at an early stage of life with few assets and needs but who may return in the years to come when they are of greater value. If an IFA has such clients, few sites can cater for them self-serving as professionally as the Hargreaves Lansdown Vantage site.

Some IFAs alternatively may look to create their own execution only sites but other IFAs have such a tight focus on who will be serviced that a clear, safe outsourced process will be welcome. For these advisers it could be worthwhile seeking more information on Vantage and how it may augment their own propositions.