Strategic report Governance Financial statements Other information OPERATING AND FINANCIAL REVIEW CONTINUED Revenue on Shares increased by 74% to £258.0 million (2020: money on terms of up to 95 days, the full impact of the rate fall Other revenues are made up of advisory fees, Active Savings and £148.5m) and the revenue margin was 57bps (2020: 43bps), towards takes over a year to flow through and hence there will be further ancillary services such as annuity broking, distribution of Venture the upper end of our expected range of 45bps to 60 bps given at the impact into the current financial year ending 30 June 2022. Capital Trusts and the Hargreaves Lansdown Currency and Market Interim results announcement on 1 February 2021. This margin is Assuming there are no further base rate changes, our guidance Services. These revenues are primarily transactional and not primarily a result of the ratio of dealing volumes to average AUA, for this year is 15bps to 20bps. Cash AUA at the end of 2021 was impacted by market growth. and in the year deal volumes have grown 54% whereas the average £12.6 billion (2020: £13.6bn). They declined by 23% in the year mainly because of the disposal of Shares AUA has grown by 31%. Hargreaves Lansdown is the leading FundsLibrary Limited, our data services provider, which made up retail stockbroking business in the UK, with a 43.3% share (source: HL Funds consist of 10 Multi-Manager funds, on which the average £4.8 million of the revenue in the comparative year. In addition, Compeer Limited XO Quarterly Benchmarking Report Q1 2021). This management fee until 28 June 2021 has been 75bps per annum, advice fees were lower as COVID-19 made it more difficult to has enabled us to benefit from the growth in share trading across and three Select equity funds, on which the management fee is engage with existing and prospective new clients. the industry in the past 18 months, amongst both new and existing 60bps. Revenue from these funds has fallen by 5% this year to clients. This trend goes back to December 2019 post the General £60.7 million (2020: £63.6m) due to a lower average value of the Assets held within Active Savings on the platform continue to grow Election result and which picked up further in light of the COVID-19 funds across the year. These fees are collected on a daily basis and are shown in the previous table as “Other”. The related revenue pandemic and the associated market falls and lockdown periods. whereas the Group calculates average AUM on a month end basis, is not yet material so has been included with various other revenue Total client driven deal volumes increased 60% to 13.1 million (2020: resulting in a headline margin for the period of 72bps (2020: 73bps). streams in the same table. As highlighted previously, we believe it is 8.2m). Within this increase overseas deal volumes were up 181%, Although we have seen modest net outflows, as we have not actively strategically imperative to capture the scale advantage of being a Although overseas deals bring greater revenues they also incur marketed the Multi-Manager funds whilst the Woodford Equity first mover. Consequently, our focus remains on growing AUA at greater dealing costs for us. Income Fund has been suspended, they have been outweighed by present. Our chosen route for achieving this in the current low Whether such elevated dealing volumes continue now lockdowns market growth such that HL Funds AUM at the end of 2021 was interest rate environment is via reducing our revenue margins to have been lifted and life returns more to normal is difficult to say. £9.0 billion (2020: £8.0bn). On the main execution only part of ensure the rates offered on Active Savings are highly competitive. Our focus, however, on engaging with clients, helping to build their our business we saw net inflows for the last 8 months of the year, This will attract new clients and assets into the service that we financial knowledge and confidence, the breadth of shares available which coincides with improvements in the funds performances. need to capitalise on the opportunity. and the ease to invest via our platform may well see a higher base In January 2021 we issued the annual Value for Money report on our In November 2020 we soft launched our Cash ISA offering with level of dealing volumes than pre COVID-19. Our guidance for the own fund range. In the report we announced the decision to lower a controlled roll-out to our existing Active Savings clients before new financial year is 35bps to 45bps. Shares AUA at the end of 2021 the annual management charge on some of our Multi-Manager marketing it more widely. In the next year we will add the ability for was £53.1 billion (2020: £36.4bn). funds and introduce further price reductions linked to economies clients to transfer existing Cash ISAs that they hold elsewhere into Revenue on Cash decreased by 44% to £50.7 million (2020: £91.1m) of scale. These price changes took effect from 28 June 2021 Active Savings, which provides a significant opportunity given that as higher average cash levels were more than offset with a and hence had no real impact on the reported revenue this year. UK Cash ISAs total approximately £313 billion. Although Active decrease in the net interest margin to 39bps (2020: 74bps). This is The 2022 financial year, however, will see the full annualised impact, Savings continues to grow in terms of assets and clients the interest in line with our communicated expectations of between 34bps and which based on the fund values at the time of the price cuts will rates on offer, although highly competitive, are not particularly 40bps given at the interim results announcement on 1 February result in a loss of revenue of c.£3.6 million. conducive to marketing and significant growth. We continue to see it 2021. Net interest margin has been impacted by the emergency as part of our core offering and when interest rates eventually start base rate cuts in March 2020 from 0.75% to an all-time low of The margin for 2022 is therefore expected to be in the range to increase we would expect to see improved growth. As at the end 0.10%. Term rates offered by the banks initially held up well but fell of 66bps to 70bps. Note that the platform fees on these assets of 2021, Active Savings AUA was £3.1 billion (2020 £2.2bn). dramatically a few months later. With the majority of clients’ SIPP are included in the Funds line and hence total average AUA of money placed on rolling 13 month term deposits, and non-SIPP £119.5 billion (2020: £100.6bn) excludes HL Funds AUM to avoid double-counting. 61 Hargreaves Lansdown Report and Financial Statements 2021