Strategic report Governance Financial statements Other information SECTION 1: RESULTS FOR THE YEAR NOTES TO THE GROUP FINANCIAL STATEMENTS INCOME STATEMENT 1.1 Revenue Revenue represents fees receivable from financial services provided to clients, net interest income on The portfolio management service is provided to clients who prefer a managed service. client money and management fees charged to clients. It relates to services provided in the UK and is This service encompasses the HL platform custody and administration, fund management and stated net of value added tax. ongoing advice services. All revenue streams are as described above. Additionally initial advice charges are levied on taking the product up or on any advised deposit into the product, as Revenue is measured at the fair value of the consideration received or receivable, and represents described in transactional revenue below. Each stream is separately charged in relation to the amounts receivable for services provided in the normal course of business, net of commission product. Each stream can also be taken by HL clients who do not use the portfolio management payable, discounts, VAT and other sales related taxes. service, either as separate services or in any combination as required. Ongoing Revenue Although most ongoing revenue is based on the value of underlying benefits, these are not The largest source of revenue for the Group encompasses ongoing revenue, which includes considered to constitute variable income in which significant judgement or estimation is involved. platform fees, fund management fees, interest on client money and ongoing advisory fees and The calculations are based on short timelines or point in time calculations that represent the end of renewal commission. This is revenue predominantly earned over time. a quantifiable period, in accordance with the contract. These are charged to and paid by the client Platform fees are received for the provision of custody and administration of products on the HL on the same value, constituting the transaction price for the specified period. At any time during platform and are charged monthly in arrears for the service provided in the period, recognised on the period a client may choose to remove their assets from a service and no further revenue an accruals basis as they fall due. The consideration due is based on the value of clients’ underlying is received. assets under administration. All obligations to the customer are satisfied at the end of the period in which the service is provided Fund management fees are calculated as a proportion of the net asset value of the funds under for recurring revenue, with payment being due immediately, management in each of the HL Multi-Manager and Select funds for the management services Transactional provided by the Group’s fund management subsidiary. They are charged monthly in arrears and are The other source is revenue earned on individual transactions and is primarily made up of recognised on an accruals basis in the period during which the service is provided. stockbroking commission and advisory event driven fees. The price is determined in relation to the Interest earned on client money is the net interest margin earned on money held within Group specific transaction type and are frequently flat fees. There is no variable consideration in relation products by clients and is accrued on a time basis, based on the client money balances under to transactional revenue. administration and by reference to the effective interest rate applicable. The Group earns fees on stockbroking transactions entered into on behalf of clients. The fee Renewal commission is earned on third party agreements entered into by clients, as a result of earned is recorded in the accounts on the date of the transaction, being the date on which services advice provided to them and is recognised on an accruals basis as it becomes due and payable to are provided to clients and the Group becomes entitled to the income. the Group. Initial adviser charges are made to clients for providing advice to clients on specific financial Ongoing adviser charges are levied monthly in arrears for the period during which the service is matters or in relation to amounts deposited into the portfolio management service. This can take provided and are calculated as a percentage of the assets under management within the Group’s the form of ad hoc advice on a specific pool of assets or initial advice about taking managed portfolio management service. services. The transaction price is determined at the point advice is accepted based on the final value of assets that are being advised upon. Revenue is recognised at the point at which acceptance of the advice is made by the client and payment is taken on the implementation of advice. The average time between acceptance and implementation is 30 days, if advice is not accepted then no charge will be taken. If the client is advised to take a managed service, ongoing adviser charges are levied separately. 144 Hargreaves Lansdown Report and Financial Statements 2021