2138008ZCE93ZDSESG90 2021-07-01 2022-06-30 iso4217:GBP 2138008ZCE93ZDSESG90 2020-07-01 2021-06-30 iso4217:GBP xbrli:shares 2138008ZCE93ZDSESG90 2022-06-30 2138008ZCE93ZDSESG90 2021-06-30 2138008ZCE93ZDSESG90 2020-06-30 ifrs-full:IssuedCapitalMember 2138008ZCE93ZDSESG90 2020-06-30 hargeaveslansdownplc:SharesHeldByEBTReserveMember 2138008ZCE93ZDSESG90 2020-06-30 hargeaveslansdownplc:EBTReserveMember 2138008ZCE93ZDSESG90 2020-06-30 ifrs-full:RetainedEarningsMember 2138008ZCE93ZDSESG90 2020-06-30 ifrs-full:EquityAttributableToOwnersOfParentMember 2138008ZCE93ZDSESG90 2020-06-30 ifrs-full:NoncontrollingInterestsMember 2138008ZCE93ZDSESG90 2020-06-30 2138008ZCE93ZDSESG90 2020-07-01 2021-06-30 ifrs-full:IssuedCapitalMember 2138008ZCE93ZDSESG90 2020-07-01 2021-06-30 hargeaveslansdownplc:SharesHeldByEBTReserveMember 2138008ZCE93ZDSESG90 2020-07-01 2021-06-30 hargeaveslansdownplc:EBTReserveMember 2138008ZCE93ZDSESG90 2020-07-01 2021-06-30 ifrs-full:RetainedEarningsMember 2138008ZCE93ZDSESG90 2020-07-01 2021-06-30 ifrs-full:EquityAttributableToOwnersOfParentMember 2138008ZCE93ZDSESG90 2020-07-01 2021-06-30 ifrs-full:NoncontrollingInterestsMember 2138008ZCE93ZDSESG90 2021-06-30 ifrs-full:IssuedCapitalMember 2138008ZCE93ZDSESG90 2021-06-30 hargeaveslansdownplc:SharesHeldByEBTReserveMember 2138008ZCE93ZDSESG90 2021-06-30 hargeaveslansdownplc:EBTReserveMember 2138008ZCE93ZDSESG90 2021-06-30 ifrs-full:RetainedEarningsMember 2138008ZCE93ZDSESG90 2021-06-30 ifrs-full:EquityAttributableToOwnersOfParentMember 2138008ZCE93ZDSESG90 2021-06-30 ifrs-full:NoncontrollingInterestsMember 2138008ZCE93ZDSESG90 2021-07-01 2022-06-30 ifrs-full:IssuedCapitalMember 2138008ZCE93ZDSESG90 2021-07-01 2022-06-30 hargeaveslansdownplc:SharesHeldByEBTReserveMember 2138008ZCE93ZDSESG90 2021-07-01 2022-06-30 hargeaveslansdownplc:EBTReserveMember 2138008ZCE93ZDSESG90 2021-07-01 2022-06-30 ifrs-full:RetainedEarningsMember 2138008ZCE93ZDSESG90 2021-07-01 2022-06-30 ifrs-full:EquityAttributableToOwnersOfParentMember 2138008ZCE93ZDSESG90 2021-07-01 2022-06-30 ifrs-full:NoncontrollingInterestsMember 2138008ZCE93ZDSESG90 2022-06-30 ifrs-full:IssuedCapitalMember 2138008ZCE93ZDSESG90 2022-06-30 hargeaveslansdownplc:SharesHeldByEBTReserveMember 2138008ZCE93ZDSESG90 2022-06-30 hargeaveslansdownplc:EBTReserveMember 2138008ZCE93ZDSESG90 2022-06-30 ifrs-full:RetainedEarningsMember 2138008ZCE93ZDSESG90 2022-06-30 ifrs-full:EquityAttributableToOwnersOfParentMember 2138008ZCE93ZDSESG90 2022-06-30 ifrs-full:NoncontrollingInterestsMember
EMPOWERING
PEOPLE TO
SAVE AND
INVEST WITH
CONFIDENCE
Report and Financial Statements 2022
CONTENTS
Strategic report
Hargreaves Lansdown at a glance 02
Chair’s introduction 04
CEO Review 06
Strategy & KPIs 12
Market overview 18
Business model 22
Stakeholder engagement 24
People 26
Corporate citizenship 31
Performance 45
Risk management and the
principal risks and uncertainties 51
Governance
Chair’s introduction 61
Board of Directors 63
Corporate governance report 66
Audit Committee report 74
Directors’ Remuneration report 79
Nomination Committee report 107
Risk Committee report 111
Directors’ report 114
Section 172 statement 118
Statement of Directors’ responsibilities 122
Financial statements
Independent auditors’ report 124
Section 1: Results for the year 131
Section 2: Assets and liabilities 139
Section 3: Equity 147
Section 4: Consolidated statement
of cash flows 149
Section 5: Other notes 150
Section 6: Company financial statements 159
Other information
Directors, company secretary, advisers
and shareholder information 166
Five-year summary 167
Glossary of alternative financial
performance measures 168
Glossary of terms 171
Our purpose
We empower people to save and invest
with confidence. Offering a service
that supports them in building their
financial resilience and achieving the
right outcomes. We listen and respond
to the needs of our clients and other
stakeholders to evolve, grow and
prosper collectively.
Who we are
We are the UK’s largest digital wealth
management service. For over 40 years,
we have helped clients to manage their
finances through our broad and easy
to use service. Today we are trusted
with more than £123 billion by 1,737,000
clients. We are a well established, FTSE
100 company, headquartered in Bristol
employing over 2,000 people.
Governance Financial statements Other informationStrategic report
1
Hargreaves Lansdown
Report and Financial Statements 2022
HARGREAVES LANSDOWN AT A GLANCE
OUR PURPOSE
DRIVES OUR
STRATEGY
... ACHIEVED THROUGH
OUR 5 STRATEGIC PILLARS
The delivery of our strategy will encompass the whole business,
as we optimise the way we work together to execute on the
next stage of HL’s growth. We are mobilising and monitoring
delivery and execution across five pillars of our strategy.
Create a step
change in Client
Service & Efficiency
Accelerate Growth
via our Integrated
Proposition
Develop
our Digital
Backbone
Enable our People,
Strengthening
our Culture
Scale the
Foundations
FIND OUT MORE
Pg 4: Chair’s Introduction
for the Chair’s perspective on our client
focused strategy
Pg 12: Strategy and KPIs
for further details on our Strategy and KPI’s
we will be using to measure progress and
performance against our strategic pillars
Transform the savings
and investment experience
Combine the best of
human expertise, augmented
by digital capability
Deliver a uniquely personalised
service to simply manage your
financial health and wealth
Governance Financial statements Other informationStrategic report
Hargreaves Lansdown
Report and Financial Statements 2022
2
HARGREAVES LANSDOWN AT A GLANCE
CONTINUED
... GROUNDED IN OUR
CULTURE AND OUR 5 KEY VALUES
Over 40 years of client service means we understand the important role
we can play in building a better future for both our clients and wider society.
Our culture, values and governance ensure we keep our clients at the heart
of all we do and that we deliver this in a sustainable and responsible way.
1
We put the
client first
3
We do the
right thing
5
We do
it better
From the day-to-day exceptional
client experience, to the constant
improvement of our services,
we use client feedback to shape
future development.
We always aim to do the best for
our clients. We are fair, honest and
focus on the long-term. It’s why our
clients trust us, and how we earn
their loyalty.
For over 40 years, HL has
set the tone for the retail
investment market. We are
committed to energetically
innovating and improving.
2
We go the
extra mile
4
We make
it easy
We want to drive
the next evolution
in client experience.
For our clients and for each other.
We focus on driving positive
outcomes, taking every opportunity
to delight, inspire and reassure.
Savings and investments should
be easy to access, understand and
execute. We make things simple which
gives our clients confidence to make
important decisions at the right time.
Governance Financial statements Other informationStrategic report
3
Hargreaves Lansdown
Report and Financial Statements 2022
TRANSFORMING THE SAVINGS
AND INVESTMENT EXPERIENCE
CHAIR’S INTRODUCTION
Client focused strategy
During a challenging year of global economic,
political and health adversity, HL has focused
our time and attention on two key areas: helping
clients today and building out tomorrow’s strategy
for sustainable growth and a market-leading
offering in an increasingly competitive market.
Clients have responded to better insights and
even more relevant information and services
through a strong client retention rate, improved
NPS score and a record number of clients adding
to their accounts at tax year end. Across the
country, a vast majority of investors are
challenged with how best to save and invest
during these unprecedented times. As the market
leader, a position we don’t take for granted,
we are uniquely positioned to apply our insight,
capabilities and resources to step up and
transform today’s client experience into one
where retail investors have greater access to
products, services and assistance with better
outcomes than are available in the market today.
To achieve our purpose of empowering people
to save and invest with confidence, we worked
hard this year on a strategic plan and investment
that focuses on greater efficiency, scale and
accelerated growth through engaged and skilful
leaders. Following months of detailed work by
management and challenge from the Board,
the executive team delivered its first Capital
Markets Day (“CMD”) on 22 February 2022.
The Board unanimously supports the £175 million
of strategic investment spend outlined at the
CMD as the right thing to do to drive the
business forward. This view has been reinforced
through conversations with stakeholders since
that time. The Board also worked closely with
the CEO over the past year to help him build an
exceptional management team with significant
digital and business transformation experience
to ensure the strategy is effectively delivered.
With a focused strategic direction and resources
in place to deliver it, the Board has given strong
attention to ensuring there are appropriate
governance and controls in place to oversee
the delivery of the strategy including metric
dashboards, risk oversight and regular review
of major milestones and timelines. To read more
about the strategy, please see pages 12 to 17.
Sustainable and responsible growth
ESG considerations have strengthened
considerably at HL over the past year
with progress in three key areas that align
with our legal entities:
• HL’s actions as a responsible business (PLC)
• HL’s stewardship as a responsible fund
manager (HLFM)
• HL’s offering as a responsible investment
and savings provider (HLAM)
Our vision for ESG at HL
istoinspire confidence for
asustainable, resilient, and
successful financial future.
Deanna Oppenheimer
Chair
Governance Financial statements Other information
4
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CHAIR’S INTRODUCTION
TRANSFORMING THE SAVINGS AND INVESTMENT EXPERIENCE CONTINUED
Each of the management team has a specific
responsibility for driving our ESG strategy across
the company. Some notable achievements in the
year include:
• The launch of the Savings and Resilience
Barometer in conjunction with Oxford
Economics to give a comprehensive view
of the nation’s financial resilience.
• Improvements in our female representation,
gender pay gap, and early work on ethnic
representation.
• The first Sustainability Accounting Standards
Board (SASB) report has been completed
and published on our website.
• A new ESG investment policy has been
approved, integrated, and published on
our website.
• The launch of the HL Growth workplace
default fund with ESG integration and
exclusions in place.
We are focused on ensuring that proper ESG
integration will drive AUA, meet regulatory and
other stakeholder requirements, deliver better
client outcomes and enhance our reputation.
Board governance and changes
The Board is committed to delivering high
standards of corporate governance and
embedding the right culture and behaviour
throughout the business whilst considering our
stakeholder interests. To ensure we have the
appropriate skills and expertise to guide and
challenge the business through the next stage
of growth, we have continued to strengthen
the skill set of the Board throughout the year.
As previously announced in June 2021, with
effect from 1 September 2021, Penny James
was appointed as our new Senior Independent
Director (SID). Penny brings exceptional skills
with wide ranging financial services experience,
particularly in leading digital innovation and
transformation whilst strengthening our
Board diversity.
The Board have overseen an orderly transition
for the role of CFO. In December 2021,
we announced the appointment of Amy Stirling
as CFO with effect from 21 February 2022, taking
over from Philip Johnson who stepped down
from the Board on 31 January 2022. On behalf
of the Board, we thank Philip for his work at HL
during a strong period of growth. Amy brings
over 20 years of strategic financial management,
leadership and brand experience across a range
of industry sectors both as an executive and
non-executive. She is already bringing valuable
insights, pace and results to the business.
In June 2022, we announced the appointment
of Darren Pope to the Board as a Non-Executive
Director with effect from 1 September 2022.
Darren will bring strong skills with a broad range
of financial services and regulatory experience
and adds resiliency to the Audit Committee.
More detail of all these appointments can be
found on page 61.
Dividend
At our CMD we outlined that we would continue
our progressive ordinary dividend policy, growing
the ordinary dividend by 3% per annum for this
year and next. As such, the Board recommends
payment of a final ordinary dividend of 27.44p
per share, subject to shareholder approval at
the AGM. If approved, such dividend will be
paid on 24 October 2022 to all shareholders
on the register at the close of business on
23 September 2022.
An interim dividend of 12.26p per share was
paid on 1 April 2022. Taking this into account,
the total ordinary dividend for the year will be
39.7p per share (2021: 38.5p), an increase of
3% on last year.
Looking forward
As we look ahead, there is much uncertainty
driven by external conditions beyond our control
that could impact our revenues and earnings.
What we can control, however, is robust
governance over the execution of our recently
announced strategy and the efficient spending
of that investment by our highly experienced
management team. Whilst currently there are
headwinds across our industry, we are
committed to our purpose by driving efficiency,
resiliency, and sustainable growth for the benefit
of all stakeholders and the broader society.
As ever, on behalf of the Board, I would like to
thank all our stakeholders including our clients
who continue to save and invest with us, our
colleagues who work tirelessly to deliver for our
clients, and our shareholders for their continued
investment and support.
Deanna Oppenheimer
Chair
4 August 2022
Governance Financial statements Other information
5
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CEO REVIEW
EMPOWERING YOU TO SAVE
AND INVEST WITH CONFIDENCE
Transforming the saving
and investing experience
This year has been a year of contrasting moods.
It was welcome to see signs of recovery from the
COVID-19 pandemic, but that sense of optimism
has been replaced by new challenges including
inflationary pressure, international conflict and a
worsening cost of living crisis that is now having
an impact on so many lives. The result is that
investor confidence has fallen significantly.
At times like these it helps that we have a
deep sense of history and draw on lessons
from our over 40-year track record of supporting
our clients through tough economic times.
HL has managed through unpredictable market
conditions throughout our history, including
several previous financial crises, political
instability and general elections, referendums
and Brexit. Our approach has been consistent:
we support our clients by providing relevant
insight, information and knowledge that both
builds confidence and ensures that investment
decisions and execution are as easy as they
can be in uncertain times. In 2022 we have had
two clear priorities: being there for our clients
throughout these turbulent market conditions
to help them achieve their financial goals;
and accelerating our ambition to transform the
saving and investing experience, where we
have set out a clear programme of strategic
investment to improve how our clients can
engage and manage their money whilst driving
growth for our shareholders.
Given the economic pressures, it is evident
that financial resilience is now a key priority
in everyone’s lives. Our purpose – to empower
people to save and invest with confidence –
has never been more essential. Clients’ needs,
which were already changing fast during the
pandemic, have continued to evolve amid the
new pressures from inflation, higher interest
rates and geopolitical uncertainty. As their
lifelong partner and with unparalleled
understanding of their financial goals that
sit alongside navigating all of the pressures
in their lives, it is critical that we now execute
our strategy to continue to drive leadership in
our sector by building the digital wealth manager
of the future. We will transform the experience
that clients encounter when they manage their
money, combining the best of human expertise
from our colleagues and augmenting it with the
supercharged use of data and technology to
deliver a uniquely personalised service that
will make managing wealth, financial health
and resilience, easier and more intuitive, with
relevant information that drives real outcomes.
This integrated way of servicing our clients,
the depth of data we can draw on, the
comprehensive and unrivalled range of products
and services in one place all underpin how we
create value for our clients. We are proud of
our track record of high quality service that has
enabled us to earn and retain the loyalty and
trust of our clients. Their continued confidence
in picking us as their financial partner is evident
in our rating as the direct-to-consumer platform
with the highest brand awareness (Platforum UK
Consumer Insights Jan 2022). We beat the high
street on a regular basis for accessing market-
leading rates on their cash – our Active Savings
service has had market leading rates for over
80% of this year. Alongside our cash offer, clients
benefit from discounted prices for popular
investment funds with an average saving of 20%
across our Wealth Short List of funds stemming
from us using our scale to deliver value for them.
They are able to do all of this using digital tools
and services that resulted in HL being rated #1
for investor experience in October 2021 by
Platforum. Our investment to evolve our strategy
means that our clients will benefit from the
creation of more value-added services, as we
expand into a broader wealth management
market, where incumbents have traditionally
been too slow to adapt to ever-changing
consumer needs.
Given the economic pressures,
it is evident that financial
resilience is now the key
priority in everyone’s lives.
Chris Hill
Chief Executive Officer
Governance Financial statements Other information
6
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CEO REVIEW
EMPOWERING YOU TO SAVE AND INVEST WITH CONFIDENCE CONTINUED
This market has reached an inflection point,
with new technologies enabling us to service
clients with personalisation through engaging
tools, data analytics and timely relevant nudges
in ways that were simply not possible before.
By investing to scale and further broaden our
proposition at HL, our aim is to capture a growing
proportion of the £3 trillion addressable wealth
and cash savings market in the UK and drive
the next stage of our sustainable growth.
The £175 million focused investment programme
will deliver a significant shift, allowing us to scale
in a more cost effective way, improve the client
experience and proposition and drive efficiency
through our client service. Myself, all of my
colleagues and our Board are united behind
the delivery of our strategy and confident
in the value it will deliver for both clients
and shareholders.
Performance in the year
The difficult backdrop in 2022, driven by a
combination of macroeconomic and geopolitical
events has hit markets and dented investor
confidence throughout the year. As we have
seen across the industry, this has led not only to
reduced asset values, but also to subdued flows
for many direct-to-consumer services and lower
activity across wealth management as a whole.
Through the year we delivered £5.5 billion of net
new business. I am particularly pleased that in
spite of this tough backdrop, the quality of our
service attracted a further 92,000 net new
clients, taking our total client numbers to a
record new high of 1.74 million. This compares
to FY21 where positive influences like the
COVID vaccine and subsequent recovery and
the heightened savings environment during
lockdowns led to a unique record year. As a
result, we have seen an expected reduction
in flows and client growth, which has impacted
our results for the year, with profit before tax of
£269.2 million.
Encouraging engagement is a key success metric
for us and our investment into digital tools and
our app continues to pay off with 290 million
digital visits in 2022 and an increase in mobile
engagement with 61.5% of digitally active
clients using the app (2021: 58.3%). This higher
engagement was also reflected in our flows
where a record 882,000 clients contributed to
their ISAs and pensions this tax year and net new
business per new client increased to £15,565
(2021: £13,943).
In 2022 we continued our Better Investors
programme which is aimed at building and
improving our long-term relationship with clients,
providing over 590,000 nudges to clients to raise
awareness of key insights on investment basics
such as levels of cash balance, compounding,
levels of diversification and risk and the
importance of regular investing. These nudges
continue to help us maintain high levels of client
retention at 92.1% (2021: 92.1%) whilst nudging
up our asset retention rate to 91.8% (2021: 91.4%).
In recent years we have seen clients diversifying
their portfolios, increasing their weightings to the
US, China and particularly technology stocks and
the NASDAQ. Having reached a record AUA of
£141.2 billion at 31 December 2021, the second
half of our financial year to 30 June 2022 has
seen significant market turbulence with the FTSE
All Share down 6.3%, the S&P 500 down 20.6%
and the NASDAQ down 29.5%. This negative
impact has more than offset the net new
business flows resulting in AUA at the end of the
financial year at £123.8 billion (2021: £135.5bn).
Despite this impact we delivered a robust
revenue performance of £583.0 million (FY21:
£631.0m), underpinned by our diversified revenue
streams. Although asset related revenues and
share dealing volumes have been impacted,
the recent rises in interest rates to 1.25% at the
year end have provided a positive tailwind for
cash revenue, which will continue into FY23.
The rising interest rate environment was also
reflected in the enhanced performance of our
Active Savings service, where assets hit a record
£4.6 billion with over 114,000 client accounts.
Delivering our strategy and executing on our
key initiatives will require £175 million of strategic
spend between now and FY26. In the first year
we have incurred £25.7 million of Investment
Cost (including £4.6m of spend which has been
capitalised) and £7.2 million of dual technology
running costs resulting in £313.0 million of
statutory operating cost and delivering a
statutory profit before tax of £269.2 million
(2021: £366.0m). We are committed to
disciplined investment with a focus on cost
control across the business. In the period,
underlying operating costs were £284.7
1
million,
up 7% vs prior year reflecting c3% of wage
inflation and the annualisation of growth in
people and capability to support and develop
the 92,000 new clients added. This has resulted
in underlying profit before tax of £297.5
1
million
(2021: £366.0m).
590,000+
nudges to clients to raise
awareness of key insights
on investment basics
such as levels of cash
balance, compounding,
diversification, risk
and importance of
regular saving.
92,000
net new clients added in
the year taking our total
clients to 1.74 million.
61.5%
of digitally active clients
use our mobile app.
1 Underlying operating costs and underlying profit before
tax are new alternative financial performance measures
and are defined on page 168.
Governance Financial statements Other information
7
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CEO REVIEW
EMPOWERING YOU TO SAVE AND INVEST WITH CONFIDENCE CONTINUED
In January this year, in
partnership with Oxford
Economics, we launched
the first edition of the Savings
and Resilience Barometer,
a tool designed to provide
a holistic view of the state
of the nation’s finances.
Our strategy
We announced the evolution of our strategy in
February at our Capital Markets Day as we invest
to transform, combine and deliver the next phase
of wealth management. Over the past year,
I have built a highly experienced and capable
Executive team that understand what it takes to
deliver a digital transformation at scale and the
transition that HL must undertake to become the
digital wealth management service of the future
and change how people manage their money.
The execution of this strategy is underway
and being delivered through five key pillars:
• Accelerate Growth via our Integrated
Proposition
• Create a step-change in Client Service
and Efficiency
• Develop our Digital Backbone
• Enable our People, Strengthening our Culture
• Scale the Foundations
We are focused on delivery and driving success
through disciplined investment that drives clear
benefits for clients and shareholders and have
made a great start against each of these pillars
in 2022.
Accelerate Growth via
our Integrated Proposition
As client needs continue to evolve, we must
continue to update our own proposition hand
in hand to unlock the next stage of our growth.
At our Capital Markets Day, we outlined plans to
expand our investment solutions, improving the
range of investment options we provide to clients
at all stages of their investment journey from
beginners to highly experienced investors.
Through launching a combination of new funds
and investment solutions, HL will have the
investment choices to address a broad range
of client needs.
It is also clear that increasing interest rates
and volatile markets highlight the importance of
diversified portfolios and accelerate the growth
of Active Savings, which allows us to help clients
in a more effective and time efficient way.
