Hargreaves Lansdown Regulatory News (HL.)

PRESS RELEASE / INVESTOR & ANALYST BRIEFING

FSA CONSULTATION PAPER ON PLATFORMS

18 NOVEMBER 2010

Press Comment

Ian Gorham, Hargreaves Lansdown's Chief Executive said:

"We are satisfied with the outcome of the FSA's platform paper. The paper recognises the value of services such as those provided by Hargreaves Lansdown, which give clients the ability to access a huge choice of investments at low cost. At the same time it recognises the aggregation benefits product providers also derive from our services. The paper contains a number of initiatives which, if properly delivered, should benefit financial services retail clients. We do not perceive any threat to the Hargreaves Lansdown model from the paper. As we already offer most of the initiatives proposed by the FSA, such as re-registration, the cost implications for Hargreaves Lansdown should be very limited."

Hargreaves Lansdown provides the following more detailed response:

General overview

·; As an independent company, Hargreaves Lansdown supports the key potential outcomes for the Retail Distribution Review, particularly the provision of unbiased advice and promotion of investment choice.

·; We are satisfied with the consultation paper. There are no elements of the paper that give Hargreaves Lansdown cause for concern. We do not perceive any threat to the Hargreaves Lansdown model or sources of income.

·; We particularly note that the FSA has concluded platforms may continue to receive remuneration from product providers, recognising the benefits and services provided to these providers. We also note that execution-only (non-advised) business remains out of scope for most elements of the paper. We agree with these conclusions. Non-advised business represents over 85% of Hargreaves Lansdown Assets under Administration.

·; The paper sets out requirements for platforms to meet various administrative standards, such as providing re-registration facilities and information to unit holders. Hargreaves Lansdown already allows clients to re-register and transfer to other providers. We foresee very limited cost implications for our company from the paper.

·; We also welcome the FSA's intention to focus on more timely transfers of investments in the financial services industry. The current transfer processes across the financial services industry are often unnecessarily complex and slow - usually when involving outflows from non-platform companies - and cause frustration, cost and uncertainty for clients who are exercising choice over their own investments.

The Future of the Market and Pricing

·; It is possible the platform and advisory marketplace may reshape over the next few years. The RDR may contribute to this change. It is impossible for any organisation to predict those changes precisely, but we are confident that a platform of sufficient scale providing a high quality service such as our own shall continue to be successful and grow profitably.

·; Like many, we believe the requirement for adviser charging, coupled with an increasing trend for investors to conduct their own research using widely accessible sources of information may lead to a reduction in the number of Financial Advisers in the UK. Hargreaves Lansdown sees this as an opportunity to attract further substantial numbers of clients to the high quality, low-cost Vantage service where they can administer their own investments.

·; We note the FSA's comment that they "would be surprised if [annual management] charges were maintained at current levels." We understand the logic of their expectation of a fall, whilst noting market forces are the key driver of prices rather than regulatory change. Hargreaves Lansdown has been at the forefront of achieving improved pricing for clients over the years. However, we wait with interest to see if such changes will occur to the extent FSA envisage. For example, if the IFA population shrinks, fund managers may need to retain income to finance alternative distribution and advertising strategies. Therefore they may consider reducing charges, especially in the short term, imprudent. Hargreaves Lansdown is a highly profitable and well established platform. Some other platforms are yet to demonstrate their sustainability and do not have the same economies of scale. The charges some other platforms levy on product providers for their services may need to increase if they are to survive. Therefore the potential for flexibility in the pricing chain appears uncertain.

·; Assuming the main aspects of the Consultation Paper are adopted into the rules in due course, Hargreaves Lansdown shall watch market developments with interest and react accordingly. We believe the paper does not currently require any changes to our highly successful business model or our services to clients.