Peter Hargreaves is unimpressed with plans for software-generated “augmented advice”. His opinions matter more than those of most West Country pensioners. He is the billionaire co-founder of savings platform Hargreaves Lansdown.
In line with his views, half-year financial performance reported on Wednesday showed little evidence of intelligence, artificial or otherwise.
Hargreaves has criticised the group’s aim of corralling customer data and harnessing the insights. Judging from the market reaction, other shareholders are equally sceptical about the strategy of chief executive Chris Hill.
The company trades at 16 times forward earnings, half its level two years ago.
Hargreaves Lansdown, which is stacked with customer cash, has benefited from rising interest rates. A billion pounds of net inflows went into fixed rate savings products in the final quarter of last year, versus small net outflows elsewhere.
Higher interest rates generated fatter net interest income of £125mn in the period, against just £12mn in 2021. However, underlying costs rose 14.6 per cent year on year to £146mn.
Initially, shares rose 7 per cent. An equally sharp reversal followed. The rising costs of the tilt towards technology was to blame.
So far, the shift to using more software-generated advice has produced little gain. Bots have delivered around 690,000 automated recommendations to customers. Hill envisages that the shift will eventually make clients stickier, yielding a higher share of wallet after a £225mn spending plan concludes in 2026.
Intensifying rivalry for UK clients means that dealing platforms need to embrace advice powered by AI. The question is whether a retail savings business can develop this capability in-house. Tech giants are ploughing billions into creating broader solutions that could be fruitfully adapted by smaller groups.
Chatbots are unlikely to be an area where this business is likely to have competitive advantage. Its strength has been in online share dealing and administration. Here, it has been losing ground to rivals. This is where capex should be focused.
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