Finally, as a direct-to-consumer service, we know
that we must offer clients the tools they need to
manage their own investments, but we also know
that, at important stages and at moments that
matter, focused guidance and advice can be key
to building confidence and delivering the right
outcomes. Therefore, we are going to launch a
new digital, human and advice service that will
complement the significant support and
engagement we already offer our clients.
• Investment solutions – We launched the HL
Growth Fund as the default multi-asset fund for
the SIPP in December 2021, integrating into key
Workplace journeys from April. We have seen
encouraging levels of engagement from clients
with £102 million assets under management
by the end of the financial year and high levels
of opt-in. We have continued to expand our
capabilities and have made new hires into the
fund management team.
We expanded our research coverage to
Exchange Traded Funds, providing regular
updates on client’s most popular investment
trust holdings, and appointed a dedicated
ESG team providing increased education and
analysis with 60% more articles, increased
engagement and an increase in the number
of responsible funds on the Wealth Shortlist.
ESG is now a separate and distinct feature
of all research that we produce.
41%
of households are dipping
into reserves or debt to
tread water. Source: HL’s
Savings and Resilience
Barometer Report for
Great Britain, July 2022.
Governance Financial statements Other information
8
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CEO REVIEW
EMPOWERING YOU TO SAVE AND INVEST WITH CONFIDENCE CONTINUED
• Active Savings – We added two new partner
banks, including Santander International, taking
the number of partner banks to 15. Across the
year we have seen £1.5 billion of net inflows
with AUA now at £4.6 billion and 114,000
client accounts. The increases in interest rates
through the second half of the year along with
strategic marketing spend, however, has seen
a step up in net flows with £0.7 billion added
in the last quarter. This diversified proposition
not only drives client and asset retention,
but importantly in a rising rates environment
has also been a driver of new client wins.
• Augmented Advice – Over the year we have
made significant progress with our Augmented
Advice offering, scoping, designing and building
key features, informed by significant client
testing. Our Augmented Advice proposition will
establish a brand new experience for clients,
incorporating insightful tools like financial
wellbeing dashboards and calculators with
nudges and coaching to provide an enhanced
level of insight that supports them in hitting
their financial goals. We have made an
experienced hire to lead both this initiative
and our face to face advice business.
As we look ahead to 2023, our focus will be
on key deliverables across the three streams:
we will be launching new funds and developing
investment solutions, starting with a US fund
launch in Q2 of our financial year (subject
to regulatory approval); we will build on the
momentum that we have seen in Active Savings
with a continued focus on that product; and
we will launch a pilot for our augmented advice
service at the end of H1.
Create a step change in
Client Service & Efficiency
HL has always been known for its high quality
client service. Maintaining and evolving this
to deliver a future proofed client experience
underpinned by scalable and cost-efficient
processes is fundamental to our strategy
and critical to our future success. In 2022
we continued to evolve our service, driving
improvements to the client experience,
highlighted by our Trust Pilot score which
is now rated ‘excellent’. We continue to strive
for further progress and have focused on:
• Enhancing the quality of engagement –
By ensuring our service becomes ever more
personalised, we believe we will continue to
improve client engagement. In July we started
the roll-out of a Cloud Contact Centre platform
through our partner Amazon Connect. This
offers a simple to use platform for our client
service teams to improve the way they serve
our clients and reduce time taken to answer
queries. Connect allows us to simplify our
operating model, evolving client servicing so
we can use our talented colleagues to focus
on delivering an experience that adds value to
the client, one that is actioned by data insight
and through automating experiences that our
clients expect to be self-serve. It is the first
step in delivering a more personalised client
experience in a more efficient way and will
ensure improved levels of Client Satisfaction
and NPS and also reduced cost to service.
The platform will continue to be enhanced
through 2023, delivering cost savings and
service improvements by the second half
of the year.
• Building simplicity & resilience – We want to
offer a simpler and more consistent service
underpinned by technology solutions that make
it easy for us and clients. In 2022 we partnered
with Ecospend to provide ‘Pay by Bank’
services, utilising the latest technology in Open
Banking to create a more efficient and effective
payment journey option for our clients. This will
create greater resilience in our service and
deliver significant cost saving over 2023
as we roll it out across our client journeys
and applications.
We have also undertaken a project to digitise
our inbound mail processes. Using third-party
providers we have completed the first two
phases of this work, focusing on new business
applications and workflow. This work will lead
to a reduction in cost to serve, allowing us
to service more clients without extra costs,
and strengthening our ability to scale whilst
maintaining resilience. It will also act as a key
strategic enabler for workflow automation
and the delivery of our wider service strategy.
• Driving innovation – HL has a long history of
innovating: we lead the market in delivering
new solutions to enhance the saving and
investing experience for clients and 2022 has
continued this trend. In May we launched REX,
a new Retail Offer Service with Peel Hunt,
enabling retail investors to access IPOs and
secondary fundraising, a key area where
retail investors previously lacked the tools
to engage. The first corporate action was for
an infrastructure investment trust and 25% of
the shareholders participated. This continues
to broaden the service we offer our clients,
providing greater functionality and increasing
client satisfaction.
Our key focus for 2023 in service and efficiency
will be on delivering across each of these areas
to enhance the quality of our client engagement
and deliver on cost savings outlined at our
Capital Markets Day.
35.9%
of households have more
than 6 months’ worth
of essential expenditure,
of which half have gone
on to invest to make
more of their money.
Source HL’s Savings and
Resilience Barometer
Report for Great Britain,
July 2022.
Governance Financial statements Other information
9
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CEO REVIEW
EMPOWERING YOU TO SAVE AND INVEST WITH CONFIDENCE CONTINUED
Develop our Digital Backbone
We have set out the ambition to be the leading
digital wealth management service and transform
how people manage their money. By investing
in more digital capabilities – from data analytics,
using cloud for scale and innovation, and better
managing end-to-end client journeys – we will be
able to continue to take advantage of our growth
and the scale of our platform reducing cost to
serve and creating operating leverage, using the
infinite scalability of the cloud.
Enhancing our digital capability underpins all of
our success and drives the execution of all of our
strategic pillars. In 2022 we have delivered on
some key foundational outcomes that underpin
our digital backbone:
• Cloud & Platform – We need to leverage a
cloud-based flexible infrastructure to build
systems that auto-scale and increase our
ability to innovate enabling us to partner
with companies that are pioneering the
latest technology. In 2022 we have set out
foundations for our cloud migration, signing
contracts with industry leaders ForgeRock and
Kong to support our development of enhanced
identity and authentication solutions and
building our ability to scale. We have also
begun to apply cloud-based solutions through
partnerships including Amazon Web Services,
who are supporting the delivery of our new
cloud and data platforms, building increased
personalisation and efficiency into our service.
• Data – We have an unparalleled insight into
client behaviour and needs built up over 40
years of lifelong relationships. We must be
able to use this data to provide the highest
quality of client service and personalise the
experience for both clients and colleagues.
We are focused on data enrichment to build
the foundations that enable a smoother
transition to the cloud and to power augmented
solutions. This year we have partnered with
Precisely, to prepare our data for the future
and enable us to manage and govern across
its life cycle, identifying and cataloguing
data assets as well as improving data quality
through rules and workflows that then power
AI driven guidance.
• Digital Foundations –These enable us to
deliver an end-to-end digital client experience
at pace, and key to this is ensuring that HL’s
transformation is client-product and client-
journey led. In 2022 we have realigned our
digital teams in a single organisation under
our Chief Digital and Information Officer and
created a stream-lined product led organisation
under our Chief Technology Officer. One key
element of the product led approach is to
ensure consistency between online and mobile
journeys – in 2022 we have focused on this,
including adding previously non-mobile
functionality such as fund switching so it is
available across all devices and improving our
mobile app to increase accessibility. We have
also utilised product led teams to deliver
improvements across other strategic pillars,
including the digitisation of our mail room
and the launch of the Retail Exchange service.
The launch of a new design system has
increased the pace of our developers through
an ability to create consistent user experience.
Across each of these initiatives we are seeing
delivery at pace and achieving outcomes
that significantly enhance the client and
colleague experience.
Our Digital Transformation is focused on delivery
and our execution plan is broken into clearly
identified and achievable projects, where we
can deliver at pace and see tangible cumulative
benefit. Our focus in 2023 will be on utilising the
ForgeRock and Kong partnerships to centralise
digital identity to create a market leading
experience; and we will increase our ability to
execute multivariant releases. These are key
elements that complement and support a data
driven, product led way of working. Alongside
this we will also continue our cloud journey,
delivering significant internal and external tools
through our partnership with AWS.
Enable our People,
Strengthening our Culture
The delivery of a strategy is only possible
with the right people, capabilities and culture
underpinning it. HL’s success is due to our
brilliant colleagues and their continued efforts to
go the extra mile, innovate and deliver for clients.
The execution of our strategy will be reliant on
introducing key new capabilities in some areas
and so we are focused on building the right
environment to develop and enhance colleague
performance, retain and attract the right talent
and make HL a great place to work. In 2022 we
have adapted to the post-pandemic environment
by building a hybrid working pattern that is
colleague led and enabling our offices for new
working patterns. We have also been focused on
supporting colleagues through the challenging
conditions impacting all of us and in May
provided a ‘breathing space’ payment for
colleagues to aid with their cost of living needs.
We continue to look at solutions to provide
colleagues with support during this time.
Looking ahead to 2023 we continue to onboard
the new capability to support our strategy
whilst also focusing on developing and enabling
colleagues to adopt agile and product led ways
of working, supporting HL’s ability to deliver client
outcomes and change at pace.
HL has a long history of
innovating; we lead the market
– driving new solutions to
enhance the client experience.
Governance Financial statements Other information
10
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CEO REVIEW
EMPOWERING YOU TO SAVE AND INVEST WITH CONFIDENCE CONTINUED
Scale the Foundations
A critical element of any successful business
is the enabling functions that support the
delivery and execution of the strategy. To drive
sustainable returns over the long-term we must
ensure we strengthen our foundations to ensure
both resilient client journeys and support growth
and new ways of working. In 2022 we have done
this through welcoming new capability across
key teams including a significant increase in
Risk and Compliance. We have also delivered
key resilience and scalability improvements to
key systems including our Drawdown payments
and commercial banking systems. In 2023 we
will continue to prioritise this enhancement of
foundations in parallel to our work to build new
functionality, ensuring that we have the systems
and people to deliver our strategy. We must also
meet regulatory expectations including delivering
in line with the new Consumer Duty to help
ensure the right outcomes for clients.
It is clear that HL is in execution mode. In 2022
we have set the foundations for the successful
delivery of our strategy. We are confident that
we have the right strategy and the right team to
deliver and now we are seeing the results. I look
forward to sharing more of these as we transform
our business over the coming years.
FY23 Guidance and medium-term outlook
We are currently seeing, and for the period
ahead expect to see continued, economic
and geopolitical turbulence. This will continue
to impact key drivers of our business including
asset levels and investor confidence. We have
supported clients through such events and
period for many years and each time we have
come through stronger. This time will be
no different.
The strategy we outlined in February 2022 will
deliver outstanding client service, strong growth
and returns and continued market leadership for
HL. We are therefore confident that execution of
this strategy by the highly experienced team we
have assembled will deliver the metrics and
targets we set out at our investor day.
Our visibility on whether the timing of delivery
of our targets has been impacted will be
influenced by when we have greater visibility
on normalisation in markets and related investor
confidence as we outlined at the time of the
CMD. We will keep you updated as we execute.
In the meantime, to position ourselves to benefit
as markets do normalise, we are focusing on
factors we can control including the execution
of the strategy. In this context we have set out
expectations for FY23 as follows:
• Revenue margin of between 44 and 47 basis
points primarily reflecting the higher revenue
margin on cash resulting from higher
interest rates.
• Underlying cost growth of between 9.5% and
11.5%. This is on the back of lower than guided
cost growth in 2022 and will, in absolute terms,
still be lower than costs guided to at the time
of the Capital Markets Day. It also reflects
c£15 million of cost savings.
• £65-75 million of strategic spend with no
change to our overall strategic spend to the end
of 2026 of £175 million and £20 million of dual
tech running costs as previously guided to at
the Capital Markets Day. This investment will be
funded through £55 million of annual recurring
cost savings delivered over the period.
• 3% Ordinary dividend growth.
Finally, I would like to thank my colleagues once
again for their hard work and energy through yet
another difficult period where they have ensured
that we have provided a market leading service
to an ever-growing number of clients. I also
want to thank our clients for their continued
engagement and enthusiasm as we develop our
proposition and service through such difficult
times. Our goal is to continue to enhance their
financial resilience and transform how they
manage their money.
Chris Hill
Chief Executive Officer
4 August 2022
HL’s success is due to our
brilliant colleagues and their
continued efforts to go the
extra mile.
Governance Financial statements Other information
11
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
STRATEGY & KPIS
DELIVERING
OUR STRATEGIC
PRIORITIES
Our client focused strategy and
culture enables us to build long-term
relationships and address the structural
growth opportunities that exist.
We are investing across the 5 pillars of our
strategy to deliver the next generation of wealth
management, driving sustainable returns and
a high quality client experience.
We are committed to ensuring our investment
drives significant returns. Therefore to monitor
delivery across each of our strategic building
blocks we have allocated relevant key
performance indicators. We have established
regular monitoring of these metrics across
committees and our plc Board to ensure progress
is made effectively.
1 2
Create a step change in
Client Service & Efficiency
Accelerate Growth via
our Integrated Proposition
We are using digital technology and data to
deliver tailored, seamless client journeys to
improve client experience and enhance client
outcomes, whilst delivering scalability and
cost-efficiency.
We are strengthening our core proposition
by investing in our Investment Solutions,
accelerating our Active Savings service and
launching our new Augmented Advice and
Guidance capabilities. These will all help to drive
client acquisition, increase ongoing engagement
and improve retention rates.
3 4
Develop our
Digital Backbone
Enable our People,
Strengthening our Culture
By investing in our digital capabilities –
from data analytics, to transferring data to the
cloud, and better managing basic end-to-end
client journeys – we will be able to continue
to take advantage of growth and scale
our platform in a more cost-efficient way,
reducing our cost to serve and creating
operating leverage.
We are simplifying the organisation to drive faster
decision making and clear accountability. Focusing
on enhancing our colleague value proposition and
strengthening our ways of working and culture.
5
Scale the
Foundations
Strengthening operational resilience and risk
management to ensure resilient client journeys
whilst further developing our enabling functions
to support growth and new ways of working.
Governance Financial statements Other information
12
Strategic report
Hargreaves Lansdown
Report and Financial Statements 2022
STRATEGY & KPIS
DELIVERING OUR STRATEGIC PRIORITIES CONTINUED
1
Create a step change
in Client Service
& Efficiency
We have always been
recognised for our
high-quality client service
and experience – helping and
supporting clients to save
and invest with confidence.
We have a clear strategy for how we will
continue to evolve our service moving forward,
using digital technology and data to deliver
tailored, seamless client journeys to improve
client experience and enhance client outcomes,
whilst delivering scalability and cost-efficiency.
We want to make it easy for clients to manage
their investments and to provide a service that
enables them to do it better and deliver their
financial goals.
Progress in 2022
In 2022 we have continued to drive
improvements across our service and in line
with this clear strategy:
• We have partnered with Amazon Web
Services to roll out a Cloud Contact Centre,
making it easier for clients to use our
service and colleagues to provide a
personalised experience.
• We have significantly improved our
transfer performance and associated client
experience – driving average pension transfer
times from 43.3 days in 2021 to 21.2 days
in 2022 and driving improvement in the
experience and efficiency across all products.
• We have reached a record TrustPilot score,
hitting an ‘Excellent’ rating score at 4.3, a
significant increase over the year (2021: 3.7).
• We have partnered with EcoSpend to provide
‘Pay by Bank’ services, leveraging the latest
open banking technology to offer a direct
and efficient way to pay directly on to your
HL account from your bank.
Focus for 2023
• Launch our new Cloud Contact Centre,
improving the client experience and the value
that our knowledgeable colleagues can add
to every interaction.
• Launch open banking payments across key
journeys and applications.
• Deliver cost savings and increased efficiency
as outlined at our Capital Markets Day.
KPI: Client Satisfaction
Based on the average results of client feedback
in the quarterly client satisfaction surveys
in 2022.
Why
This provides a measure of our clients overall
satisfaction with our service performance.
A high score will have a positive effect,
reinforcing the long-term relationships
we build with our clients.
Progress for the year
• Over the year we have delivered significant
improvement across service measures
including improved transfer times and
reduced complaints.
• Over the year our Helpdesk have taken
1.269 million calls (2021: 1.341 million) and
416,000 emails (2021: 489,000).
• We won the award for Boring Money Best
Customer Service 2022 and were rated Gold
for our Customer Service by The Times
Money Mentor.
Result
80.7 (2021: 79.3)
Principal Risk
Strategic and operational
Governance Financial statements Other information
13
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
STRATEGY & KPIS
DELIVERING OUR STRATEGIC PRIORITIES CONTINUED
2
Accelerate Growth
via our Integrated
Proposition
We have a broad and
extensive proposition of
investment and savings
products to support our
clients throughout their
financial lives.
Through our focused investment we will
strengthen our core proposition by expanding
our Investment Solutions, accelerating our
Active Savings service and launching our new
Augmented Advice & Guidance capabilities.
These will help drive client acquisition, increase
ongoing engagement, improve retention rates
and deliver greater net new business.
Progress in 2022
• HL Funds – In January we launched the first
of the new HL funds we plan to deliver. This
HL Growth Fund acts as the default fund for
clients of our Workplace Solutions SIPP and
by June had grown to £102 million. The new
HL Fund capabilities and suite of solutions
will provide a wide range of cost competitive
choices, tailored for investor experience and
investment objectives.
• Advice – At our Capital Markets Day we
announced our plans to launch a new
omni-channel advice proposition that
combines the best of human interaction
and our 40 years of insight into clients’
needs, augmented by better data analytics
and digital capabilities to provide a
game-changing proposition. We have
designed and built the key features of this
product, with technical delivery on track for
pilot launch at the end of calendar year 2022.
• Our Active Savings service is a critical part
of our diversified proposition. As interest
rates have risen in 2022 we have seen this
proposition continue to grow – hitting
£4.6 billion assets and 114,000 client
accounts. Over the year we have had at least
one market leading rate on platform for 86%
of the time and welcomed new banks such
as Santander International and Allica.
Focus for 2023
• Launch the pilot for our augmented advice
service at the end of H1, providing clients
with the next level of support with their
investment journey.
• Continue to build momentum in Active
Savings given the favourable interest rate
environment.
• Launch next tranche of HL Funds, starting
with the US fund – due in the second
quarter of our financial year (subject to
regulatory approval).
KPI: Net New Business
Represents subscriptions, cash receipts,
cash and stock transfers in, less withdrawals
and assets transferred out.
Why
NNB is an indicator of the trust and security
clients place in Hargreaves Lansdown along
with the perceived value of the client offering.
The greater the assets gathered, the greater
the revenue.
Progress for the year
• Challenging external conditions have
impacted investor confidence and led to
subdued net new business performance
in 2022.
• Despite this our strong proposition continues
to be recognised with HL winning Best ISA,
Best Buy LISA and Best Buy Pension at the
2022 Boring Money Awards.
• We continue to see many clients establish
regular savings into their HL accounts with
292,000 unique regular savers in FY22
(2021: 283,000).
Result
£5.5BN (2021: £8.7bn)
Principal Risk
Strategic and operational
KPI: Total Clients
Represents the total number of active clients
that are using our service by the end of the
year (unique number of clients holding at least
one account with a value over £100 at the
year end).
Why
As we attract, engage and retain a higher
volume of clients we build increased potential
for growing future AUA.
Progress for the year
• Challenging conditions impacted new client
acquisition but we still attracted 92,000 net
new clients over the period.
• Significant marketing and advertising in the
second half of the year including our third
brand awareness campaign building on the
success of previous years and underpinning
our position as the most recognised
D2C brand.
• New clients added across our range of
accounts and across all demographic
segments.
Result
1.74M (2021: 1.65m)
Principal Risk
Strategic and operational
Governance Financial statements Other information
14
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
STRATEGY & KPIS
DELIVERING OUR STRATEGIC PRIORITIES CONTINUED
3
Develop
our Digital
Backbone
As a leading digital wealth
management service our
technology and the client
experience we deliver is
critical. We are committed
to improving our digital
capability to optimise our
service, enhance our
proposition and improve
our efficiency.
By investing in more digital capabilities –
from data analytics, to transferring data to the
cloud, and better managing end-to-end client
journeys – we will be able to continue to take
advantage of our growth and further scale our
platform, reducing cost to serve and creating
operating leverage.
Progress in 2022
• We have set out foundations for our cloud
migration, signing contracts with industry
leaders ForgeRock and Kong to support
our development of enhanced identity and
authentication solutions and our ability
to scale.
• We are focused on data enrichment to build the
foundations to enable a smoother transition to
the cloud and to power augmented solutions.
We have partnered with Precisely in 2022
to deliver a data governance tool which will
support us in achieving this.
• Launched a new Flare design system
which will support us in quicker product
development through offering a design tool
which enables consistent user experiences.
• We added features to our Mobile App
including offering functionality that was
previously only available via our website,
like fund switching. We have also increased
accessibility to the app, both by improving
our log-in process for those that require
two factor authentication and improving
integration with 3rd party support tools
like screen readers.
Focus for 2023
• Digital identity to move to the ForgeRock
cloud, enabling the modernisation of
on-boarding and critical data management
around identity. This will allow us to
personalise for our clients, offer them new
products and help power augmented advice.
• The ability to provide multivariant releases
to offer products much faster and based
on user behaviour in a safe and secure way.
• Our partnership with Amazon Web Services
will see major releases of internal and
external tools, providing us with greater
resilience and scalability and allowing all
of our teams to move faster to solve client
and colleague needs.
KPI: Strategic Delivery
Represents the progress we have made
with our strategic goals.
Why
Delivery of our strategy is critical to ensure
we continue to deliver sustainable growth
into the future.
Progress for the year
• We successfully delivered our 2022 Capital
Markets Day outlining our plans and focused
investment to the market, gaining supportive
feedback from major investors.
• Execution underway with transformation
office and processes established, plans for
change to product led organisation outlined
and target operating model in development.
• Executive team in place and aligned behind
this plan.
Principal Risk
Strategic and operational
KPI: Client Retention
Based on the monthly retained number of
clients, as a percentage of the opening months’
clients and averaging for the year. A lost client
is deemed as one who falls below a holding
of £100.
Why
A high client retention rate is a sign that clients
are happy with the service we provide and that
it fulfils their investment needs. The longer a
client is with Hargreaves Lansdown, the more
assets they are likely to accumulate.
Progress for the year
• This year we have maintained our retention
rate as clients continue to see HL as their
lifelong partner and consolidate their assets
with our service.
• We have also enhanced our support and
guidance, launching the new HL Podcast
and continuing our Better Investors
campaign where we have used data to
identify clients who may need more help
with investment basics like diversification
and risk management.
