Business model

Hargreaves Lansdown's business model is focused on the private investor and covers a wide range of activities including distribution, wrap platform provision, investment management, research, provision of tax wrappers, stockbroking and advisory services.

In providing this breadth of services direct to the private investor, Hargreaves Lansdown offers a compelling proposition for clients. It also represents a differentiated business model which enables it to capture a greater proportion of the revenues arising from each client's portfolio of investments. This diversifies Hargreaves Lansdown's earnings streams, enhances its margins and improves client recruitment and retention.

Fund supermarkets and wrap platforms typically focus on servicing the IFA community and are remunerated for acting as administrator. The IFA using the platform is remunerated for acting as distributor. Hargreaves Lansdown provides its fund supermarket and wrap platform direct to the private investor, thereby performing the role, and capturing the economics, of both the platform provider and distributor.

The Directors believe that this business model, together with the Group's significant purchasing power, enables it to retain a greater share of the annual management charge, also known as renewal commission, from fund providers than it would through acting solely as a fund distributor or a fund platform provider. Hargreaves Lansdown in turn strengthens its ability to win and retain clients by discounting initial charges and passing on a portion of the annual management charge to clients as a loyalty bonus. Over the last year, Hargreaves Lansdown has provided over £200 million in discounts and rebates.

The Hargreaves Lansdown business model therefore allows the Group to offer highly competitive prices to its clients and achieve strong profitability.

Hargreaves Lansdown is focused on increasing the proportion of its revenues which are recurring in nature. Recurring revenues include the share of annual management charges from the fund providers and investment management charges from the Group's own multi-manager funds. This approach has both enhanced the alignment of interest with the Group's clients and improved the quality of its earnings. In the year ended 30 June 2011, approximately 78% of the Group's revenues were recurring in nature.