• HL won the award for UK D2C Best Investor
Experience from Platforum, with our strong
experience continuing to encourage clients
to use our digital channels.
Result
92.1% (2021: 92.1%)
Principal Risk
Operational and financial
Governance Financial statements Other information
15
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
STRATEGY & KPIS
DELIVERING OUR STRATEGIC PRIORITIES CONTINUED
4
Enable our People
Strengthening
our Culture
Our people are our biggest
asset and are fundamental
to delivering our vision, our
strategy and the sustainable
growth of our business.
As part of our strategy we have clearly defined
how we need to evolve to better enable our
people and strengthen our culture. We will
simplify the organisation to drive faster decision
making and clear accountability, focusing on
enhancing our colleague value proposition and
strengthening our ways of working and culture.
Progress in 2022
• We have undertaken the transition of
colleagues from pandemic ways of working,
taking the best of the flexible working
practices welcomed during COVID-19 and
optimising our offices to welcome colleagues
back to regular in-person working.
• We have increased resources that support
the HL Way. The HL Way makes clear what
we represent, acting as both an internal
commitment to a standard of behaviour,
but also a public declaration of our values,
principles and beliefs.
• We have focused on supporting colleagues
through the challenging external conditions
faced in 2022 with a ‘breathing space’
payment paid to help colleagues manage
the increasing cost of living.
• Delivered key hires to increase our capability
across key areas of our strategy including
Advice, Investment and Risk Management.
Focus for 2023
• To improve delivery and efficiency across
the business we will adopt product led ways
of working and update our target operating
model to reflect this.
• We will encourage a colleague led
continuous personal improvement approach
to development.
• We will continue to find and on-board new
capability in key areas to support the delivery
of our strategy.
KPI: Colleague Engagement
Our annual colleague survey provides visibility
on colleague views and sentiment on our
business. Colleague engagement is a key score
based on four core metrics assessing colleague
pride, advocacy, motivation to go the extra mile
and intent to remain at HL.
Why
We believe it is important to listen to and
understand our colleagues’ views and
motivation; their honest feedback is crucial
in evolving our colleague engagement
programme and colleague value proposition.
Progress for the year
• Our colleague survey saw a strong response
rate at 73% (2021: 70%).
• Over the year we used colleague feedback
and engagement insight to inform decision
making around a number of projects.
• Examples include our return to office and
future of work where colleague insight helped
us enable our flexible working practices.
As well as our strategy communications,
where we have used feedback to understand
what colleagues want to learn more about.
Result
64% (2021: 66%)
Principal Risk
Strategic, operational
Governance Financial statements Other information
16
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
STRATEGY & KPIS
DELIVERING OUR STRATEGIC PRIORITIES CONTINUED
5
Scale the
Foundations
A critical element of any
successful business is the
enabling functions that
support the delivery and
execution of the strategy.
To drive sustainable returns over the long-term
we must ensure we strengthen operational
resilience and risk management to ensure
resilient client journeys whilst further
developing our enabling functions to support
growth and new ways of working.
Progress in 2022
Over 2022 we have been focused on
strengthening our capability across our
enabling functions to ensure we are best
placed to deliver our strategy, this included:
• Enhancing our Risk and Compliance teams
to ensure we have the right structure and
team to provide strong and scalable 2nd line
expertise and insight.
• Driving operational resilience improvements
across business critical systems in line with
regulatory time frame.
• Implementing the Business Priorities
Committee to ensure effective prioritisation
of risk focused initiatives and the
strengthening of our control environment.
Focus for 2023
• We will execute key regulatory change
including Consumer Duty.
• We will continue to update key systems
to enhance our operational resilience
and scalability.
• We will further develop our enabling functions
to support growth and new ways of working.
KPI: Statutory Profit Before Tax
Profit generated by the business over
the period. In light of our strategic spend
announced in 2022 we are now reporting
Profit Before Tax in two ways; underlying
– measuring the underlying performance
of the business excluding strategic spend,
statutory – measuring the overall business
performance including strategic spending.
Underlying PBT is defined in the Glossary of
Alternative Financial Performance Measures
on page 168.
Why
A scalable platform with strong operational
resilience, risk management and enabling
functions helps to gather and retain assets
and clients which drives revenues and profits.
Progress for the year
• PBT on an underlying basis reduced 19%
to £297.5 million in the period, driven by
reduced revenue given the supranormal
pandemic driven activity and flows in 2021
and the challenging conditions faced in 2022.
• PBT on a statutory basis reduced 26% to
£269.2 million. As outlined at our Capital
Markets Day we intend to invest £175 million
by 2026. This expenditure will generate
significant growth over the medium term
but has impacted PBT in 2022.
Result
£269.2M (2021: £366.0m)
Principal Risk
Strategic, operational and financial
Governance Financial statements Other information
17
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
AN ATTRACTIVE MARKET
AT AN INFLECTION POINT
MARKET OVERVIEW
Wealth management is
experiencing structural growth
and has reached an inflection
point. Our market leading
proposition and service means
we are well placed to disrupt.
An attractive market
The UK savings and investment market has
seen significant growth in recent years and our
addressable market is estimated at £3 trillion.
Within this we operate as the leading direct-to-
consumer (D2C) UK platform with a 41.7% share
of a market worth £289 billion. Despite current
challenges, the structural factors at play along
with an acceleration of existing trends resulting
from COVID-19, look set to provide growth for
many years to come and as the UK’s leading
digital wealth manager we have a great
opportunity to win in this growing market.
Our addressable market today is made up of
an estimated £1.4 trillion of private wealth plus
£1.6 trillion of cash savings giving an implied
market share for Hargreaves Lansdown of
c4.1%. Outside the D2C space, the bulk of this
addressable market is held through independent
financial advisers, independent wealth managers
and vertically integrated firms. A significant
amount of this investment pool will have been
initially advised upon, maybe many years ago, but
now receives no ongoing advice and little support.
This provides a deep source of potential transfers
to Hargreaves Lansdown as clients look to
consolidate their investments onto our platform.
This £1.4 trillion is concentrated across around
7 million people with £100,000 or more of
investments (source: ONS). However, more
and more people are beginning to invest thanks
to the various structural drivers, with COVID-19
accelerating this trend. In addition, pension
auto-enrolment in the UK has revolutionised
saving, with over 1.6 million employers and
more than 10 million employees now participating
in the programme.
The size of the market opportunity has never
been this significant. The impact of the structural
and secular shifts will drive the market from
the £3 trillion seen today to £4 trillion by 2026.
As the market leading digital wealth management
service HL is well placed to drive significant
growth from this evolution.
Structural growth drivers and
secular shifts will significantly
grow our addressable market
in the coming years.
£4.0tn
Addressable
market in 2026
£3.0tn
Addressable
market today
£123bn
Market addressed
by HL today
Governance Financial statements Other information
18
Strategic report
Hargreaves Lansdown
Report and Financial Statements 2022
MARKET OVERVIEW
AN ATTRACTIVE MARKET AT AN INFLECTION POINT CONTINUED
Secular shifts
People need help understand their finances,
manage them in the right ways for them and to
do so simply and increasingly through digital means.
People are
living longer
Ongoing low
asset yields
Political & market
uncertainty
Complex savings
environment
Individual
responsibility
There is an estimated
£314 billion gap between
retirement expectations and
the cost of funding such
expectations – ‘The Savings
Gap’. The level of funding
necessary to provide retirement
income is increasing, driven by
longer life expectancies, less
generous company pensions
and ambitious retirement
expectations.
Since the financial crisis the
interest rate environment in the
UK has been low, driving down
yields on cash based products
and increasing the demand for
investing as individuals look
for an opportunity to capture
increased returns.
Political and market uncertainty
reinforces the importance of
saving and investing and the
need for individuals and families
to be financially resilient.
This drives engagement
as individuals realise the
importance of being financially
prepared for the future.
Successive UK governments
implementing further changes
to pension savings, the
introduction of various ISA
products, the growing
awareness of responsible
investing, historically low
but rising interest rates and
significant cost inflation have
made finding the right solution
for individuals’ investment
needs ever more complex.
The burden of responsibility
for retirement is shifting from
government and corporates
to the individual. This gap
cannot be closed without
individuals taking ownership for
self-provision and without the
use of long-term investments
alongside cash savings.
Hargreaves Lansdown and the
rest of the UK Savings industry
needs to help bridge this gap.
Governance Financial statements Other information
19
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
MARKET OVERVIEW
AN ATTRACTIVE MARKET AT AN INFLECTION POINT CONTINUED
Inflection Point
It is through our market leading position and
deep understanding of clients and their needs,
that we recognise the wealth management
market has hit an inflection point. It is clear
that there is a strong opportunity to disrupt
the existing, fast growing market and drive
the next generation of wealth management,
and that HL is well placed to execute on this.
Over our 40 years of experience we have
built innovative investment tools, pioneering
new products and services like Active Savings
and the Stocks & Shares Lifetime ISA and
introduced high quality digital experiences
through our award winning mobile app.
This ongoing innovation and development
has driven breadth of offering and an evolving
range of products for our clients. This strong
track record underpins our confidence in our
ability to capture the market opportunity.
Our Proposition
Our proposition and service is designed to
help clients of all ages from seasoned investors
to those starting out.
ISAs
We have developed a suite of ISA products
to support clients through a variety of savings
goals. The current ISA allowance of £20,000
provides great scope for tax efficient investing.
The Stocks & Shares ISA is increasingly becoming
a long-term investment plan for many and hence
provides a significant opportunity for new
business flows.
The Lifetime ISA (LISA), launched in April 2017,
is open to those aged 18 to 40 and can be used
towards a deposit on a first home or towards
saving for retirement. As at 30 June 2022,
we have over 108,000 accounts with £1 billion
of invested assets, which probably makes us
the largest provider of LISAs. This is also the
case with the Junior ISA (JISA), which since
The Wealth Management Market has hit an Inflection point
Clients
Client expectations of how they manage
and interact with their savings and investments
are changing and have been accelerated by
COVID-19. They no longer compare just to
other wealth managers or financial services
companies, but to the client experience offered
by the likes of Amazon. Hargreaves Lansdown
has been using its insight and innovating to
meet client needs for many years and will invest
in these digital, personalised and on-demand
technologies to retain its leadership in client
service and experience.
Regulation
The regulator has a clear focus on client
outcomes and the value of long-term investing:
its recent consumer strategy recognises
the need for people to participate in markets
with a specific target of a '20% reduction in
the number of consumers with higher risk
tolerance holding over £10k in cash by 2025'.
This is equivalent to 1.7 million people. A focus
on outcomes and long term investing have long
been key principles for Hargreaves Lansdown
with our clear purpose to empower clients to
save and invest with confidence.
Technology
Technological capability has moved forward
– from cloud computing to the power of
Artificial Intelligence and the increase in hybrid
tools – what the wealth management industry
needs to move forward is available and ready
to be harnessed to drive the next level in
client experience.
Incumbent Players
We believe the existing incumbents in the
wealth management market are not always
meeting clients’ evolved needs. Expensive
adviser fees and confusing, time consuming
and jargon heavy investment providers
and services are not meeting clients’
changed expectations. Our digital insight
is unmatched in the direct-to-consumer
space – we understand what clients want
from their wealth management service
and the tools they need.
Governance Financial statements Other information
20
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
MARKET OVERVIEW
AN ATTRACTIVE MARKET AT AN INFLECTION POINT CONTINUED
Each of these propositions will be a key focus
for our investment over the next few years and
offer clear reasoning for how we will capture
the market opportunity.
The investment programme will also deliver
improved operational efficiency, which will
deliver sustainable annualised cost savings of
c£55 million by FY26. This not only helps fund
our investment spend but will also provide us
with a more scalable and efficient technology
platform and business, where we can continue
to innovate and develop at a faster rate.
Our Competition
We operate in an increasingly competitive
landscape and new competitors continue
to enter the digital wealth market with
innovative technology and new solutions.
We are never complacent and continue to
watch the competitive landscape closely.
Where competition raises the awareness of
saving and investing we see this as a good thing.
Financial education and awareness in the UK
is relatively low and hence high quality, client
focused companies like ours have a key role in
addressing these issues. Healthy competition
ultimately delivers better outcomes for investors.
Achieving scale is key to becoming successful.
Once scale is achieved, sustainable profits rely
on continued investment. The updated strategy
we outlined in 2022 highlights where we see
the opportunity for HL to continue our growth
trajectory and the investment we will make to
deliver this – offering the next generation of
wealth management for our clients.
Hargreaves Lansdown never stands still.
We have always led the way in the direct-to-
consumer investment market and continue to
look to improve the experience for our clients,
ensuring value for money is delivered.
introduction in June 2011, has proved popular
with Hargreaves Lansdown clients. Many of
our LISA and JISA clients are new to Hargreaves
Lansdown highlighting how it serves as a
way of attracting a younger demographic
to our platform.
Pensions
Pension auto-enrolment in the UK has
revolutionised saving, with over 1.6 million
employers and more than 10 million employees
now participating in the programme.
The workplace will continue to play a pivotal role
in retirement saving and Hargreaves Lansdown
Workplace Solutions, which already provides
pension, investment and annuity services for
over 590 employers, can really make a difference
by improving employee engagement with saving
through a range of high quality services.
Better investor engagement with retirement
savings and the decisions people can take to
improve their financial futures is a high priority.
Hargreaves Lansdown is committed to being
at the forefront in helping people meet this
challenge. Through our varied retirement
proposition featuring Self Invested Personal
Pensions (SIPP), Drawdown and Annuities, as
well as a number of retirement planning tools,
we offer many options for clients to manage their
own retirement savings and the education and
support to build their confidence in doing so.
Cash Savings
Alongside our investment products, in the growing
interest rate environment we also offer market
leading cash savings rates through our cash
savings service. ‘Active Savings’, our digital
deposit service provides a simple digital solution
for managing cash savings across multiple
providers. Since its launch we have continued
to refine the proposition now offering Fixed term,
Easy Access and Cash ISA products. As at
30 June 2022, we had over 114,000 client
accounts with over £4.6 billion AUA, and are
seeing clients joining HL for the first time
through this service. Clients holding risk based
investments often have cash held elsewhere
so utilising Active Savings becomes a natural
extension of their interaction with us and
enables us to become ever more part of their
financial lives.
Our Investment
At our 2022 Capital Markets Day we outlined
our strategic priorities, and the £175 million
investment programme required to deliver
against the strategy. This investment will drive
significant change within the business, helping
us to better utilise our unmatched client insight
and data to deliver the client experience of
the future.
• We will expand our investment offering,
launching new funds through HL Fund
Management. These will be across different
sectors, incorporate ESG considerations
and have low cost options. The development
of these funds will drive significant increases
in the proportion of our clients’ assets that
are held in HL Funds over time and support
enhanced net new business as new clients
bring money onto our platform.
• We will accelerate our Active Savings service.
We will grow the assets held with strong
new bank partnerships, better functionality,
increased marketing to existing HL clients
and the general public and a clearer transition
to our Savings service, so we have the best
and most complete offer available.
• We will launch a new omni-channel advice
proposition that will aim to bridge the gap from
D2C to Advice and offer an integrated service
with a platform that helps our clients manage
key life events and adapts to their current
needs. This expansion will lead to a higher
share of wallet as clients consolidate their
savings and investments with us and increase
retention as more choose to build lifelong
relationships because we can help at all the
key financial moments that matter.
Lifetime ISA accounts
108,000+
with £1.0bn+ AUA
Junior ISA accounts
160,000+
with £1.4bn+ AUA
SIPP drawdown
accounts
59,000+
with £9.4bn+ AUA
Governance Financial statements Other information
21
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
POWERFUL
DISTRIBUTION
ENGINE
OUR
RESILIENT
GROWTH
CYCLE
BUSINESS MODEL
Our client focused culture
enables us to build long-term
relationships and generate
a deep understanding of
their needs.
This informs our decision making,
underpinning our strategy to transform
the savings and investment experience,
combine the best of human expertise
augmented by digital capability and deliver
a uniquely personalised service to simply
manage your financial health and wealth.
Through our strategic investment we
fuel our business, creating a powerful
distribution engine that drives long-term
sustainable growth.
We attract clients with our high quality service
and offering, we engage them with our expert-led
content and easy to use functionality and we
retain them for the long-term by supporting them
in driving towards their financial goals.
Attract
Our market leading proposition and service
enables us to attract and build lifelong
relationships with clients. We provide the
broadest offering of savings and investment
solutions in the retail market.
With over 40 years of experience, we have
built a trusted brand with our clients, ranking
#1 for brand awareness in direct to consumer
investment firms. We continuously evolve our
approach to client acquisition, investing in our
marketing, service and proposition to ensure
we maintain and improve our high quality
offering and empower clients to save and
invest with confidence.
Engage
Client experience is our obsession. Through our
high quality client experience underpinned by our
expertise and technology we engage clients as
they build wealth, becoming their trusted partner
and reinforcing our relationship with them.
Our strategy is focused on enhancing our
technology, service and insights to ensure we
have a continuously improving and increasingly
personalised client experience.
The happier and more engaged clients we have,
the greater is the flywheel effect for increased
new business flows through transfers of
investments held elsewhere onto our platform,
new lump sum contributions and regular savings,
particularly with regards to the tax allowances
within a SIPP and an ISA.
Retain
Retention is key to our ongoing revenue
generation, as clients consolidate their wealth with
our service and build their assets through time.
Our broad proposition enables us to provide
a service that can support clients throughout
their lifetime and changing goals. Our deep
understanding of client needs combined with
our expertise on the wealth management market
enables us to focus our reinvestment and the
allocation of resources to improve existing and
develop new services, which makes us an ever
more integral part of clients’ daily financial lives.
Governance Financial statements Other information
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
22
BUSINESS MODEL
OUR RESILIENT GROWTH CYCLE CONTINUED
Revenue
We generate revenues based on the value of assets
administered on our platform, activity levels of our
clients and a net interest margin on uninvested
cash and advice given to clients. Of these
revenues, 71% are ongoing in nature, providing
a high degree of profit resilience. By providing
an excellent service we attract new clients and
new assets, ensuring we are well positioned to
grow revenues across the market cycle.
Costs
From our revenues, we fund the administration
of the platform, our proposition and the business
as a whole. Key to our strategy is reinvestment
back into people, technology and marketing,
ensuring that we are always improving and
evolving our service and maintaining our
competitive advantage.
Profits and dividends
Our diversified revenue streams and scalability
deliver profits which quickly convert into cash.
After ensuring we maintain a surplus of capital
over and above our regulatory requirement,
we can then pay dividends to our shareholders.
Through placing clients at the heart of all we do,
we have already achieved significant scale and
the focused investment we have planned and
adherence to our core values will enable further
growth. This will deliver long-term value creation
across a range of stakeholders including:
Clients
We listen to clients and have built a strategy
based on our deep understanding of their needs.
Investing and championing their cause to help
them secure better financial futures and to make
their financial lives easier.
Employees
We continue to increase the diversity and
inclusiveness of our workforce and engage,
motivate and inspire them to deliver excellent
client service. People and Culture is one of the
five key pillars of our strategy and rewarding
careers are delivered through investment in
professional and personal development and
a focus on well-being and mental health.
Investors
We deliver long-term sustainable returns through
[share price appreciation] and a progressive
dividend policy.
Society
We are a responsible corporate citizen, playing
a positive, supportive and leading role in both
our local community and wider society.
The evolution of our strategy will underpin and
accelerate this value generating cycle of attracting,
engaging and retaining over the long-term.
Total AUA
£ billion
Net new business
£ billion
123.8
135.5
104.0
2022
2021
2020
5.5
8.7
7.7
2022
2021
2020
Total clients
’000
Clients with monthly savings
’000
1,737
1,645
1,412
2022
2021
2020
292
283
229
2022
2021
2020
FIND OUT MORE
Pg 12: Our strategy and KPIs
Measuring our strategic progress.
Pg 45 Our financial performance
The results we’ve achieved this year.
Pg 31: Responsible business
DRIVING STRONG GROWTH SUSTAINABLE RETURNS VALUE CREATION
Governance Financial statements Other information
23
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
STAKEHOLDERS ARE
AT THE HEART OF
OUR STRATEGY
STAKEHOLDER ENGAGEMENT
The evolution of our strategy has been directly
informed by our stakeholders. Engaging with
them helps us to understand their evolving
needs and is critical for our decision making
and ongoing success.
We have invested in the development of our
stakeholder communities and continue to focus
on enhancing our relationships with them as
we believe it is the right thing to do.
Clients
Our strategy is built around our clients and
understanding their evolving needs is critical
to our long-term success.
Employees
HL would not be the business it is without our dedicated
and talented employees, always striving to deliver a
high quality service and act in line with our values.
Shareholders
As owners of our company and providers
of capital, supportive shareholders are
instrumental to our growth.
Society
Responsible businesses that support their local
communities and wider society will be those that
thrive in future.
How did we
engage with
them?
• Targeted group surveys
and website surveys
• Monitoring of client behaviours
across our digital platforms
• User testing as we evolve
our proposition and service
• Regular updates and insight from
our investment and saving experts
• Feedback received from the 1.269
million client calls received by
our Helpdesk
• Colleague Forums, biannual
colleague engagement surveys,
regular pulse surveys, and other
ad hoc focus groups
• Online communications portal
to share key activity and updates
• Regular internal communications
and briefing sessions from senior
leaders and executives
• Peer recognition scheme
to identify colleagues who
demonstrated outstanding
behaviours and conduct aligned
to our values and the HL Way
• Our senior management team
met with shareholders and
potential investors across
the year via a programme of
results presentations, individual
and group meetings and
attendance at in-person and
UK and US virtual conferences
• Our AGM, which provides an
opportunity for shareholders
to ask questions and vote
on resolutions
• Our corporate brokers and
sell-side analysts provide valuable
feedback and market insight
• Active engagement with
policymakers to ensure the
position of retail investors in
the UK is understood and policies
are designed to help investors
• We have established a Savings
and Resilience Sounding Board
to explore options for supporting
clients with financial resilience,
with representation from
HM Treasury, the Department
for Work and Pensions, FCA,
Money and Pensions Service and
other businesses and charities
• We have explored citizenship
and sustainability agendas
through various relationships with
community partners, charities and
Bristol One City Plan. We listened
to issues raised at our AGM
What were
the key topics
raised?
Clients told us that they wanted:
• Practical help on how to achieve
their financial goals, and invest
in line with ‘responsible’ or
ESG values
• Help to navigate challenging
times: inflation, cost of living
crisis etc.
• Great value and support across
all stages of their savings and
investments life
• Frameworks and guidance to
help make the best financial
decisions and ultimately achieve
good outcomes
• Our strategy and how the
evolution will drive development
for colleagues and the next
stage of growth for the business
• What the future of work looks
like for HL, building on the
positive lessons learnt from
the COVID-19 pandemic
• The importance of inclusion,
diversity and continued
development to succeed
for the future
• The cost-of-living crisis and
how this impacts individuals
• How will the business return
to operating margin growth?
• What is the level of
investment needed to
deliver sustainable growth?
• The increasing threat of
competition and pricing pressure
• Quality and behaviours
of new clients
• How we are dealing with
aspects of ESG as a business,
a platform and a Fund Manager
• Savings and Resilience of the
nation in the aftermath of the
COVID-19 pandemic and given
the cost of living crisis
• The Guidance-Advice boundary
and how clients may benefit
from greater support with
their investments
• Retail access to IPOs
• Supporting the communities
in which we operate to thrive
• To consider our climate strategy
and the environmental impact
of our operations
How did
we respond
• We built our strategy around our
understanding of clients – aiming
to enhance our high quality
service in line with their needs
• We launched a responsible
investment hub on our website
and announced plans to ensure
our new fund launches reflect
ESG considerations
• We enhanced our transfer
service, improving the speed
and ease of use for clients
• We launched more services
on our mobile app including the
ability to fund switch and easier
log-in options for those needing
two factor authentication
• We continued our better
investors campaign, using data
to help provide education and
insight to clients who need help
with investment basics like
diversification and risk
• Enhanced the office
environment to support new
flexible working practices
• Launched a ‘Future of Work’ task
force looking at the best future
ways of working that support
our culture and delivery but
also enhance the colleague
value proposition
• Involved all leaders and teams
in the cascade of our strategy,
focusing on developing our
people and enabling our culture
• Continued to execute our I&D
strategy, improving diverse
representation in leadership
and launching the Strive
internship programme
• Provided a one-off payment for
colleagues most impacted by the
cost of living crisis, designed to
give colleagues some breathing
space as they faced rising costs
• We held a Capital Markets Day
to outline our strategy and
address specific topics raised
• Key topics were incorporated
into presentations and results
announcements across the year
and for separate governance and
ESG meetings held by the Chair
• Regular reports and feedback
to the executive team and the
Board on key market issues
and concerns
• We have considered climate
change impacts on our business
and issued our TCFD report
and our first SASB assessment
• We have launched the Savings
& Resilience Barometer in
partnership with Oxford
Economics. A tool that will
support clients and policy
makers with better understanding
financial resilience issues
• We have campaigned to increase
access to retail IPOs and increase
investor access to guidance
• We have undertaken fundraising
initiatives and events to support
our local HL Foundation Charities
of the year, 1625 Independent
People and Bristol Mind
• We have launched a new
‘Switch your Money On’ offering
free insight and education on
key investment topics from HL
and industry experts
FIND OUT MORE
Pg 12: Strategy and KPIs
Section 172 Statement
You can read about how the Board considers the
interests of our stakeholders when complying
with its obligations under Section 172
Companies Act 2006 on page 118
Governance Financial statements Other information
24
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
STAKEHOLDER ENGAGEMENT
CONTINUED
Clients
Our strategy is built around our clients and
understanding their evolving needs is critical
to our long-term success.
Employees
HL would not be the business it is without our dedicated
and talented employees, always striving to deliver a
high quality service and act in line with our values.
Shareholders
As owners of our company and providers
of capital, supportive shareholders are
instrumental to our growth.
Society
Responsible businesses that support their local
communities and wider society will be those that
thrive in future.
How did we
engage with
them?
• Targeted group surveys
and website surveys
• Monitoring of client behaviours
across our digital platforms
• User testing as we evolve
our proposition and service
• Regular updates and insight from
our investment and saving experts
• Feedback received from the 1.269
million client calls received by
our Helpdesk
• Colleague Forums, biannual
colleague engagement surveys,
regular pulse surveys, and other
ad hoc focus groups
• Online communications portal
to share key activity and updates
• Regular internal communications
and briefing sessions from senior
leaders and executives
• Peer recognition scheme
to identify colleagues who
demonstrated outstanding
behaviours and conduct aligned
to our values and the HL Way
• Our senior management team
met with shareholders and
potential investors across
the year via a programme of
results presentations, individual
and group meetings and
attendance at in-person and
UK and US virtual conferences
• Our AGM, which provides an
opportunity for shareholders
to ask questions and vote
on resolutions
• Our corporate brokers and
sell-side analysts provide valuable
feedback and market insight
• Active engagement with
policymakers to ensure the
position of retail investors in
the UK is understood and policies
are designed to help investors
• We have established a Savings
and Resilience Sounding Board
to explore options for supporting
clients with financial resilience,
with representation from
HM Treasury, the Department
for Work and Pensions, FCA,
Money and Pensions Service and
other businesses and charities
• We have explored citizenship
and sustainability agendas
through various relationships with
community partners, charities and
Bristol One City Plan. We listened
to issues raised at our AGM
What were
the key topics
raised?
Clients told us that they wanted:
• Practical help on how to achieve
their financial goals, and invest
in line with ‘responsible’ or
ESG values
• Help to navigate challenging
times: inflation, cost of living
crisis etc.
• Great value and support across
all stages of their savings and
investments life
• Frameworks and guidance to
help make the best financial
decisions and ultimately achieve
good outcomes
• Our strategy and how the
evolution will drive development
for colleagues and the next
stage of growth for the business
• What the future of work looks
like for HL, building on the
positive lessons learnt from
the COVID-19 pandemic
• The importance of inclusion,
diversity and continued
development to succeed
for the future
• The cost-of-living crisis and
how this impacts individuals
• How will the business return
to operating margin growth?
• What is the level of
investment needed to
deliver sustainable growth?
• The increasing threat of
competition and pricing pressure
• Quality and behaviours
of new clients
• How we are dealing with
aspects of ESG as a business,
a platform and a Fund Manager
• Savings and Resilience of the
nation in the aftermath of the
COVID-19 pandemic and given
the cost of living crisis
• The Guidance-Advice boundary
and how clients may benefit
from greater support with
their investments
• Retail access to IPOs
• Supporting the communities
in which we operate to thrive
• To consider our climate strategy
and the environmental impact
of our operations
How did
we respond
• We built our strategy around our
understanding of clients – aiming
to enhance our high quality
service in line with their needs
• We launched a responsible
investment hub on our website
and announced plans to ensure
our new fund launches reflect
ESG considerations
• We enhanced our transfer
service, improving the speed
and ease of use for clients
• We launched more services
on our mobile app including the
ability to fund switch and easier
log-in options for those needing
two factor authentication
• We continued our better
investors campaign, using data
to help provide education and
insight to clients who need help
with investment basics like
diversification and risk
• Enhanced the office
environment to support new
flexible working practices
• Launched a ‘Future of Work’ task
force looking at the best future
ways of working that support
our culture and delivery but
also enhance the colleague
value proposition
• Involved all leaders and teams
in the cascade of our strategy,
focusing on developing our
people and enabling our culture
• Continued to execute our I&D
strategy, improving diverse
representation in leadership
and launching the Strive
internship programme
• Provided a one-off payment for
colleagues most impacted by the
cost of living crisis, designed to
give colleagues some breathing
space as they faced rising costs
• We held a Capital Markets Day
to outline our strategy and
address specific topics raised
• Key topics were incorporated
into presentations and results
announcements across the year
and for separate governance and
ESG meetings held by the Chair
• Regular reports and feedback
to the executive team and the
Board on key market issues
and concerns
• We have considered climate
change impacts on our business
and issued our TCFD report
and our first SASB assessment
• We have launched the Savings
& Resilience Barometer in
partnership with Oxford
Economics. A tool that will
support clients and policy
makers with better understanding
financial resilience issues
• We have campaigned to increase
access to retail IPOs and increase
investor access to guidance
• We have undertaken fundraising
initiatives and events to support
our local HL Foundation Charities
of the year, 1625 Independent
People and Bristol Mind
• We have launched a new
‘Switch your Money On’ offering
free insight and education on
key investment topics from HL
and industry experts
Governance Financial statements Other information
25
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
ENABLE OUR PEOPLE,
STRENGTHENING
OUR CULTURE
PEOPLE
Our colleagues are our biggest asset and are
fundamental to delivering our vision, our strategy,
and the sustainable growth of our business.
We want our colleagues to have meaningful
and rewarding careers and make HL a great
place to work, develop and fulfil career potential.
Unprecedented times
The past year has continued to be difficult for all
of us. Whether it concerns the global pandemic,
war in Ukraine, cost of living crisis or the volatile
stock market – the wider environment has had
a significant impact on all our colleagues.
Responding to these challenges and supporting
our colleagues through them has been a critical
focus. At the end of August 2021, we rewarded
all colleagues at certain role levels with a
one-off special award to thank them for working
together and supporting our clients through the
challenging pandemic period. Subsequently
in May this year, in recognition of the fact that
rising living costs were impacting the finances
of colleagues, we provided a one-off payment
to those we believed would be most adversely
impacted, based on their current basic salary.
This payment was designed to give colleagues
some breathing space as they faced rising costs.
Alongside this payment, we also made some
immediate changes to the pay levels of our
entry level roles in Service and Facilities and
continue to invest in our colleagues as part of
our year-end review through salary increases
and our bonus scheme.
The aftermath of the pandemic has presented
new opportunities to improve how we work
together, and we are actively involving our
colleagues in how we develop this. As our
colleagues have been able to return to the
office, we have been continuing to support them
in a new flexible way of working. We have been
listening and responding to colleagues needs
to ensure they are motivated and enabled to
perform at their best. This includes improving
our office environment to make this an inclusive
and collaborative space for colleagues.
Governance Financial statements Other information
26
Strategic report
Hargreaves Lansdown
Report and Financial Statements 2022
PEOPLE
ENABLE OUR PEOPLE, STRENGTHENING OUR CULTURE CONTINUED
Our culture and the HL Way
Over the past year we’ve placed a big focus
on developing our culture as this underpins
the delivery of our strategy.
Our client focused mind-set has helped us
become the successful HL we are today and
has made us an industry leader. As we continue
to develop and grow, the way we conduct
ourselves is critical for us to thrive at scale.
Last year, we launched ‘The HL Way’ to help
colleagues make the right choices for our clients,
and each other. The HL Way is how we work,
providing tool sets for good decision making,
with guides and examples of good practice.
It brings our values and the Conduct Rules to
life, building on our aim – to help our clients
to save and invest with confidence – using our
knowledge, our expertise, and remembering
our regulatory responsibilities.
This year, we have evolved the HL Way to help
colleagues understand how best to fulfil their
personal responsibilities, making clear what
we stand for, the principles to follow and why
it’s important. Providing clear guidance helps
colleagues live by our values, make effective
decisions, and tells them where to go for help
when things don’t feel right.
Each of our colleagues play an
important role in the team at HL.
The HL Way will help colleagues
make the right choices for our
clients, and each other.
Chris Hill
Chief Executive Officer
Strengthening our culture is a key priority as
this is essential to delivering our strategy and
providing great service for our clients. Over the
past year we’ve delivered a range of activities
focused on colleague engagement. This has
ranged from company-wide hybrid town hall
events, expert webinars and focus groups to
prepare and engage colleagues with our new
strategy and transformation programme, ‘act of
kindness’ gifts, and social events to foster our
sense of community and collaboration.
This year we hosted our first in-person HL
Heroes recognition awards where we asked
colleagues to nominate colleagues who have
demonstrated outstanding behaviours and
conduct aligned to each of our values, and how
this has positively impacted clients, colleagues,
our community, stakeholders and the business
as a result. Overall, we received 218 high calibre
nominations to acknowledge those colleagues
who have gone above and beyond.
Outstanding and diverse talent
Our focus on building a diverse and inclusive
culture is not simply because it is the right thing
to do. We believe it will lead to better outcomes
for clients, colleagues, our community and
our business. Diversity in its broadest sense,
including race, age, gender, and religion,
supports us to make better business decisions,
manage risk more effectively and drive
innovation. We believe inclusion and diversity
is everyone’s responsibility, so every colleague
has this in their objectives, ensuring we all
play our part.
Our inclusion and diversity strategy has three
priority areas and an aligned action plan to drive
progress. This strategy will enable us to continue
to build our inclusive culture and brand where
colleagues feel engaged whilst attracting a broad
pool of talent.
More information about our Inclusion
and Diversity approach and initiatives
can be found at: www.hl.co.uk/
corporate-social-responsibility/diversity
Female and ethnic minority representation
Two of our priority areas relate to the progression
and retention of female and ethnic minority
talent at HL. We know that tone from the top
and executive buy-in and accountability continue
to be crucial to achieving sustainable change.
We have further strengthened commitment to
progress this year by introducing specific gender
and ethnicity performance targets for all
executive members.
It was just really nice to
have the HL Heroes in person
and meet colleagues for the
first time, whilst in a positive
environment. I felt really
honoured to be there and
I hope it continues each year
to inject such positivity into
the workplace.
HL Colleague
Governance Financial statements Other information
27
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
PEOPLE
ENABLE OUR PEOPLE, STRENGTHENING OUR CULTURE CONTINUED
Female representation
We have made strong progress in increasing
the proportion of women and creating a diverse
workforce at HL and we continue to seek
to improve:
• We are signatories of the Women in Finance
Charter and are proud to have exceeded our
target range (25-30% by 2021) , with 31.5%
of senior management roles held by women.
• We have exceeded the FTSE Women Leaders
target of 40% women on Boards and are
proud to have a female Chair, Chief Financial
Officer, Senior Independent Director and
majority of female Board Committee Chairs.
• We have launched a new partnership with
Women on Boards.
• HL was featured as a case study in the Fawcett
Society’s ‘Menopause in the Workplace: Impact
on Women in Financial Services’ report.
• As of 30 June 2022, women made up 33% of
the Executive Committee and its direct reports.
• We continue to participate in the 30% Club’s
‘Women Ahead’ mentoring scheme.
This year, the 2021 gender pay gap figures show
that we have reduced our Mean Gender Pay Gap,
Median Gender Pay Gap and Median Bonus Gap
since the last submission. Our Median GPG
continues to improve year-on-year, from 19.1% to
14.5%, with continued positive movement since
the figures from 2018. The Mean Bonus Gap has
widened slightly, by 1.2% in the last year.
These figures reflect the increases in female
representation at Board and Director level
because of our strategic focus on hiring and
promoting more, and losing fewer, senior women.
However, we know to continue to ensure success
this needs to filter down into the organisation
to drive long-term change.
Full details of our Gender Pay Gap report
can be found at www.hl.co.uk/corporate-
social-responsibility/gender-pay-gap
Ethnic minority representation
Since the launch of our Inclusion and Diversity
strategy in 2020, we have focused on increasing
the ethnic diversity of our workforce and
supporting the progression and development
of Black, Asian, and Minority Ethnic colleagues.
Progress this year includes:
• Winning a Stepping Up award acknowledging
the leadership and support HL is providing to
changing diversity and inclusion across the city
of Bristol.
• Launching the Strive internship scheme, aimed
at providing paid work experience opportunities
to Black, Asian and Minority Ethnic Students
across the region. The scheme has won an
Institute of Student Employers award for our
outstanding partnership with the University
of the West of England.
• Introducing representation targets for female,
ethnic minority, and black representation at
senior and mid-career levels.
• The Board meeting the Parker Review
recommendation to have at least one Director
from an ethnic minority background by 2021.
Our workforce
Total workforce 2022: 2,042
Total workforce 2021: 1,842
41%
Female
59%
Male
36%
Female
64%
Male
As at 30 June 2022 As at 30 June 2021
Board of
Directors
Other senior
management
1
Total
employees
(FTE)
Board of
Directors
Other senior
management
1
Total
employees
(FTE)
Female 5 (50%) 13 (28%) 839 (41%) 3 (33%) 10 (26%) 670 (36%)
Male 5 (50%) 34 (72%) 1,203 (59%) 6 (67%) 29 (74%) 1,172 (64%)
1 Other senior management is defined as an employee who has responsibility for planning, direction or
controlling the activities of the Group, or a strategically significant part of the Group, other than the Board
of Directors.
Governance Financial statements Other information
28
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
PEOPLE
ENABLE OUR PEOPLE, STRENGTHENING OUR CULTURE CONTINUED
Inclusive culture and our colleague networks
Alongside our focus on diversity, we have
committed to creating an inclusive culture at HL.
Our award-winning HL colleague networks play
a critical role in fostering inclusion and belonging,
and each one is supported by an Executive
sponsor to ensure their activities get the
visibility and support they need to have the
greatest impact.
These networks continue to grow their
membership, activities and influence and include:
• Gender diversity group
• Cultural diversity group
• Kaleidoscope (LGBT+)
• Wellbeing groups including mental,
physical fitness and social activities
• Sustainability Group
• Financial Inclusion
• Chronic Conditions and Disability Group
Over the year, the groups have been active
in promoting the importance of inclusion and
diversity as well as engaging colleagues. Over
300 colleagues are members of one or more of
the networks, and the networks have delivered
events across the year, marking key dates and
campaigns, with both external speakers and
internal panels.
We are an equal opportunities employer and give
full consideration to all applications. When a
disabled colleague commences employment or
becomes disabled during employment we will,
in consultation with the colleague, ensure that
such reasonable adjustments are made as
required to enable them to work safely and
effectively. We recognise that all colleagues have
equal rights to career development and training
based on their abilities and therefore this will
be made accessible to them, with reasonable
adjustment considered as required.
Whilst we know there is always more we can do,
we feel proud that our 2022 Colleague Survey
results showed that 83% of colleagues feel
positive that HL values and promotes employee
diversity (with 4% responding negatively and
the remainder neutral).
Other progress this year in supporting inclusion
at HL includes:
• Issued a new Trans and Non-binary Equality
policy and introduced gender-neutral toilets
• Launched a mandatory inclusion and diversity
e-learning for all colleagues to support us in
building an inclusive and psychologically safe
environment at HL
• Rolled out Empowered and Inclusive Team
Working Masterclasses for leaders
• Launched ‘ExCo listening sessions’ supporting
Executive Committee members to gain greater
insights into the lived experiences of different
colleague groups
Reward
Key to attracting and retaining the best people
is our approach to reward. We use independently
benchmarked pay and benefits data to ensure
we pay our colleagues fairly for the work they do.
We believe in clear, fair, and transparent pay
and reward. Our salaries go beyond our legal
obligations, the National Living Wage (and
national minimum wage for those on internships,
placements, or apprenticeships) and we
are proud to say that we are Living Wage
Foundation Accredited.
We do, however, know we can do more. Building
and maintaining a strong colleague proposition
that ensures colleagues are rewarded fairly
and that we are competitive in the market is
fundamental to ensuring the success of HL.
As such we’re working on developing and
improving our colleague value proposition.
Given the challenging external conditions faced
in the year from the increased cost of living, we
have supported our colleagues with a one-off
‘breathing space’ cash payment in addition to
their pay.
To complement our pay, we include most of
our colleagues in a bonus scheme linked to
the success of HL and individual performance.
The ‘how’ is just as important to us as the ‘what’
and colleagues are assessed on the delivery
of their objectives, the behaviours they display
and how they’ve demonstrated our values.
We believe that our colleagues should be
able to share in the success of our business
and all colleagues are eligible to sign up to
our Save as You Earn (SAYE) scheme. As at
30 June 2022, c45% of eligible colleagues are
currently participating in one of our existing
Share Save Schemes.
To complement our direct financial rewards,
we provide Company matched pension
contributions (which includes a double matching
scheme to encourage our colleagues to save
for their retirement) and extended life insurance
protection. HL Rewards, our flexible benefits
scheme, offers a comprehensive range of
protection, health, financial and lifestyle benefits
to ensure we provide a benefits package that our
colleagues value. This includes double matching
of any payroll giving that colleagues make to
the HL Foundation.
Learning and development
Learning and development is a key component
of our People Strategy and aligns to our overall
strategy and approach. We want everyone to
have the opportunity to develop as far as their
effort and capability will take them.
We recognise the importance of building a
pipeline of skilled and motivated talent for future
leadership and expert roles and have developed
several interventions to ensure we deliver this
We respect, value and embrace
diversity and ensure everyone
is recognised and respected
for the different perspectives
they bring.
Chris Hill
Chief Executive Officer
Governance Financial statements Other information
29
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
PEOPLE
ENABLE OUR PEOPLE, STRENGTHENING OUR CULTURE CONTINUED
pipeline to meet the business needs. Our fully
blended learning provision offers a bespoke
service with the use of technology providing
bite-sized, digital learning to support the ongoing
engagement and development of colleagues
when they need it.
We are committed to supporting the next
generation and offer people the opportunity to
start their career or gain work experience with
us. This year we have introduced a new Service
Graduate Scheme alongside our existing
rotational scheme, a range of apprenticeships
for school/college leavers and career changers.
We also offer 12-month industrial placements
for undergraduates, internships, and
work experience.
Colleague engagement and listening
It is widely recognised that an organisation
whose colleagues understand how their work
adds value is critical to strategic delivery.
We believe it is important to listen to and
understand our colleagues’ views and motivation;
their honest feedback is crucial in evolving our
colleague engagement programme. Our most
recent annual colleague engagement survey
received a strong response rate of 73% (2021:
70%). Over the past few years, we’ve seen our
key metrics fluctuate around a stable average.
Our engagement score in our most recent survey
was 64% (2021: 66%).
In addition to our twice-yearly engagement
survey, we have run regular pulse surveys so that
we can quickly respond to colleague sentiment.
We’ve also run additional surveys and focus
groups to obtain colleague insight into topics
such as communication, whistleblowing, and
our future workplace. We are always listening,
so this year, we launched colleague listening
sessions where members of the Management
Team listened to what colleagues had to say on
topics around pay, progression and culture at HL.
The Colleague Forum was set up in January 2019
in line with the UK Corporate Governance Code
to make sure that the ‘voice of the workforce’
is considered in the decision making process
of the Board. It meets periodically throughout
the year and is an important forum for obtaining
and discussing colleagues’ views on key matters
affecting the Group. Key topics discussed in
the period under review have included Executive
Director and senior management pay, and the
Group’s culture and strategy.
Human rights
We continue to embed respect for human rights
and aim to ensure that our business operations
and supply chain are free from modern slavery,
exploitation, and discrimination. There have
been no recorded incidences of modern slavery
in our supply chain, but we are not complacent.
We continue to monitor risks closely and want
to drive up opportunities for colleagues to raise
the flag and seek help when needed. We are
committed to acting ethically and with integrity
in all our business dealings and relationships and
to implementing and enforcing effective systems
and controls to ensure slavery is not taking place
anywhere in our business, or in any of our supply
chains. We recognise this is a serious global
issue and are committed to improving our
practices and playing our part in combatting
slavery and human trafficking.
We adhere to our Human Rights policy at all
times, and we are fully compliant with our
obligations under the Modern Slavery Act 2015.
One of our core values is to do the right thing,
which includes treating people fairly whether
they are our clients, colleagues, contractors
or people working in our supply chain. Our
Human Rights Policy reflects key developments
in the human rights agenda and defines our
commitment to human rights including, but not
limited to, the prevention of modern slavery and
the provision of remediation when necessary, in
our operations and supply chains. This includes
the colleagues we employ and their right to be
treated equally and their freedom of association.
We all have a responsibility to be alert to the risks
of modern slavery. We continue to take further
steps to ensure we have the right training and
controls in place to combat slavery and human
trafficking, and in our statement, we explain how
we are doing this.
Please visit our website –
www.hl.co.uk/__data/ assets/pdf_file/
0009/11399832/Modern-Slavery-Act.pdf
Anti-bribery and corruption
Hargreaves Lansdown maintains a full suite of
policies and procedures to guard against bribery
and corruption. This includes an Anti-Bribery
Policy, outlining the offences, responsibilities
of all colleagues and clear reporting procedures;
a Whistleblowing policy and process; Anti-Money
Laundering and Market Abuse policies and
procedures for dealing with making and
accepting gifts and hospitality.
All colleagues undertake bespoke training
programmes, at least annually, for all these areas,
in addition to having access to online guidance
and procedures aiding awareness. Colleagues
can access policy and guidance statements via
the company-wide Sharepoint page and these
procedures are reviewed and updated on a
periodic basis by the Senior Managers
responsible for them.
Please visit our website – www.hl.co.uk/
corporate-social-responsibility/
our-policies
83%
of colleagues feel
positive that HL values
and promotes employee
diversity (2021: 72%)
Response rate to the
annual colleague
engagement survey
Response 73%
(2021: 70%)
No response 27%
Governance Financial statements Other information
30
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
BUILDING OUR POSITION
AS A RESPONSIBLE BUSINESS
CORPORATE CITIZENSHIP
Our approach to responsible citizenship
Hargreaves Lansdown is enabling clients
and society to build their financial resilience.
As a leading FTSE 100 financial services
company, we are committed to integrating
sustainable social, ethical and environmental
considerations into our long-term view
of managing the wider environment and
social footprint.
We do this through three approaches
• HL’s actions as a responsible business
• HL’s stewardship as a responsible
fund manager
• HL’s offering as a responsible investment
and savings service provider
Our vision for ESG at HL is to inspire confidence for
a sustainable, resilient and successful financial future.
FIND OUT MORE
Pg 44: Non-financial
information disclosures
OUR VISION,
STRATEGY,
CULTURE
AND VALUES…
…DRIVE OUR
COMMITMENT
TO CORPORATE
CITIZENSHIP
Community
Play a positive, supportive and
leading role in our local community.
Pg 33
Responsible business focus
Ensuring responsible and sustainable decision
making is at the heart of everything we do to
empower clients, our local community and
wider society.
Pg 34
TCFD
To reduce our contribution to climate
change and support the transition
to a low carbon economy.
Pg 37
Governance Financial statements Other information
31
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CORPORATE CITIZENSHIP
BUILDING OUR POSITION AS A RESPONSIBLE BUSINESS CONTINUED
In order to deliver on our purpose, to empower
people to save and invest with confidence,
we encourage clients to take control of their
financial future and support them in establishing
and maintaining the resilience that this
requires over a lifetime. We are a responsible
and sustainable business that works to deliver
for all our stakeholders.
In 2022 we have continued to make progress
on our ESG strategy. From supporting the
local community to minimising our global
environmental impact, we want to ensure our
actions have an increasingly positive impact.
In the community we have:
• Helped young people to get the best start
to life to enable them to gain the skills and
confidence to get a job.
• Supported local businesses through mentoring.
• Supported the regional economic recovery plan.
E S G
‘E’ is about how we
reduce our impact on
the environment and
ensure our business and
the service we offer our
clients is sustainable
for the long term.
It means assessing and addressing
risks to the resilience of our business
over the long term and as such ensuring
we are well prepared for the challenges
our clients, community and other
stakeholders will face in future.
‘S’ is about how we
support our community,
clients and colleagues.
There is increasing scrutiny on how
businesses treat their colleagues
and communities – it needs to be fair,
transparent and have clear alignment
to addressing the issues in our society
including Inclusion and Diversity.
We need to ensure that our colleagues
and clients can be confident that HL
is a business that does the right thing.
‘G’ is about how our
governance supports
the long-term resilience
and sustainability of
our business.
We need an effective governance
structure that allows for the robust
challenge and transparent reporting
that is expected from a business of our
size and influence. It helps us to make
and execute better decisions. The FCA
has made the importance of business
culture very clear. Clear and effective
governance is key to this and integral
to our ESG and wider strategy.
Governance Financial statements Other information
32
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CORPORATE CITIZENSHIP
BUILDING OUR POSITION AS A RESPONSIBLE BUSINESS CONTINUED
Community
Supportive and leading role
in our local community.
We’re proud of the contribution our colleagues
and business make to the local community
and our focus has been on supporting activities
that encourage social mobility whether through
education, food provision or financial resilience.
We appreciate the difficulties the pandemic
has presented to education and have donated
over 140 laptops to schools in order to close
the digital divide. Our apprenticeships and
placements offer students the opportunity
to gain experience and life skills.
One City Approach:
We are a founding signatory of the Bristol
Equality Charter – a pledge by the signatories
to take actions relevant to them, to improve
equality and diversity across the city. We are
also a founder member of the Bristol Equality
Network, and we have signed the Women in
Business Charter.
We continue to be active participants, through
our involvement with the Bristol City Office,
including involvement in the Skills and Economy
Board, supporting the city wide initiative to end
period poverty in Bristol and the Stepping Up
mentoring scheme, a region wide positive action
leadership programme aimed at changing the
diversity leadership landscape across the public,
voluntary and commercial sector.
Volunteering:
The HL Volunteering Scheme gives people
a chance to volunteer by having two days
(or 16 hours) of the calendar year to offer their
time, skills and experience to good causes.
We run a number of volunteering schemes,
focused on building social mobility and improving
resilience. These are primarily based within
schools, developing the building blocks to enable
future resilience, focusing on basic numeracy
and literacy skills. Our Envision Mentoring
programmes enable young people to work with
business mentors to tackle a real-life social issue,
whilst gaining insight into the world of work
through meaningful employer engagement.
Additionally, we work with the Bristol Sport
Foundation to support disadvantaged children
through providing volunteers to hear primary
school children read aloud, or providing
mentoring support to students at risk of dropping
out of the school system.
All of our schools volunteering activity takes
place with young people who have been
identified as in receipt of the pupil premium/
eligible for free school meals, with the hope of
building their confidence and employability skills.
We also support local organisations such as
Fareshare and Feeding Bristol, in addition to
sustainability focused organisations such as
Avon Needs Trees, Your Park and Marine
Conservation Trust.
Our volunteering scheme has exceeded
5,750 hours volunteered since 2019.
HL Foundation
The HL Foundation is our charitable trust.
The Foundation’s mission is to utilise the skills
and time of our workforce and partners to make
a positive, sustainable difference in the world
around us.
The charities we support are nominated and
selected by employees.
Our charity partners for 2022 are 1625
Independent People and Bristol Mind. We have
a programme of engagement focused on
fundraising and volunteering activities, including
financial education sessions and skill based
volunteering to support the charity operations.
In light of current affairs, we also set up a
fundraising appeal to support those impacted
by the war in Ukraine.
Our fundraising aims are to:
• Continue to fund a mental health worker
and a mentoring coach to support young
people’s well-being
• Support career guidance, financial wellness
and inspiring future employment opportunities
for vulnerable young adults
• Cover the cost of phone calls to MindLine
helpline for one month
• Fund the training for at least 20 volunteers
to be trained on the MindLine helpline
As well as support to fundraising, we also
offer colleagues double matched payroll giving.
This has trebled the numbers of colleagues
donating via Give As You Earn (GAYE).
All of the legal and administration costs of
the Foundation are met by the Group so 100%
of the money raised goes to the employee
nominated charities.
More details can be found on the website
www.hl.co.uk/corporate-social-
responsibility/hl-foundation
Governance Financial statements Other information
33
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CORPORATE CITIZENSHIP
BUILDING OUR POSITION AS A RESPONSIBLE BUSINESS CONTINUED
Responsible business focus
Responsible and sustainable
decision making at the heart
of everything we do.
Savings and Resilience Barometer
Financial resilience has become a central issue
over the past two years as we continue to
experience and live with the consequences
of the pandemic and the economic uncertainty
it has created.
In January we launched a wide-ranging piece of
research on the financial resilience of the nation.
This research sought to look at how issues,
from debt and protections, to savings and
investments, interact so we can understand
how to build a more resilient nation.
This research was developed from our
‘5 to Thrive’ campaign which focuses on the
five core pillars which are the building blocks to
developing greater financial resilience; controlling
your debt, protecting you and your family,
saving a penny for a rainy day, plans for later
life and investing to make more of your money.
By building an ongoing campaign around this,
we are democratising some of the expertise
that we have within our advice teams for those
that can’t or won’t pay for such services.
More information can be found at
www.hl.co.uk/features/5-to-thrive and
our comparison tool can be found here:
www.hl.co.uk/features/5-to-thrive/
savings-and-resilience-comparison-tool.
Tax strategy
Integrity and good conduct are central to
our culture and this means we aim to comply
with both the spirit and the letter of the law
and are committed to conducting our tax affairs
in a clear, fair and transparent way.
Taxes provide public revenues for government
to meet economic and social objectives. Paying
and collecting taxes is an important part of our
role as a business responsibly operating within
and contributing to society.
We aim to comply with all our tax filing,
tax reporting and tax payment obligations.
We seek to maintain an open, honest and
positive working relationship with tax authorities
and we do not undertake aggressive tax
planning. Our corporation tax and employer’s
National Insurance paid in respect of the
year ended 30 June 2022 was £61.6 million
(2021: £77.5m). In addition, we pay other taxes
such as VAT, stamp duty and business rates.
Our full tax strategy is available at:
www.hl.co.uk/about-us/tax-strategy
United Nations Sustainable
Development Goals (UNSDGs)
The UNSDGs provide a focus for how
businesses, governments and civil society can
tackle these challenges in order to promote a
more sustainable future for all. They have helped
to inform our thinking about where we can play
a role and we contribute in different ways to
12 out of the 17 goals. Find out more about how
we align to the UNSDGs on the CSR section of
the HL website.
Hargreaves Lansdown contribute
to the following United Nations
Sustainable Development Goals
Governance Financial statements Other information
34
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CORPORATE CITIZENSHIP
BUILDING OUR POSITION AS A RESPONSIBLE BUSINESS CONTINUED
Supporting climate action
Our commitment to sustainability means
integrating social, ethical and environmental
considerations into our operations. Strong
corporate governance ensures sustainable
management and growth with a long-term
view and a responsibility to manage our wider
environment and social footprint. We have
committed to support the delivery of the
United Nations Sustainable Development Goals
(UNSDGs) and finding opportunities within
our businesses to build a cleaner, more resilient
and inclusive world.
HL acknowledges the impact it has on the
environment and climate change, and is
committed to:
• Identifying and assessing environmental
aspects to determine those that are significant,
as explored in our TCFD report on page 37.
• Committing to be net zero by at least 2050 and
to be carbon neutral across our Scope 1, 2 and
3 business travel and employee commuting
emissions by 2025.
• Providing all employees with relevant education
and information to encourage them to live and
work in an environmentally responsible manner.
• Focusing on continual improvements in
environmental performance and activity by
means of a proactive colleague Environmental,
Sustainability and Climate Change network.
Our business is fundamentally based on
intellectual capital and conducts the majority
of client transactions online and undertakes
no industrial activities. Therefore, the direct
environmental and social impacts of our daily
operations are limited. We are aware that under
Scope 3 emissions, our investment portfolio is
the most material source of carbon emissions
and we are currently reviewing our approach
to this with an external agency.
Running and maintaining our IT infrastructure
at our offices and data centres comprises
the main source of our environmental impact.
This supports our award winning platform which
is fundamental to the success of our business.
The installation of energy-efficient servers,
transitioning to cloud hosted services and a
programme of cyclical replacement of hardware
and software reduces our energy usage
and cost.
HL Tech, our Warsaw technology hub, operates
in a similar way, in a new, environmentally friendly
building, where the impact is also low.
Doing it better for our clients
Our objective of reducing waste and minimising
the environmental impact of our business is
aligned with our objectives of protecting client
data, reducing costs and improving efficiency.
We aim to deal with clients and other businesses
electronically wherever possible, not only to
speed up information transfer, but also to reduce
the amount of paper we use.
We have invested heavily in providing a user-
friendly, comprehensive website, a mobile app
and automated links to banks and fund providers.
As a result, 93% (as of June 2022) of our clients
are registered for online accounts and 81% now
use our paperless service.
Where we do send out paper, such as our
flagship magazine ‘The Investment Times’,
we use sustainable resources and minimise
our use of plastic. The Investment Times is now
sent in recyclable paper envelopes rather than
degradable plastic saving the equivalent of
1.4 million plastic bags.
We recognise that sustainability and ethical
behaviour is increasingly important to our clients
and we provide investment information, research
and guides on ethical investing within our
Responsible Investment section on the website.
Our ESG investment and engagement policies
can also be found here.
Governance Financial statements Other information
35
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CORPORATE CITIZENSHIP
BUILDING OUR POSITION AS A RESPONSIBLE BUSINESS CONTINUED
We believe in the transparency of data and
actions towards a climate resilient management
of our business. In part, this is to continually plan
and take action as a business by working with
changing regulatory policy. As such, we have
been disclosing to the Carbon Disclosure Project
(CDP) since 2018, we have included our TCFD
in this report and our Sustainability Accounting
Standards Board (SASB) report can be found on
our website. We collaborate with rating agencies
such as Sustainalytics and MSCI, which helps
highlight where we can improve. We aim to
continue to go the extra mile in this area and
increase our participation in forums and
industry collaboration.
HL is listed on the FTSE4Good index series,
demonstrating our strong environmental,
social and governance principles, having
been independently assessed according
to the FTSE4Good criteria.
Doing it better for our colleagues
We promote energy efficiency and the
avoidance of waste throughout our operations,
in accordance with our environmental policy.
• 100% of the general waste and packaging
disposed of in our head office is recycled.
We have implemented food waste recycling
across our offices.
• Our water usage by increased by 7.5%,
however, this was driven by increased numbers
of employees to work from our office as
opposed to home.
• Working alongside colleagues across internal
departments we are embedding sustainability
considerations within our return to the office
planning. This includes advocating for
employees to engage in sustainable behaviours
by providing the facilities within our office,
such as bicycle storage, free bicycle
maintenance checks and amenities such as
changing rooms to enable more sustainable
commuting. We recently increased the
allowance available for the Cycle to Work
Scheme and offer season ticket loans
for employees to use public transport.
We shred and recycle all confidential waste.
We save energy through the passive infrared
sensor lighting in our offices and we have a
number of initiatives internally to reduce our
paper use, with the ambition of being a paperless
office. These activities are supported by running
educational talks to promote recycling, from
external speakers such as City to Sea, Avon
Wildlife Trust and The Soil Association. We
donate old office and IT equipment to schools
and charities where appropriate or dispose of
via specialist third parties.
Our Financial Advisers are spread throughout
the UK which minimises travel time and carbon
emissions. We also provide a telephone advice
service where a face-to-face meeting is
not required.
For the year ending 30 June 2022 our
emissions per employee decreased by 20%.
Colleagues are passionate about working
together to ‘do it better’ and our Sustainability
Network is vital in helping us to achieve our
environmental aims. From promoting initiatives
to reduce our carbon footprint through talks,
events and written articles for staff, through
to introducing initiatives for waste reduction
and increasing climate-change awareness.
The Group are currently working on engaging
with communities on sustainability-related
issues through volunteering and, promoting
sustainable commuting habits with the aim
of coming back to the office greener.
Doing it better for the wider community
HL is part of a network of organisations that has
pledged to work towards a sustainable city with
a high quality of life for all, as demonstrated by
our membership of the Bristol Green Capital
Partnership. To support this, we source 100%
of our electricity from renewable sources.
HL colleagues also have the opportunity to
volunteer in projects which have a positive
impact on the environment. We recognise how
important biodiversity is for a healthy planet and
are working with local organisations to conserve
and maintain green spaces near to the office
such as the rewilding of College Green to help
promote biodiversity in the centre of Bristol,
tree planting and beach cleans.
We continue to work with TravelWest to support
their Travel to Work Survey so we can feed into
the city’s transport plans and provide more
accurate Scope 3 employee commuting data.
Online accounts
93%
of our clients
are registered for
online accounts
Paperless service
81%
of our clients now use
our paperless service
Recycling
100%
of the general waste
and packaging disposed
of in our head office
is recycled.
NET ZERO
We are committed to be
net zero by at least 2050
Governance Financial statements Other information
36
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CORPORATE CITIZENSHIP
BUILDING OUR POSITION AS A RESPONSIBLE BUSINESS CONTINUED
TCFD
We are committed
to becoming a more
sustainable business.
We are aiming to align with the global goals
of the Paris Agreement to limit global warming
to 1.5 degrees Celsius and aim to take
responsibility for how we manage the impact we
have on the environment and on climate change.
Our commitment to sustainability means
integrating social, ethical, and environmental
considerations into our operations with strong
corporate governance ensuring more sustainable
management and development with a long-term
view, in addition to our responsibility to manage
our wider environmental and social footprint.
Last year, we reported the significant step we
had taken of committing to achieve net zero
emissions no later than 2050 across our full
range of business operations. In 2022, we have
continued to develop our approach to this,
further refining our commitments, and going
into more detail around our investment data.
Our strategic objective is to reduce our
contribution to climate change and support
the transition to a low carbon economy. We are
aiming to limit our direct carbon impact, and
educate ourselves and our wider stakeholders,
including clients and shareholders, creating
environmental awareness and striving to live,
travel and work in a more environmentally
responsible manner.
Within our fund management we strive to
embed climate considerations in our investment
management and stewardship activity, with all
new HL funds EU SFDR Article 8 aligned at a
minimum, and supported by offering clients the
tools, information and research to invest in line
with their values.
The Task Force on Climate-related Financial
Disclosures (TCFD) seeks to improve and
increase the reporting of climate-related
financial information. We are pleased to present
our second report, covering HL Plc and its
operations, aligning to the recommendations
set out in the TCFD framework. We set out
below our climate-related financial disclosures
consistent with the all TCFD recommendations
and at least 9 out of 11 of the recommended
disclosures. By this we mean the four TCFD
recommendations and the 11 recommended
disclosures set out in Figure 4 of Section C
of the report entitled “Recommendations of
the Task Force on Climate-related Financial
Disclosures” published in June 2017 by the TCFD.
For strategy disclosure (a) and metrics and
targets disclosure (a), further work is planned to
enhance the identification, impact and reporting
for climate-related risks and opportunities and
how these map over the short, medium and
long term, in addition to further work on defining
the metrics used to assess these risks and
opportunities. We will continue to develop on this
report year on year and intend to include these
additions within the 2023 report. We will
continue to develop on this report year on year,
including adding greater detail on our fund
management process in future iterations.
Governance
Our Board of Directors oversee our long-term
strategy. This includes ESG, climate change
and sustainability.
They analyse progress with bi-annual board
papers, regular focused presentations, and
deep-dive sessions. This covers topics such
as the overarching ESG strategy, our approach
to risks and opportunities and how these
approaches feed into objectives. The Board
agrees the corporate objectives and approves
initiatives, such as our emissions targets, director
objectives and supporting our Group policies.
The Board takes collective responsibility for all
sustainability matters, encouraging collaboration.
In turn this will help drive change, and a more
sustainable future for our business and
our clients.
Our Executive Committee review an ESG
Dashboard on a quarterly basis, providing
them with updates on evolving ESG risk and
governance, our emissions data and client
attitude towards ESG. Additionally, our executive
compensation is linked to a number of ESG areas,
including our environmental goals, which can
be found on page 111 in the 2021 Report and
Financial Statements.
In 2021 we have had ESG sessions with
external consultancies to help build the working
knowledge of those involved within the ESG
arena. Day to day activities are coordinated and
driven through our ESG Taskforce and working
groups. This is made up of representatives across
the core strategy areas of responsible fund
management, fund research and analysis, client
proposition, compliance, product governance,
public affairs, and responsible business.
Our strategic objective is
to reduce our contribution
to climate change and
support the transition
to a low carbon economy.
Governance Financial statements Other information
37
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CORPORATE CITIZENSHIP
BUILDING OUR POSITION AS A RESPONSIBLE BUSINESS CONTINUED
This means colleagues from across the business
are working together to optimise climate-related
opportunities and minimising risks.
The HL Sustainability Group is an employee-led
network focusing on sustainability, with over
70 core members. The group is sponsored
by a senior executive and works to help us to
engage colleagues and support the business to
understand, measure and reduce our direct and
indirect environmental impact. Over the past year
the group have supported the work to return to
the office greener, with the installation of electric
vehicle charging points, improved cycling
facilities, transition of internal supplies to
sustainable alternatives and our food waste
recycling scheme.
Strategy
Whilst we are aware that changes required to
achieve a low carbon economy may present
some risks, we also believe that there are
opportunities for us and our clients during this
transition. We are committed to ensuring our
business operations are structured to ensure
we contribute to a low carbon based economy
as well as ensuring our clients have access to
the relevant tools, information and research
to make involved decisions on where to invest,
available on our Responsible Investment Hub.
www.hl.co.uk/funds/
responsible-investment
We have undertaken a scenario analysis, looking
at four scenarios for global warming, over two
different time frames. This helped to form the
foundations of our climate change strategy that
will ensure HL is a financially resilient business.
We have developed the analysis undertaken in
FY20, to include any other factors which have
arisen in the past year, such as implications
from COP 26, the Ukrainian war and subsequent
energy crisis. Additionally, our scenario analysis
includes more information on the impacts of
COVID-19 as more data is now available. This
includes research on the impacts of COVID-19
on the environment and socio-economic factors
such as business travel.
In our first scenario, climate action has been
prioritised and emissions significantly reduced
by 2030. As a result, global temperature
increases have been limited to 2°C or less.
Our second scenario is 2°C or less in 2050.
In the third, no climate action has been taken
by 2030 and global temperatures have risen
by 4°C or more. Lastly, this scenario has been
considered in 2050.
The qualitative and quantitative data enables a
consideration of the ‘what ifs’. These scenarios
will be assessed in terms of the risks,
opportunities, and the materiality in the next
steps of the TCFD process.
Unless stated otherwise, the data are
assumptions of what could be expected in the
scenario. Those that do not fit the time frames,
such as the ‘reputation’ analysis, are included
as they offer supporting evidence and an
understanding of the risk posed.
The scenario analysis will form the foundations
of a climate change strategy that will ensure HL
is a climate resilient business.
We have focused our scope on five key
risks, in line with TCFD recommendations.
1. Technology:
Climate change and resource scarcity are
linked. As a digital business, there’s a risk
the technology we use doesn’t use scarce
energy efficiently.
2. Policy and Legal:
With the transition to a lower carbon
economy, policies such as carbon-pricing
mechanisms and taxes could pose a risk
to our business.
3. Markets:
These disruptive policies could influence
financial markets. We have considered
this market risk having policy and legal
repercussions. In particular, the impact
of a shift away from fossil fuel investment.
4. Reputation:
How we participate in the transition
to a lower carbon economy could affect
our reputation.
5. Physical:
We have considered the chronic
physical risks of coastal flooding from
rising sea levels or riverine flooding risks,
as well as temperature rise implications.
Predicting socioeconomic development
is arguably more difficult than predicting
the long-term physical impacts of climate
change. To make sure our analysis was
broad enough, we applied a range of
existing models
1
to these five key risks.
We also looked at third-party research,
expert judgement, and internal stakeholder
focus groups.
1 Examples of models used; WRI Aqueduct Floods; Climate
Central Surging Seas; IAMC 1.5°C Scenario Explorer, IIASA;
PRI IPR and IEA.
We are committing
to achieve net zero
emissions no later
than 2050.
Governance Financial statements Other information
38
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CORPORATE CITIZENSHIP
BUILDING OUR POSITION AS A RESPONSIBLE BUSINESS CONTINUED
Risks and opportunities
We undertook an internal risk assessment using
scenario analysis on our operations. It found
the 2030 scenario for 2°C low risk, but then this
increased to medium risk for the 4°C scenario.
The 2050 scenario for 4°C was deemed to be
high risk. These risks were assessed via a
‘likelihood’ versus ‘impact’ matrix, offset against
controls to mitigate to help determine the risk
rating, for example a high risk has a high
likelihood and higher impact of causing a
significant event. The main risks were transitional
– market, regulatory and reputational risk.
We recognise the significance of global warming
and as a diversified financial institution, HL has
exposure to both physical and transition risks.
Despite a lack of direct exposure to climate-
related risks, a scenario like that articulated by
the Inevitable Policy Response (IPR) could impact
our future revenues and profits. As a result,
we have committed to aligning our business with
the global goal of achieving net zero by 2050.
Opportunities include:
• Increasing availability of energy efficient
technologies for example, cloud hosted
services could significantly reduce our
operational carbon footprint.
• Utilising business communication technology,
such as Teams and Zoom, to keep aspects
of remote working, limit business travel and
consequent emissions is also crucial here.
• As business travel across the industry has
not returned to pre-pandemic levels, there
is an opportunity to leverage technology,
limiting carbon and emissions under Scope 3.
There have been positive short-term impacts
on the environment from less commuting and
business travel. Our year on year Scope 2
emissions decrease for 2020-21 was well within
expected minimum levels. We are aware that
this could be partially due to COVID-19 and
the impacts of virtual work. Post-pandemic,
we will observe employee behaviours on
commuting and business travel. If this returns
to pre-pandemic levels, we will record this,
and revise our mitigation accordingly.
• The chance to enhance brand value through
robust reporting. Authentic targets will attract
and retain colleagues, clients and shareholders.
And we know that transparency drives
investor confidence.
• The Department for Business, Energy and
Industrial Strategy
2
(BEIS) stated the UK low
carbon economy could grow four times faster
than the rest of the economy between 2015
and 2030.
– We can support our clients to invest in this
area, through our Responsible Investing hub.
We have created a responsible investment
hub which makes it easier for clients to invest
in this area. Here, there is information about
ESG investing, tools and articles as well as
providing a list of funds in the responsible
investment sector.
– Furthermore, as announced earlier in the
year, we are launching a new Sustainable
Finance Disclosures Regulation Article 9
aligned fund over the coming years,
in addition to ensuring all additional new
funds are SFDR Article 8 as a minimum.
Risks:
In our original scenario analysis we assessed the
2°C and under 2050 scenario posed a medium
risk. Limiting temperature increases over the next
few decades will involve costs for businesses.
These might act as a drag on share prices and
could also impact economic growth compared
to the business as usual scenario. This shows
that climate action economic benefits
significantly outweigh the cost.
In the 4°C and above 2050 scenario, a significant
increase in energy demand is expected as a
result of rising water scarcity. We assessed this
was a high risk. Due to the misalignment with
the Paris agreement, reactive policies and taxes
could be implemented. In addition, increased
protests and citizen climate activism could be
targeted at FTSE 100 companies.
An overarching risk across all scenarios is the
reputational damage, which can in turn lead to
litigation risk. This could result from poor climate
risk management, misalignment with reporting
and ‘greenwashing’. We recognise the impact
this could have on relations with all of our
stakeholders. This is ever present, particularly
after COP 26 and the increase in green
investment products.
Hitting our climate-related targets is the key
to mitigating this risk. Our approach is to set
short-term targets to make sure we are on track
to meet long-term pledges. Within our operations
we have set a target to achieve by 2025,
before then looking to 2050, as stated here:
www.hl.co.uk/corporate-social-responsibility/
climate-commitments. We will follow the same
approach within our fund management, with
targets set by 2023. These will be reviewed
by our Board and driven by our ESG Taskforce.
We also need to consider demand for our
services if we don’t evolve to embrace ESG
investing. Likewise, consideration must be given
to the business’ growth rate and falling average
age of HL’s clients. The environment is one of
the top concerns
3
of millennials and Gen Z.
As the business’ youthful client base grows,
so do the expectations and scrutiny of our
climate action and we recognise the importance
of championing responsible climate action for
all current and future stakeholders.
Risk management
Climate change risk forms part of HL’s
Risk Universe. Each department within
the business has responsibility to identify
potential climate-related risks and implement
mitigating controls. Strategic implementation
of climate-related objectives are overseen
by the Executive Committee.
Emerging developments of climate related risks
are monitored through the Group’s Emerging
Risk and Horizon Scanning process. The
Executive Risk Committee and Board Risk
Committee receive quarterly updates on HL’s
emerging risks and the actions being taken
by Accountable Executives.
We continue to focus on strengthening our
management of climate-related risks making
these considerations a component of our
strategic planning process and executed through
strategic implementation. For example, the Funds
HL proposes to launch as part of its new strategy
place increased focus on ESG considerations
in their selection and management. HL has
assessed the financial impact of the risks and
the financial impact is not material. Over future
iterations we intend to develop our quantification
of these risks and add further analysis to the
financial impact.
2 HM Government 2017, “The Clean Growth Strategy”. 3 Deloitte 2020, “The Deloitte Global Millennial Survey 2020”.
Governance Financial statements Other information
39
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CORPORATE CITIZENSHIP
BUILDING OUR POSITION AS A RESPONSIBLE BUSINESS CONTINUED
Risk Impact identified Mitigation
Transition
Technology • The link of climate change and resource scarcity is becoming increasingly
apparent, for example, droughts and heatwaves will make the water needed to
produce electricity scarce. As a digital business, we are aware of the risk of not
having the right technology to manage energy scarcity.
• The ongoing energy crisis is resulting in increasing costs for running a digital
business due to material infrastructure.
• We intend to undertake work to understand the potential technology risks within
our portfolio.
• Whilst there is a risk of not having sufficient technology to manage energy
scarcity, in addition to considering unsuccessful investment in new technology
& costs to transition to lower emission technology we believe this is a low risk in
the short term but poses a higher risk over the long term in a 4 degree scenario.
The risk of energy scarcity is being managed through the transition to cloud hosted
services, such as Amazon Web Services (AWS). Using the cloud means fewer
servers are needed and less energy used. HL is transitioning to using AWS systems,
for which Amazon claims the AWS’s infrastructure is 3.6 times more energy efficient
than the median of the surveyed US enterprise data centres, delivering a 72%
reduction in carbon footprint on average. As this transition has been confirmed,
HL could expect increased energy efficiency by 2030. Coupled with our investment
in cloud-based services is our exploratory work into how we can deploy artificial
intelligence to enhance efficiencies.
We’re also improving the energy efficiency of our operations through conscious
switches, such as installing LED lighting in our offices. Between 2015 and 2020
we’ve reduced the energy (kWh) we use per client by 57.9%.
Due to virtual working, people are commuting less which leads to less emissions.
Following the pandemic, a YouGov poll found that 34% of UK respondents
stated environmental sustainability affects their decisions around travel. In the
UK there has been a 142% increase in hybrid working. It was also found that
42% of people would not return to business travel such as business trips and
client meetings, choosing instead to hold them virtually. This has created an
opportunity to reduce Scope 2 emissions, especially in the short-term. The effects
on emissions are potentially long-term depending on the evolution of these social
behaviours and attitudes to business travel.
Policy
and legal
• With the transition to a lower carbon economy, we have recognised the risk that
reactive policies could have to HL, such as carbon-pricing mechanisms to reduce
GHG emissions, and associated taxations.
• As regulatory requirements inevitably increase as new policies are introduced,
additional costs needed to adapt to these should also be considered.
• There are a number of legislative reporting changes due (such as SDR, TCFD,
new ISSB Reporting standards) and failure to align to and report against these
will result in negative impacts, both financially and reputationally.
We scan the horizon for policy and legal risks associated with climate change.
We screen regulatory press releases, consultations and publications to spot
potential changes that could impact our operations. Through this process,
risks are assessed in terms of impact.
Governance Financial statements Other information
40
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CORPORATE CITIZENSHIP
BUILDING OUR POSITION AS A RESPONSIBLE BUSINESS CONTINUED
Risk Impact identified Mitigation
Transition
continued
Market • These disruptive policies could also pose a risk to financial markets. We have
considered this market risk from the perspective of policy and legal repercussions,
in particular, looking at the impact of a shift from fossil fuels. Also, how the
demand for fossil fuels has changed due to socioeconomic behaviours and
attitudes following the pandemic.
• The Ukraine crisis and the intent to replace Russian oil has led to many countries
turning to coal (www.climatechangenews.com/2022/03/15/some-eu-members-
turn-back-to-coal-to-cut-reliance-on-russian-gas/) or imports of liquefied
natural gas (www.oilprice.com/Energy/Energy-General/Shale-CEO-US-Can-
Easily-Replace-Russian-Gas.html) as alternative sources to close the gap short
term. This presents a risk to the decarbonisation transition.
• Carbon markets recognised at COP26 which can open new revenue streams.
This has an impact on financials of putting an explicit price on carbon emissions,
and the knock on effect that can have to listed companies and the market.
• This could pose a low risk over the short term due to reactive policies listed
and impact on the markets, resulting in increasing risk over the longer term
Disruptive policies and the subsequent shift away from fossil fuels poses a risk to
client outcomes, for example to meet the 1.5 degrees target, phase-down of coal
is required per United Nations COP26. We mitigate this risk by creating content
that educates our clients on the importance of diversifying their investments.
Diversification is a key part of building resilience into a portfolio and we offer clients
the opportunity to save and invest in a large selection of assets.
We have six responsible funds on the Wealth Shortlist currently, in addition to the
nineteen new funds which will be launched that are EU SFDR article 8 aligned at
a minimum and have launched our Responsible Investment Hub to provide clients
with the tools and research to invest in line with their preferences.
We are aware of the risk of portfolio exposure and risk management and are
exploring tools to help identify our transition risks and to support client decision
making. Within our Fund Management we integrate ESG factors into our portfolios
and have an ESG proprietary dashboard to support our analysis.
Reputation • The Task Force has recognised climate change as a potential source of
reputational risk in terms of an organisation’s contribution to, or detraction from,
the transition to a lower carbon economy. We have focused on the risk of a
misalignment between reporting and HL’s actions.
• This could pose a short term, lower impact risk than the previous risks covered
A robust and transparent climate strategy will help mitigate the reputational impact
stemming from climate inaction. This includes ensuring any promotion of funds is
accurate and do not lead to claims of greenwashing which would have a negative
impact on reputation.
Physical
Physical • Physical risks resulting from climate change can be event driven (acute)
or longer-term shifts (chronic) in climate pattern.
• We have considered the chronic risk of coastal flooding from rising sea levels
or riverine flooding risks, as well as temperature rise implications.
• The Intergovernmental Panel on Climate Change (IPPC) report notes that climate
change interacts with global trends such as unsustainable use of natural
resources, growing urbanisation, social inequalities, loss and damage from
extreme events and a pandemic, jeopardising future development.
• Whilst there is an increasing risk of the physical impact of climate change over
the longer term, it was deemed as lower risk due to the smaller impact it would
have on our physical operations
As part of our business continuity plans, we consider the effects of adverse
weather. We have plans and playbooks for incidents such as flooding. These plans
also include annual due diligence of our suppliers, including climate-related risks.
In terms of flooding, Bristol City Council’s flood zone planning encompasses our
core Harbourside office. Insurance is also in place for further protection.
Temperature rise is mitigated through the installation of improved cooling systems
that reduces the overheating of our core technology systems and server rooms.
Governance Financial statements Other information
41
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
Metrics & Targets
Targets are a means to ensure we are on track to
meet our long-term goals. We continue to adjust
our targets on an annual basis to keep the aims
ambitious. We aim to set a science-based net
zero target within the next year. With regard to
operational emissions, HL commits to:
• Reduce our Scope 1* and 2* emissions by
15% (relative to baseline year FY18) each year.
• Measure and report all material Scope 3*
emissions by 2023 – primarily focusing on
our financed emissions which account for
the majority of our emissions, and emissions
which account for at least 50% of the total.
• 20% reduction in tonnes of CO
2
e for Scope 1+2
emissions per average full-time equivalent
employee each year (relative to baseline
year FY16).
• 100% of the general waste and mixed recycled
packaging disposed of in our head office is
recycled. We are working to expand this to
include our food waste by 2022.
Since 1 October 2013, the Companies Act 2006
(Strategic Report and Directors’ Report)
Regulations 2013 has required all UK quoted
companies to report on their greenhouse gas
emissions as part of their annual Directors’ Report.
We have reported on all of the emission sources
required under the Companies Act 2006 (Strategic
Report and Directors’ Report) Regulations 2013.
We also support the Carbon Disclosure Project
by reporting our CO
2
emissions.
Scope 1 is calculated by taking the invoice
consumption data (in KwH) from our Gas supplier
and refrigerant gas data multiplied by the UK
Government GHG conversion factors.
Scope 2 is calculated by taking the invoice
consumption data (in KwH) from our Electricity
supplier multiplied by the UK Government GHG
conversion factors.
Scope 3 Business travel is calculated by taking
colleague expense claim data multiplied by
emission factor data. Employee commuting is
calculated using Travel West ‘travel to work
survey data’ and average distances travelled,
multiplied by emission factor data, the
percentage of colleagues working from home
is also factored in. There has been an increase
in Scope 3 emissions in FY22 as a result of
COVID-19 restrictions being lifted and more
people returning to the office and carrying out
business travel.
We do not have responsibility for any emission
sources that are not included in our consolidated
statement. Our emissions are calculated in line
with the Greenhouse Gas Protocol using the
2021 emission factors provided by DEFRA.
The Group’s Scope 1, 2 and 3 emissions for the
year to 30 June 2022 are set out in the table
below. Scope 1 emissions relate to the Group’s
fugitive emissions from the combustion of fuel
and operating activities and Scope 2 emissions
relate to the Group’s electricity usage. Scope 3
emissions relate to business travel and employee
commuting. The table also shows the Group’s
energy usage arising from the gas and electricity
purchased for and used in operating its premises,
using the operational boundary definition.
Greenhouse gas emissions statement
In order to provide an intensity ratio for our
emissions disclosure, we have calculated
our greenhouse emissions per employee.
The Directors believe that the number of
employees is the best indicator for a Group
of this size and nature for the purposes of this
disclosure. The number of employees used
is the average number of full-time equivalent
employees over the measurement period.
For the year ending 30 June 2022 our emissions
per average employee was 0.71 tonnes down
20% on the prior year (2021: 0.89). The average
number of employees for the year was 1,984
(2021: 1,776).
CORPORATE CITIZENSHIP
BUILDING OUR POSITION AS A RESPONSIBLE BUSINESS CONTINUED
Emissions from:
Tonnes of CO
2
e
Change
Current
reporting year
2021-2022
Comparison
year
2020-2021
Direct emissions Scope 1 – Combustion of fuel and
operations of facilities including air conditioning 942.1 975.5 -3%
Indirect emissions Scope 2 – Purchased energy for own use 476.1
1
672.1
1
-29%
Tonnes of CO
2
e per average full-time equivalent employee 0.71 0.89 -20%
Energy used (KwH) 3,851,381
2
4,446,733
2
-13%
Scope 3 – Business travel 29.9 0.6 +4,902%
Scope 3 – Employee commuting 404.0 193.3 +109%
1 The purchased energy for own use figure includes 34.9 Tonnes of CO
2
emissions (30.8 T, 2021) relating to our operations in Poland.
It is not feasible to split any other metrics by country.
2 The energy used figure includes 180,594 KwH (145,092 KwH, 2021) relating to our operations in Poland. It is not feasible to split any other
metrics by country.
Governance Financial statements Other information
42
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CORPORATE CITIZENSHIP
BUILDING OUR POSITION AS A RESPONSIBLE BUSINESS CONTINUED
Net zero
HL recognises the significance of net zero,
transparent disclosures and authentic pledges
to allow for a sustainable economy. We are proud
to support the transition to carbon neutrality
by committing to net zero and publishing our
TCFD assessment of climate-related risks and
opportunities for our operations. We recognise
that the hard work starts here in evolving
our business to embed climate-related risk
management, continue to refine and expand
our disclosures, and focus on reducing HL’s
environmental footprint.
We are committing to be carbon neutral across
our Scope 1, 2 and Scope 3 business travel and
employee commuting emissions by 2025. We are
using the term ‘carbon neutral’ as we recognise
that we may need to utilise carbon offsetting as
part of our commitment and without the certainty
that we won’t use them, we do not want to
mislead with our commitments. This pledge
complements the City of Bristol’s 2030 net zero
target, allowing HL to champion our community’s
green growth. This will be met through a
combination of internal reduction methods
and a portfolio of carbon removal and reduction
projects. We commit to be net zero across all
of HL operations emissions (including Scope 3
financed emissions) by at least 2050 and will
seek accreditation for this via the science based
target initiative, in accordance with the Paris
Agreement by 2024 at the latest.
This is for HL plc.; we intend to disclose targets
for HLFM and HLAM in the near future.
To read more about our ambitions,
please refer to our climate commitments
web page www.hl.co.uk/
corporate-social-responsibility/
climate-commitments
*Definition of terms used:
Scope 1 and 2 are those emissions that are
owned or controlled by a company, whereas
scope 3 emissions are a consequence of the
activities of the company but occur from sources
not owned or controlled by it.
Scope 1 emissions: emissions from sources
that an organisation owns or controls directly.
Scope 2 emissions: emissions that a company
causes indirectly when the energy it purchases
and uses is produced.
Scope 3 emissions: emissions that are not
produced by the company itself, and not the
result of activities from assets owned or
controlled by them, but by those that it’s
indirectly responsible for, up and down its
value chain. An example of this is when we buy,
use and dispose of products from suppliers.
Scope 3 emissions include all sources not within
the scope 1 and 2 boundaries.
Governance Financial statements Other information
43
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
CORPORATE RESPONSIBILITY
CORPORATE CITIZENSHIP
NON-FINANCIAL INFORMATION STATEMENT
Reporting requirement Policies and standards which govern our approach Where you can find out more
Environmental
matters
Our report on Corporate Citizenship sets out our approach and policy in respect of the environment,
sustainability and climate change and provides examples of the action we are taking to promote energy
efficiency and reduce waste. It also provides details of our energy consumption and greenhouse gas emissions.
The environment, sustainability
and climate change and
Greenhouse gas emissions
pages 35 to 43.
Employees
Our people strategy aims to motivate and inspire colleagues to reach their full potential and our people policies
are in place to attract and promote an inclusive, diverse and healthy workforce.
Our report on Corporate Citizenship sets out our approach and the policies that support it.
This includes how we aim to attract and retain outstanding people, our commitment to personal development
of colleagues to expand our talent pipeline, and how we engage with colleagues and support their well-being.
We are committed to building a diverse workforce at all levels and creating an inclusive culture for all.
Our report on Corporate Citizenship sets out how we are doing this, and further information on our policies
to promote diversity and inclusion can be found in the Nomination Committee Report.
Employees pages 26 to 30.
Nomination Committee Report
page 107.
Social
Our report on Corporate Citizenship provides details of our approach to supporting our community. There you
can read more on our approach and the policies, schemes and initiatives that support it. You can also find
information on how our tax strategy supports our role as a business responsibly operating in and contributing
to society.
Community and Tax Strategy
pages 33 to 34.
Respect for
human rights
We are committed to supporting the rights of individuals and our people policies promote and support the
protection of the rights of our colleagues. We have a zero tolerance approach to slavery and human trafficking
of any kind within our business operations and supply chain. You can read more on our approach and the
policies in place to support it in the People section of this report.
Employees and Human Rights
page 30.
Anti-corruption
and anti-bribery
We have a full suite of policies and procedures in place to guard against financial crime, including bribery
and corruption, money laundering and terrorist financing, market abuse and fraud. You can read more about
our approach and the policies in place to support it in the People section of this report.
Anti-bribery and corruption
page 30.
Additional information Page
Description of principal risks and impact of business activity Principal risks and uncertainties, conduct risk (client outcomes)
and operational risk (financial crime)
51 to 59
Description of the business model Business model 22 to 23
Non-financial key performance indicators Strategy and KPIs 12 to 17
As a FTSE 100-listed business, we have an
important responsibility to contribute to the
communities around us and the wider economy.
We focus on driving high levels of corporate
responsibility, governance and sustainability and
look to engage with a wide range of stakeholders
in order to help create value for all. This section
of the Strategic Report constitutes the Group’s
Non-Financial Information Statement for the
purposes of sections 414CA and 414CB of the
Companies Act 2006. The information listed is
incorporated by reference.
The Strategic report was approved by the Board
of Directors and signed on its behalf by:
Chris Hill
Chief Executive Officer
Governance Financial statements Other information
44
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
PERFORMANCE
OPERATING AND FINANCIAL REVIEW
INVESTING FOR
FUTURE GROWTH
Strategic investment programme
underway to deliver improved operational
efficiency and growth potential.
Assets Under Administration (AUA)
and Net New Business (NNB)
Year ended
30 June 2022
£bn
Year ended
30 June 2021
£bn
Opening AUA 135.5 104.0
Underlying NNB 5.5 8.7
Market movement and other (17.2) 22.8
Closing AUA 123.8 135.5
Hargreaves Lansdown provides the leading direct wealth
management service in the UK. The strength of our brand,
diversified offering and the quality of our client engagement
and service has enabled us to continue to deliver net new clients
and net new business growth in a somewhat turbulent year.
Net new business for the year totalled £5.5 billion (2021: £8.7bn)
driven by increased client numbers, continued wealth consolidation
onto our platform and inflows from existing clients. The prior year
comparative saw the benefit of net new business and net new
clients resulting from the announcement of the Pfizer vaccine
and the optimism that brought to both clients and markets more
broadly. The lockdown months in early 2021 also saw significant
inflows as clients were predominantly home based with more time
to open accounts, transfer investments, undertake trading activity
and add money to the platform that was not being spent
elsewhere. This year instead, investors have faced uncertainties
caused by issues not seen for a generation with war in Europe,
significant cost inflation, rising interest rates and continued
macroeconomic uncertainty weighing heavily on consumer
confidence which hit an all-time low in June of this year and in turn
impacting net new business. Throughout the period, however, we
have maintained our focus on engaging with clients and helping
them to navigate these uncertain times, to improve their financial
awareness and resilience. This, combined with the quality of
service and breadth of proposition is key to building long-term
client relationships. Our focus on service and the value our clients
place on our offering is evidenced by client and asset retention
rates remaining strong at 92.1% and 91.8% respectively (2021:
92.1% and 91.4%).
During the year to 30 June 2022, we introduced 92,000 net new
clients (2021: 233,000) to our services and grew our active client
base by 6% to 1,737,000. The average age of new clients at 36
years old, is consistent with recent periods and they are behaving
similarly to recent equivalent cohorts in terms of growing their AUA
on the platform over time, diversifying their portfolios and using
the tax wrapped accounts. We are encouraged by the qualitative
aspects of these clients and the additional lifetime value they will
bring to the Group as a result. On joining, new clients brought an
average NNB of £15,565, up 12% on last year (2021: £13,943).
Our client focused strategic
investment underpins our
future growth.
Amy Stirling
Chief Financial Officer
Governance Financial statements Other information
45
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
PERFORMANCE
OPERATING AND FINANCIAL REVIEW CONTINUED
Financial performance
Income Statement
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Revenue 583.0 631.0
Fair value gains on derivatives – 0.6
Operating costs (313.0) (266.0)
Finance and other income – 1.4
Finance costs (0.8) (1.0)
Profit before tax 269.2 366.0
Tax (53.4) (69.7)
Profit after tax* 215.8 296.3
Profit before tax 269.2 366.0
Total strategic spend
– Investment cost 21.1 –
– Dual tech running cost 7.2 –
Underlying profit before tax* 297.5 366.0
Tax on underlying profit* (59.0) (69.7)
Underlying profit after tax* 238.5 296.3
* Underlying profit before tax, Tax on underlying profit, and Underlying profit after tax for
the period exclude strategic investment costs and dual tech running costs of £28.3 million.
See the Glossary of alternative performance measures on page 168 for the full definition.
Prior period comparatives are provided on the same basis as they were reported prior to
the introduction of the new alternative performance measures.
Revenue
Revenue for the year was £583.0 million, down 8% (2021: £631.0m), driven by lower share dealing volumes as anticipated given the more
atypical trading volumes experienced during COVID-19 last year. This was partly offset by higher average asset values in the first half
and the benefit that brings in higher platform fees.
The table below breaks down revenue, average AUA and margins earned during the period.
Year ended
30 June 2022
Year ended
30 June 2021
Revenue
£m
Average
AUA
£bn
Revenue
margin
bps
Revenue
£m
Average
AUA
£bn
Revenue
margin
bps
Funds
1
254.5 65.3
7
39 232.9 58.5
7
40
Shares
2
194.9 52.3 37 258.0 45.1 57
Cash
3
50.0 13.6 37 50.7 13.0 39
HL Funds
4
60.3 8.8
7
69 60.7 8.4
7
72
Other
5
23.3 3.8
6
– 28.7 2.8
6
–
Double-count
7
– (8.7)
7
– – (8.3)
7
–
Total 583.0 135.1
7
– 631.0 119.5
7
–
1 Platform fees and renewal commission.
2 Stockbroking commission and equity holding charges.
3 Net interest earned on client money.
4 Annual management charge on HL Funds, i.e. excluding the platform fee, which is included in revenue on funds.
5 Advisory fees, Active Savings and ancillary services (e.g. annuity broking, distribution of VCTs and Hargreaves Lansdown Currency and Market Services).
6 Average cash held via Active Savings.
7 HL Funds AUM included in Funds AUA for platform fee and in HL Funds for annual management charge. Total average AUA excludes HL Fund AUM to avoid double-counting.
Funds
Revenue on Funds increased by 9% to £254.5 million (2021:
£232.9m) due to higher average AUA levels. Funds remain our
largest client asset class at 48% of average AUA (2021: 49%),
and the revenue margin earned this year was in line with our
expectations at 39bps (2021: 40bps). Funds AUA at the end
of June 2022 was £58.2 billion (2021: £66.6bn).
We expect the fund revenue margin to remain at broadly similar
levels for the next financial year, within the range of 38.0bps
to 39.0bps.
Shares
Revenue on Shares decreased by 24% to £194.9 million (2021:
£258.0m) and the revenue margin of 37bps (2021: 57bps) was
within our expected range. This margin is primarily a result of the
ratio of dealing volumes to average AUA. In the year client driven
deal volumes fell by 32% to 8.9 million (2021:13.1m), whereas the
average Shares AUA has grown by 16%. Within this decrease
overseas deal volumes, which derive greater revenues were down
41%. The drop in deal volumes and revenues year on year primarily
relates to the significant boost seen last year on the back of Pfizer
announcing the success of their vaccine trials in November 2020
and the elevated deal volumes during the lockdown months of
January 2021 to March 2021.
Governance Financial statements Other information
46
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
PERFORMANCE
OPERATING AND FINANCIAL REVIEW CONTINUED
Total deal volumes (including automated deals such as dividend
reinvestment) decreased by 27% to 10.5 million (2021: 14.4m) but
were in line with expectations of c40,000 deals per trading day,
albeit from a peak in January of 46,000 deals per trading day
driven by market volatility to a low in June of 37,000 as a result
of low levels of investor confidence and a lack of market stimulus.
Despite the more recent reduction in volumes, client driven trading
remains ahead of levels seen prior to the pandemic. We are well
placed to benefit from future market volatility and growth in share
trading across the industry. However, we expect to see these
more muted volumes continue through much of the year ahead.
We remain the market leader in terms of UK stockbroking volumes
with a 38.2% share (source: Compeer Limited XO Quarterly
Benchmarking Report Q1 2022). Shares AUA at the end of 2022
was £45.9 billion (2021: £53.1bn).
Our revenue margin guidance for the next financial year on shares
is 35bps to 40bps.
Cash
Revenue on Cash was broadly flat at £50.0 million (2021: £50.7m)
as higher average cash levels were more than offset by a decrease
in the net interest margin to 37bps (2021: 39bps) slightly above
the top end of our communicated expectations. With the majority
of SIPP cash placed on rolling 13 month term deposits, and
non-SIPP on terms of up to 95 days, the full impact of any rate rise
or fall takes over a year to flow through. Cash AUA at the end of
2022 was £15.0 billion (2021: £12.6bn).
As we progressed through the first half of our year, expectations
of an interest rate rise gained momentum until 16 December 2021
when the Bank of England raised interest rates for the first time
in three years from 0.10% to 0.25%. In the second half we have
seen four subsequent increases, each of 0.25%, in February,
March, May and June. The extent of pass through by us to
clients is determined by the rates we are able to achieve with our
relationship banking partners who we assess based on the criteria
of security, liquidity and yield. Assuming there are no further rate
changes, our guidance for this financial year is 90bps to 110bps.
HL Funds
HL Funds consist of 10 Multi-Manager funds, on which the
average management fee ranges from 60bps to 75bps, three
Select equity funds, on which the management fee is 60bps
and our new Workplace Default Fund ‘HL Growth Fund’, on
which the management fee is 10bps. Although the average funds
under management were up 5% versus last year, revenue from
HL Funds was broadly flat at £60.3m (2021: £60.7m) as previously
announced price cuts took effect from 28 June 2021. These price
cuts were initially announced in January 2021 as part of the annual
Value for Money report on our own fund range and included cuts
to the annual management charge on some of the Multi-Manager
funds and the introduction of price reductions linked to economies
of scale. The fees are collected on a daily basis whereas the
Group calculates average AUM on a month end basis, resulting
in a headline margin for the period of 69bps (2021: 72bps).
Overall, we have seen modest net outflows combined with
negative market growth such that HL Funds AUM at the end of
2022 was £8.0 billion (2021: £9.0bn). The net outflows primarily
relate to our advisory clients who hold these funds through
our Portfolio Management Service, which we have not been
actively marketing.
Looking forward, we are launching a range of new HL Funds along
with new investment tools and solutions. This will improve the
overall proposition and competitiveness of our own investment
funds and will begin to drive net inflows. We expect to launch
new funds with lower priced management fees than the existing
Multi-Manager funds and will be moving certain existing HL
Multi-Manager funds into the new lower priced funds. The margin
for 2023 is therefore expected to reduce and be in the range of
55bps to 60bps
Other
Other revenues are primarily made up of advisory fees and Active
Savings. The year on year reduction of revenue primarily relates
to the removal of our paper based statement fees during the year.
Overall, we expect our revenue margin to be in the range of 44bps
to 47bps for the full year.
Active Savings
Assets held within Active Savings on the platform continue to
grow and are shown in the previous table as ‘Other’. Whilst growing,
the related revenue is not yet material so has been included with
various other revenue streams in the same table. Our focus is on
growing Active Savings cash balances through both attracting
new clients and retaining cash assets on the platform. In the last
quarter of the financial year, following the base rate increases,
we have usually been able to offer market leading rates from our
growing range of partner banks. Combined with marketing Active
Savings for the first time, we have seen a significant step up in
flows towards the end of the year. Active Savings AUA at 30 June
2022 was £4.6 billion (2021: £3.1bn).
Governance Financial statements Other information
47
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
PERFORMANCE
OPERATING AND FINANCIAL REVIEW CONTINUED
Revenues
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Ongoing revenue* 414.1 390.5
Transactional revenue* 168.9 240.5
Total revenue 583.0 631.0
* Definitions are shown in the Glossary of alternative financial performance measures
on page 168.
The Group’s business model offers clients a broad range of asset
classes to suit their needs in differing market environments and
as such benefits from a diversified revenue stream. The Group’s
revenues are largely ongoing in nature, as shown in the table
above. The proportion of ongoing revenue has increased to 71%
(2021: 62%) as the transactional stockbroking commission
decreased significantly versus last year.
Ongoing revenue is primarily comprised of platform fees on funds
and equities, Hargreaves Lansdown fund management fees,
interest on client money and ongoing advisory fees. It increased
by 6% to £414.1 million (2021: £390.5m) driven by higher revenues
on funds from higher average AUA levels in the first half of the year.
Transactional revenue is primarily made up of stockbroking
commission and advisory event-driven fees. This decreased by
30% to £168.9 million (2021: £240.5m) with a 32% decrease in
client driven equity deal volumes being the driver of this revenue.
Operating Costs
As set out at the Capital Markets Day in February this year,
we have embarked on an investment programme to support
the strategic initiatives which will drive improved client
experience, enable growth at scale without the need for ongoing
commensurate increases in operating costs and expand our client
proposition by evolving our Investment Solutions, Active Savings
and Advice capabilities to meet the increasing needs of our current
and future clients.
The investment programme drives incremental spend over this
year and over the next three years through both investment cost
and dual tech running costs, together Total Strategic Spend.
Operating costs
Year ended
30 June 2022
£m
Year ended
30 June 2022
£m
Year ended
30 June 2022
£m
Year ended
30 June 2022
£m
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Underlying cost
Total strategic spend
Operating cost Operating costInvestment Cost
Dual Tech
running costs Total
Staff costs (including contractors) 144.2 6.3 5.0 11.3 155.5 119.8
Marketing and distribution costs 25.8 – – – 25.8 28.3
Depreciation and amortisation 16.1 – – – 16.1 16.2
Activity costs* 24.6 – – – 24.6 35.6
Technology costs* 28.7 – 1.0 1.0 29.7 22.8
Legal and professional costs 17.1 14.8 1.2 16.0 33.1 16.7
Other costs 16.1 – – – 16.1 12.7
Total costs (pre-FSCS) 272.6 21.1 7.2 28.3 300.9 252.1
Total FSCS levy 12.1 – – – 12.1 13.9
Total operating costs** 284.7 21.1 7.2 28.3 313.0 266.0
* Definitions are shown in the Glossary of alternative financial performance measures on page 168.
** Underlying costs excludes £28.3 million of strategic investment costs. See the Glossary of alternative performance measures on page 168 for the full definition.
Prior period comparatives are provided on the same basis as they were reported prior to the introduction of the new alternative performance measures.
They are used as the comparative reference points in the discussion on cost performance below.
Underlying costs increased by 7% to £284.7 million (2021:
£266.0m) as we continued to support the growing client base
and delivered an improved client service. The average number
of clients across the period was 11% higher than in 2021.
The key driver of cost growth was staff costs, which rose by 20%
to £144.2 million (2021: £119.8m). Average staff numbers, including
contractors, increased by 15% from 1,839 in 2021 to 2,109 in 2022.
The increase was predominantly within the service functions of
helpdesk and operations as they support our growing client base,
plus compliance and risk. Salary inflation had an impact of c3%.
Marketing and distribution costs fell by 9% to £25.8 million
(2021: £28.3m). During the period we were more targeted with our
client acquisition spend and we spent less on cash back transfer
incentives having focused instead for the year on improving our
transfer processes. As usual, marketing activity increased in the
second half and through the tax year end, including the third year
of our brand marketing campaign as ‘Switch your money on’.
Relating to the underlying operations of the business, capitalised
expenditure was £8.1 million (2021: £17.8m). The majority of this
expenditure was for cyclical replacement of IT hardware, office
equipment and the ongoing development of Active Savings.
Depreciation and amortisation costs decreased by £0.1 million.
Activity based costs primarily include dealing related costs and
debit card fees linked to cash paid onto the platform. Overall they
fell by 31% to £24.6 million (2021: £35.6m) driven by a 27%
reduction in share dealing volumes.
Governance Financial statements Other information
48
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
PERFORMANCE
OPERATING AND FINANCIAL REVIEW CONTINUED
Technology costs increased by 26% to £28.7 million (2021:
£22.8m). This was driven by increased licence fees to support
colleague numbers along with further spend incurred in providing
our proposition.
Legal and professional fees were broadly flat at £17.1 million
(2021: £16.7m) reflecting the cost of operating in a highly
regulated environment.
Other costs increased £3.4 million to £16.1 million (2021: £12.7m).
The key drivers of this were increased office running costs as
we faced higher energy costs, increased insurance costs and
travel expenses.
Total strategic spend to date primarily comprises staff (including
contractor) costs and professional fees relating to the planning
and commencement of the digital technology strategy and
strategic growth initiatives along with associated compliance,
infrastructure and support costs. In addition, in order to provide
assurance for our clients as we go through our transformation,
we will be parallel running new and legacy technology and
therefore have incurred dual tech running costs. Overall the
total strategic spend for the year was £32.9 million of which
£28.3 million has been expensed in the year (£21.1m investment
cost and £7.2m dual tech running costs) and £4.6 million has been
capitalised and will be amortised and depreciated in accordance
with our existing accounting policy.
Looking ahead to financial year 2023, our underlying costs have
come in lower than guidance for FY22, which combined with the
impact of wage inflation means we now expect to see growth of
c9.5% to 11.5% in the year ahead which is lower in absolute terms
than previously guided as we focus on managing spend. We
expect our strategic investment spend to be c£65 to £75 million,
catching up on the slightly slower start in FY22 of which c60% will
be capitalised. The amortisation and depreciation costs relating to
our strategic spend are included in the above cost guidance on
underlying costs. In addition, we expect to incur c£20 million of
dual running costs relating to the parallel running of technology
systems in the next financial year.
It is anticipated that the strategic investment cost and dual tech
running costs will continue until the financial year ending June
2026. In order to provide clarity of business performance, the
Total Strategic Spend (comprising investment cost and dual tech
running costs) will be added back to statutory profit before tax
to form an underlying profit before tax measure.
The Financial Services Compensation Scheme (FSCS) levy
decreased by £1.8 million to £12.1 million (2021: £13.9m) as the
overall amount raised under the scheme this year was lowered.
The FSCS is the compensation fund of last resort for customers of
authorised financial services firms. All authorised firms are required
to contribute to the running of the scheme and the levy reflects
the cost of compensation payments paid by the industry in
proportion to the amount of each participant’s relevant eligible
income. At present we anticipate that this levy will continue at
a similar level.
Profit before tax
Hargreaves Lansdown’s success is built around delivering
high service standards, efficiently dealing with ever growing
volumes of business and investing in further growth opportunities.
This investment is key to driving future growth and ensuring we
have a scalable operating platform, which we believe will be to
the benefit of both clients and shareholders across the market
cycle. At our Capital Markets Day, we outlined the improvements
to our client service and proposition, the improvements to our
efficiency and the cost savings the strategic investment will
deliver. This strategic investment has already begun and these
costs incurred in the year are in addition to the business as usual
or underlying costs of the business. The table below reconciles
the underlying profit before tax to the statutory profit before tax.
On an underlying basis, profit before tax fell by 19% to £297.5 million
(2021: £366.0m). On a statutory basis profit before tax fell by 26%
to £269.2 million (2021: £366.0m).
Tax
The effective tax rate for the period was 19.8% (2021: 19.1%),
in line with the standard rate of UK corporation tax. The Group’s
tax strategy is published on our website at www.hl.co.uk
Earnings per share
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Operating profit 270.0 365.6
Finance income – 1.4
Finance costs (0.8) (1.0)
Profit before tax 269.2 366.0
Underlying profit before tax* 297.5 366.0
Tax 53.4 (69.7)
Profit after tax 215.8 296.3
Tax on underlying profit* (59.0) (69.7)
Underlying profit after tax* 238.5 296.3
Weighted average number of shares
for the calculation of diluted EPS 474.5 474.5
Diluted EPS (pence per share) 45.6 62.5
Underlying diluted EPS
(pence per share)* 50.4 62.5
* Underlying profit before tax, Tax on underlying profit before tax, Underlying profit after tax
and Underlying diluted EPS for the period exclude strategic investment costs of £28.3 million.
See the Glossary of alternative performance measures on page 168 for the full definitions.
Prior period comparatives are provided on the same basis as they were reported prior to the
introduction of the new alternative performance measures.
Diluted EPS decreased by 27% from 62.5 pence to 45.6 pence,
in line with the Group’s reduction in profits. The Group’s basic EPS
was 45.6 pence, compared with 62.6 pence in 2021. Underlying
diluted EPS decreased by 19% from 62.5 pence to 50.4 pence.
The Group’s underlying basic EPS was 50.4 pence compared to
62.6 pence (see Glossary of alternative performance measures
on page 168 for the full definition).
Governance Financial statements Other information
49
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
PERFORMANCE
OPERATING AND FINANCIAL REVIEW CONTINUED
Capital and liquidity management
Hargreaves Lansdown looks to create long-term value for
shareholders by balancing delivery of profit growth, capital
appreciation and an attractive dividend stream to shareholders
with the need to invest in the business to maintain a market-
leading offering and high service standards for our clients.
The Group seeks to maintain a strong net cash position and a
robust balance sheet with sufficient capital and liquidity to fund
ongoing trading and future growth, in line with our aim of offering
a lifelong, secure home for people’s savings and investments. The
Group has a high conversion rate of operating profits to cash and
its net cash position at 30 June 2022 was £508.0 million (2021:
£503.5m). Despite this being the first year of our investment
programme, cash generated from operations more than offset the
payments of the 2021, final ordinary and special dividends and the
2022 interim dividend. This includes cash on longer-term deposit
and is before funding the 2022 final dividend of £130 million.
The Group has a Revolving Credit Facility agreement with Barclays
Bank to provide access to a further £75 million of liquidity. This is
undrawn and was put in place to further strengthen the Group’s
liquidity position and increase our cash management flexibility.
The Group also funds a share purchase programme to manage
the impact of dilution from operating our share-based
compensation schemes.
The healthy net cash position provides both a source of
competitive advantage and support to our client offering.
It provides security to our clients, and allows us to provide them
with an excellent service, for example through using surplus
liquidity to allow same day switching between products that have
mismatched settlement dates.
Capital
30 June 2022
£m
30 June 2021
£m
Shareholder Funds 575 593
Less: goodwill, intangibles
and other deductions (41) (37)
Tangible capital 534 556
Less: provision for dividend (130) (183)
Qualifying regulatory capital 404 373
Less: estimated capital requirement (219) (183)
Surplus capital 185 190
Total shareholders’ equity, as at 30 June 2022, made up of share
capital, share premium, retained earnings and other reserves
decreased to £575.1 million (2021: £593.5m) given the reduction
of profit for the year resulting from the commencement of the
investment programme and the payment of the 2021 final and
special dividends and the 2022 interim dividend. Having made
appropriate deductions as shown in the table above, surplus
capital amounts to £185 million.
HL plc has four subsidiary companies authorised and regulated
by the FCA. The FCA’s Investment Firm Prudential regime (IFPR)
came into effect on 1st January 2022 focusing on the potential
harm firms can pose to consumers and markets. HL completes this
assessment through the Group Internal Capital Adequacy and Risk
Assessment (ICARA) processes. Our assessment of HL’s capital
requirements takes account of the new regulatory requirements.
Consistent with the new IFPR requirements, HLAM specifically
is required to disclose regulatory capital information; this will
be available on the Group’s website at https://www.hl.co.uk/
investor-relations.
Dividend
Dividend (pence per share)
2022 2021
Interim dividend paid 12.26p 11.90p
Final dividend declared 27.44p 26.60p
Total ordinary dividend 39.70p 38.50p
Special dividend – 12.00p
Total dividend 39.70p 50.50p
As announced in February this year, the Group will be undertaking
an estimated £175 million of strategic investment cost to deliver
future growth and operational efficiencies. In part, the funding
for this investment will come from the suspension of any special
dividends through FY22 and FY23. The Board, however,
is confident that Hargreaves Lansdown has sufficiently strong
financial, liquidity and capital positions to execute its strategy
without constraints and hence has committed that the ordinary
dividend will grow by at least 3% throughout the period to FY24.
The Board has declared an increase in the total ordinary dividend
of 3% taking the ordinary dividend per share to 39.70 pence
(2021: 8.50 pence per share of ordinary dividend and 12.0 pence
per share of special dividend). The ordinary dividend is made up
of an interim dividend of 12.26 pence per share that was paid on
1 April 2022 (2021: 11.90 pence per share) and a final ordinary
dividend of 27.44 pence per share (2021: 26.60 pence per share).
Subject to shareholder approval of the final ordinary dividend at
the 2022 AGM, the final dividend will be paid on 24 October 2022
to all shareholders on the register at the close of business on
23 September 2022.
Amy Stirling
Chief Financial Officer
4 August 2022
Governance Financial statements Other information
50
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
EVALUATING AND
MANAGING RISKS
RISK MANAGEMENT AND THE PRINCIPAL RISKS AND UNCERTAINTIES
Our risk management framework enables
a consistent approach to the identification,
mitigation and management of risks,
which is essential to achieve our
strategic objectives.
1. Risk management
The Group aims for effective and proactive risk management
integrated into the culture of the Group.
The Board has ultimate responsibility for ensuring the Group
deploys effective risk management. The Board determines and
oversees the Group’s risk appetite including setting and monitoring
appropriate tolerance levels within which the Group must operate.
To assist the Board in discharging its responsibilities, the Group
has implemented a comprehensive risk management framework
to support identification, mitigation and management of risk
exposures which is further described below.
The Group’s Risk Management Framework (see figure 1) applies
at both Group and Legal entity levels and has been in place
throughout the period under review and up to the date of
Figure 1: Enterprise Risk Management Model
Policies & Standards
Group Risk Management Policy
Risk Category Policies
Strategic
Financial
Operational
Investment
Emerging Risk Policy
Risk Events & Escalation
Framework
Enterprise Risk Framework
Risk Appetite Framework
Risk Assurance Framework
IFPR (ICARA) Approach
Risk Acceptance
Internal Control Policy
Risk Cycle
Identify
AssessReport
MitigateMonitor
Manage
& Control
Governance
Model
Governance
Committee
(MGC)
Operational
Risk (ORC)
Executive
Committees
†
Legal Entity
Management
Structure
BRC*
Exco**
ERC
‡
* plc Board Risk Committee ** Executive Committee ‡ Executive Risk Committee † e.g. Treasury & Product Governance Committees
Governance Financial statements Other information
51
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
RISK MANAGEMENT AND THE PRINCIPAL RISKS AND UNCERTAINTIES
EVALUATING AND MANAGING RISKS CONTINUED
approval of the Report and Financial Statements and is in line with
the UK Corporate Governance Code. The Group regularly reviews
the risk framework, risk capabilities and tools to ensure effective
ongoing risk management.
Key enhancements made during the period include a refreshed
Risk Taxonomy and structure, build out of key risk specialisms
including Change and Technology risk and development of a
Strategic Risk Appetite Framework to support risk profile analysis
and support risk reporting.
The Group established formal projects overseen by the Board
to deliver the enhanced operational resilience requirements
and the new IFPR regulation for January 2022. The initial
ICARA was reported to the Board Risk Committee in April 2022.
Governance of the risk and control framework
The Group includes four principal operating legal entities,
each of which is supported by a Legal Entity Board and a
Management Committee. This Legal Entity structure manages
risk using the Group Risk Framework within agreed risk appetite
levels, with escalation on an agreed materiality basis to the
Group Executive Committee.
Risk management is acknowledged to be a core responsibility
of all colleagues at Hargreaves Lansdown.
The oversight of risk and controls management is provided by
Management and Board committees as well as the Group Risk
and Compliance functions. The Board is responsible for overseeing
the Audit, Risk, Remuneration and Nomination Committees.
Risk reporting from both first and second lines of defence support
these committees in the oversight and management of risk.
A risk policy suite is in place aligned to the Risk management
framework, with policies reviewed on an annual basis.
Key governance committees relating specifically to the
maintenance and oversight of the risk and control environment
include the Board, the Board Risk Committee, the Executive
Committee, and the Executive Risk Committee.
During the period, the governance structure has further evolved,
with the formation of an Operational Risk Committee and a
Conduct & Client Outcomes Committee reflecting the continued
growth of the business. Detail of the governance structure is
included in the Corporate Governance section of the report.
The activities of the Board and Executive Committees are
detailed in the Corporate Governance report on pages 66-73.
Key risk management framework components
Risk Taxonomy
The Group has an agreed and documented risk taxonomy, which
sets out the risk categories to which the business is exposed.
The risk taxonomy ensures that there is completeness in the
capture of risks, facilitates effective aggregation of risk across
the broader group as well as ensuring that there is consistency
of treatment across all risk categories.
The broader risk management framework is aligned to this
taxonomy which is reviewed regularly and forms the key
mechanism to support Management and Board oversight
of risk exposures.
Risk Specialists
During the period the Group has continued to build capabilities
to enhance risk management.
In the First Line of Defence a new Chief Control Officer role
has been created to develop and lead a dedicated team of risk
specialists in the business. The Second Line of Defence has
also been strengthened with greater capacity including further
capability in specialist areas e.g., Technology, Digital and Change
risk, Investment Risk and Conduct.
Figure 2: Risk Appetite
Principal Risks
Risk Appetite
Statements
Key Risk
Indicators
(KRIs)
Level 2 Risk Taxonomy
31 Risks covering
all activity at HL
Level 1 Risk Taxonomy
Strategic
Operational
Financial
Investment
Risk metrics
Governance Financial statements Other information
52
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
RISK MANAGEMENT AND THE PRINCIPAL RISKS AND UNCERTAINTIES
EVALUATING AND MANAGING RISKS CONTINUED
Risk appetite
The Group’s risk appetite is an articulation of the nature and
type of risks that the Group is willing to accept, or wants to avoid,
in order to achieve its business objectives and strategy.
The risk appetite statements combine qualitative statements and
quantitative measures, or thresholds expressed relative to metrics
such as operational performance, capital, and liquidity.
The Group’s risk appetite and its components are reviewed
on at least an annual basis. A particular focus during the period
has been the review of appetite and associated KRIs linked to
corporate strategy.
The Board has overall responsibility for determining the nature and
extent of the acceptable levels of risk it is willing to accept in the
course of achieving business objectives and strategy, achieving
positive client outcomes, and ensuring that risks are managed
effectively across the Group. The categories include strategic,
operational, financial and investment risk.
The Board sets the Group’s risk appetite and measures across the
four Level One risk categories, with KRIs monitored against each.
All KRIs include materiality thresholds for escalation and reporting.
Risk reporting
The Second Line of Defence provides risk and control reporting
to committees, Legal Entity Boards and Executive committees.
The standard format is a GCRO Report covering trends,
the Principal Risk profile, risk appetite, material risk events
and emerging risks.
Three Lines of Defence Model
Hargreaves Lansdown runs a Three Lines of Defence Model.
The First Line of Defence own and are accountable for the
management of risk. There are also embedded specialist teams in
the first line to support maintenance of a strong control framework.
Key examples of first line control functions include:
• CASS Oversight team – provides guidance to operational teams
on CASS and provides oversight of the CASS control environment.
• Operations Oversight team – provides risk and control support
to Operations, creates MI for the Operations Management Team,
and manages the Operations process framework.
• A dedicated IT Security team, which manages, tests,
and controls the cyber control environment.
• A Product Governance team – provides oversight of the design,
target markets and management of our core client propositions.
• The new Chief Control Officer team provides guidance,
consistency, and control expertise.
The Second Line of Defence is responsible for the delivery of
risk and control frameworks and policies as well as the provision
of assurance to Management that first line risk management
practices are appropriately embedded. In the Second Line of
Defence, the Group Risk and Compliance functions include teams
focused on regulatory compliance monitoring, prevention of money
laundering, prevention and detection of fraud and oversight
of data protection, Operational, Technology, Change, Conduct,
and Investment risks.
Individual capital adequacy assessment process
The Group transitioned from the ICAAP to the ICARA in Q1 2022.
The primary purpose of the ICARA is to ensure that there is a clear,
accurate and transparent link between the risk profile of the
business and the capital and liquidity held by the firm. The final
approval of the HL ICAAP was in December 2021 and the initial
ICARA was included in reporting in April 2022. The ICARA is
overseen by the Board Risk Committee
Response to the Russian invasion of Ukraine
Following the invasion of Ukraine, the Executive Committee
established a governance structure to manage the Group’s
response. Particular areas of concern were increased cyber risk,
market fluctuations, Russian and Belarussian funds, and clients
and HL’s offices and colleagues in Poland.
A working group and Steering Committee were established
with escalation to the Executive Committee. During the period,
desktop scenarios were run, existing stress tests and scenarios
were reviewed and further stressed, with findings linked to the
Important Business Services (IBS) part of the Group operational
resilience model and the ICARA.
The Working Group and Steering Committee included membership
from the Executive Committee and the wider Leadership Group,
including the Head of Operational Resilience, and the CRO.
Governance Financial statements Other information
53
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
RISK MANAGEMENT AND THE PRINCIPAL RISKS AND UNCERTAINTIES
EVALUATING AND MANAGING RISKS CONTINUED
2. Principal risks and uncertainties
The Board has carried out an assessment of the emerging risks
and principal risks facing the Group, including those that would
threaten its business model, future performance, solvency,
or liquidity.
In making its assessment, the Board considered the likelihood
of each risk materialising in the short and longer term. The Board
considered the principal risks in arriving at its viability statement.
The principal risks and uncertainties faced by the Group are
detailed below. The principal risks are categorised in line with the
risk management framework and aligned to the core risk exposures
of the Group; strategic, operational, financial and investment risks.
Principal risks reported here are those attracting the greatest
focus, and to which the organisation has the largest exposure.
The principal risks are linked to risk appetite and KRI measures
for reporting
In assessing the 2021-2022 changes, consideration was given
to the impact of COVID-19 and the Russian invasion of the Ukraine
on the Group’s inherent risks after considering mitigating actions
and controls.
As a result of this, an increasing likelihood has been reported
against the performance of markets, people, and financial crime
principal risks. Operational delivery was considered to be stable
after assessing the performance of existing, additional, and revised
processes and controls.
Management and the Board regularly discuss emerging risks.
Topics discussed during the period included third party services
and solutions, operational resiliency, cybercrime, invasion of the
Ukraine and communications from the regulator.
In assessing all risks, HL considers the reputational impacts
of risks materialising and the impacts on HL clients, of negative
publicity, and risks to the achievement of business objectives.
To mitigate potential reputational impacts HL ensures risk
exposures and potential impacts are appropriately and proactively
escalated through key risk governance. To support potential media
attention, HL has a PR function, makes use of external advisers,
and has an Internal Corporate Affairs Group to support the
Executive Committee.
Viability statement
The Board has considered the principal risks,
in arriving at the viability statement below
The principal risks and uncertainties faced by the Group
are detailed below. The principal risks are categorised into
strategic, operational, financial and investment in accordance
with our risk management framework.
Management and the Board regularly discuss emerging risks.
Topics discussed during the period included communications
from the regulator, third party services and solutions, operational
resiliency, cybercrime, and the COVID-19 pandemic.
Assessment process for the viability statement
In accordance with provision 31 of the UK Corporate
Governance Code, the Directors have assessed the viability of
the Group over the four-year period to June 2026 and confirm
that they have a reasonable expectation that the Group will
continue to operate and meet its liabilities up to this date.
The Directors’ assessment has been made with reference to the
Group’s current position and strategy, the Board’s risk appetite,
the Group’s financial forecasts and the Group’s principal risks
and uncertainties.
The Directors’ assessment has also been made after careful
consideration of the impact that the Russian invasion of Ukraine,
the increase in inflation and the associated cost of living crisis,
is having on the UK and global economy. From an HL perspective,
planning and scenario testing has examined the company’s
resilience to worst case scenarios with a range of testing over
three potential future outcomes, each looking at different
sensitivities such as interest rates, market levels and stockbroking
volumes. The worst outcome saw a 17% fall in the Group’s profit
after tax over the four-year period to June 2026. The Directors
conclude that their expectation of the Group’s viability does not
change as a result of this.
The Board considers that a time horizon of four years is
an appropriate period over which to assess its viability
and prospects, and to plan the execution of its strategy.
This assessment period is consistent with the Group’s current
strategic forecast and ICARA and it also matches the timescale
over which most changes to major regulations and the external
landscape that affect our business typically take place. The Board
has informally considered the viability of the business beyond the
assessment period and believe that the requirement for clients,
current and future, to have access to a secure and efficient
savings and investment platform will continue to increase.
The strategic forecast is approved annually by the Board and
regularly updated as appropriate. It considers the Group’s
profitability, cash flows, dividend payments, capital requirements
and other key variables such as exposure to principal risks. It is
also subjected to stress tests and scenario analysis, such as
fluctuations in markets, increased competition and disruption
to business, to ensure the business has sufficient flexibility to
withstand these impacts by making adjustments to its plans
within the normal course of business.
Governance Financial statements Other information
54
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
RISK MANAGEMENT AND THE PRINCIPAL RISKS AND UNCERTAINTIES
EVALUATING AND MANAGING RISKS CONTINUED
Taxonomy Level 1 Strategic Taxonomy Level 2 Strategy
Owner:
Chief Executive Officer
Link to strategy:
Link to HL values:
Put the client first, do the
right thing, make it easy
2021-2022 Change
STABLE
Risk
Risk that HL does not align propositions
and activity with HL’s strategic objectives.
Potential impact
• Erosion of shareholder value
• Negative impact on our reputation as an
innovative market leader
• Negative impact on existing clients in HL’s
ability to maintain premium client service
Mitigation and controls
• The Executive team and Board review strategy
in the context of propositional design and
service enhancement on a regular basis
• Dedicated proposition/client experience team
is in place
• Product governance process embedded
including use of client focus groups
• Regular client experience reviews by
the Executive
• Clear objectives aligned to Executive owners
and a supporting operating plan in place
Key risk indicators
• NNB v forecast
• Net Ease Scores
• Client retention
• Service rating
• Complaints
• Risk events
2021/22 activity
• Agreed a 5-year growth strategy
• Launched the new HL Growth fund (Default Fund
for Workplace clients)
• Launched Savings and Resilience Barometer as part
of 5 to Thrive client offering
Taxonomy Level 1 Strategic Taxonomy Level 2 Performance of markets
Owner:
Chief Financial Officer
Link to strategy:
Link to HL values:
N/A
2021-2022 Change
INCREASING
Risk
Risk that HL revenue is adversely affected by
market levels impacting strategic expectations,
resulting in erosion of shareholder value.
Potential impact
• Reduced AUA and AUM and corresponding
negative impact on revenues
Mitigation and controls
• Diversified revenue streams balanced
between recurring and transaction-based
• Monitoring and maintenance of client service
• Executive Committee, Treasury Committee
and Finance Reporting
• Liquidity policy and associated
controls oversight
Key risk indicators
• Interest rates
• FTSE 100
• Daily management information
• Client metrics (net, new and retention)
2021/22 activity
• Marketing Campaigns
• Prioritisation for internal investment on service,
technology and risk
• Ongoing discussion in the Executive Committee
Governance Financial statements Other information
55
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
RISK MANAGEMENT AND THE PRINCIPAL RISKS AND UNCERTAINTIES
EVALUATING AND MANAGING RISKS CONTINUED
Taxonomy Level 1 Operational Taxonomy Level 2 IT Operational Environment
Owner:
Chief Digital &
Information Officer
Link to strategy:
Link to HL values:
Do the right thing, make it easy
2021-2022 Change
STABLE
Risk
Risk that HL fails to manage and maintain
existing technological architecture, environment,
or components that are key to operational
delivery effectively.
Potential impact
• Inability to maintain operational efficiency
resulting in increased costs
• Poor client outcomes
• Reputational damage
Mitigation and controls
• IT Architecture plan
• Rolling internal and external monitoring
of IT environment
• Operational Plan, including prioritisation
of IT development
• Identification of contingency providers
for technology
Key risk indicators
• Unplanned downtime of client facing applications
• Status of critical projects
• Core system monitoring
• System patching status
• Technology risk events
2021/22 activity
• Delivery of a full End-to-End IT Testing platform
• Platform security improvements
• Refresh of technology strategy
Taxonomy Level 1 Operational Taxonomy Level 2 Operational delivery core
Owner:
Chief Operating Officer
Link to strategy:
Link to HL values:
Put the client first, do the right
thing, make it easy, do it better
2021-2022 Change
STABLE
Risk
Risk that HL fails to design or implement
appropriate policies, processes, or technology.
Potential impact
• Incorrect or inefficient delivery of activities
• Regulatory or policy breaches
• Poor client outcomes
• Financial losses including compensation
• Reputational damage
Mitigation and controls
• Group Risk Management Framework
• Ongoing First Line of Defence monitoring of
controls, control testing and self-assessment
• Process manuals and process mapping
• Training and development
• Operational MI
• Control focus at key governance forums,
including CASS Committee, Executive Risk
Committee and Board
• Risk Committee
Key risk indicators
• Risk events and Compliance breach monitoring
• Regulatory scrutiny or issues
• Third party breaches
• Complaints
• Helpdesk call quality
• Colleague retention rates
• Operational processing and transactional error rates
2021/22 activity
• New trading component, with enhanced scalability and speed
• New payments partner – Stripe
• Enhancements to our transfers processes
Governance Financial statements Other information
56
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
RISK MANAGEMENT AND THE PRINCIPAL RISKS AND UNCERTAINTIES
EVALUATING AND MANAGING RISKS CONTINUED
Taxonomy Level 1 Operational Taxonomy Level 2 Regulatory Compliance
Owner:
Executive Committee
Link to strategy:
Link to HL values:
Put the client first, do the right
thing, make it easy, do it better
2021-2022 Change
INCREASING
Risk
Risk that HL fails to comply with regulatory
and legal standards and/or required regulatory
change is not implemented to regulatory
expectations or requirements.
Potential impact
• Regulatory breaches
• Increased regulatory scrutiny, enforcement
action, censure, or fines
• Increased complaints or claims brought
by clients
• Where client complaints are not upheld –
complaints to the Financial Ombudsman
Service and FOS awards
• Litigation
• Reputational impact
• Missed opportunities to achieve
competitive advantage
Mitigation and controls
• Compliance-led Horizon scanning
and monitoring
• Change Committee oversight
• Compliance Plan, including complaint
handling plans
• Ongoing open dialogue with the FCA
Key risk indicators
• Volume of client complaints, FOS complaints and awards
• Volume of new outputs from regulatory bodies
• Number of regulatory change projects
• Number of regulatory breaches
• Litigation
2021/22 activity
• CASS Improvement Plan
• Investments Firms Prudential Regime (PS21/6)
• Operational Resilience (PS21/3)
• Consumer Duty (CP21/13)
Taxonomy Level 1 Operational Taxonomy Level 2 Financial Crime
Owner:
Executive Committee
Link to strategy:
Link to HL values:
Put the client first, go the
extra mile, do the right thing,
make it easy, do it better
2021-2022 Change
DECREASING
Risk
Risk that HL fails to design or implement
appropriate frameworks, including policies,
processes, or technology, to counter HL being
used to further financial crime by either internal
or external parties.
Potential impact
• Loss of sensitive data
• Poor client outcomes (including fraud)
• Negative impact on confidence in HL
• Diminish the integrity of the financial system
• Regulatory censure
Mitigation and controls
• Dedicated Chief Information Security Officer
and team, and a Security Operations Centre
focused on the detection, containment, and
remediation of information security threats
• Dedicated Information Security, Anti Money
laundering and Client Protection teams in place
• Formal policies and procedures and a robust,
rolling risk-based programme of penetration
and vulnerability testing in place
• Horizon scanning of peer group to understand
industry trends
Key risk indicators
• Fraud monitoring
• Cyber threat assessment
• Time taken to address security vulnerabilities
• Number of Information Commissioner’s Office (ICO) notifiable
data protection breaches
2021/22 activity
• Appointment of a new Group Head of Financial Crime (MLRO)
• Creation of a First Line Financial Crime team reporting to the
new Chief Controls Officer
• A programme of training and awareness for all colleagues
• Continuous cycle of cyber control improvements
Governance Financial statements Other information
57
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
RISK MANAGEMENT AND THE PRINCIPAL RISKS AND UNCERTAINTIES
EVALUATING AND MANAGING RISKS CONTINUED
Taxonomy Level 1 Operational Taxonomy Level 2 Data
Owner:
Chief Digital and
Information Officer
Link to strategy:
Link to HL values:
Put the client first, go the
extra mile, do the right thing,
make it easy, do it better
2021-2022 Change
INCREASING
Risk
Risk that HL fails to design or implement
appropriate frameworks, including policies,
processes, or technology, to manage data
and data storage.
Potential impact
• Loss of sensitive data
• Poor client outcomes (including fraud)
• Inefficient processing
• Regulatory censure
Mitigation and controls
• Dedicated Chief Information Security Officer,
Chief Data Officer and Data Protection Officer
in place
• Data Governance function
• Data storage standards
• Data usage standards
Key risk indicators
• Data related Risk Events
• Data reporting issues
• Data Privacy Impact Assessment completions
• Cyber events
• Fraud events
2021/22 activity
• Appointment of a Chief Data Officer
• Established data strategy and defining architecture to
support objectives
• Established a programme of work to deliver the Group’s data
insight capabilities
• Alignment of data and digital capabilities to support the Group’s
future requirements
Taxonomy Level 1 Operational Taxonomy Level 2 Duties to Clients
Owner:
Executive Committee
Link to strategy:
Link to HL values:
Put the client first, go the
extra mile, do the right thing,
make it easy, do it better
2021-2022 Change
INCREASING
Risk
Risk that HL’s culture and the HL values
fail to support an appropriate client focused
conduct by all colleagues, leading to poor
client outcomes.
Potential impact
• Poor client outcomes
• Negative reputational impact
• Regulatory censure and fines
• FOS complaints and awards
• Litigation
• Erosion of shareholder value
• Negative impact on achievement of AUA
and client number strategic targets
Mitigation and controls
• Colleague Communication and Training
• Conduct Risk policy
• Vulnerable Client policy
• Risk and incident monitoring and review
• Product Governance Committee
• Corporate and social responsibility programme
• Business-led diversity, inclusion, and
well-being programme of activity
• Colleague Performance Development model
• Whistleblowing process
• Conflict Management
Key risk indicators
• Glassdoor rating
• Colleague surveys
• Colleague retention
• Client survey results
• Litigation
• Volume of client complaints
• FOS complaints and awards
• Clients cancelling a new product or service
2021/22 activity
• Established a project to deliver compliance
with the Consumer Duty regulations (CP21/13)
• Strengthening Vulnerable Clients strategy as part of the
Consumer Duty implementation
• Developed governance arrangements, including
Conduct & Client Outcomes Committee
Governance Financial statements Other information
58
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
RISK MANAGEMENT AND THE PRINCIPAL RISKS AND UNCERTAINTIES
EVALUATING AND MANAGING RISKS CONTINUED
Taxonomy Level 1 Operational Taxonomy Level 2 Operational Resilience
Owner:
Chief Operating Officer
Link to strategy:
Link to HL values:
Put the client first, do the right
thing, make it easy, do it better
2021-2022 Change
STABLE
Risk
Risk that HL fails to establish robust
operational resilience solutions to support
positive client outcomes.
Potential impact
• Poor client outcomes
• Policy or regulatory breaches
• Operational inefficiencies or failures
• Reputational damage
Mitigation and controls
• Dedicated Operational Resiliency team
and programme
• Business Impact Analysis
• Business Continuity Plans
• Disaster Recovery Plans
• Crisis Management Team
• Desktop scenarios
• Scenario based playbooks
Key risk indicators
• System downtime
• Process failures
• Crisis management response
2021/22 activity
• Review of Importance Business Services
• Delivery of a full End-to-End IT testing platform
• Review and enhancements to crisis management
and Incident management approaches
Taxonomy Level 1 Operational Taxonomy Level 2 People
Owner:
Chief People Officer
Link to strategy:
Link to HL values:
Put the client first, do the right
thing, make it easy, do it better
2021-2022 Change
INCREASING
Risk
Risk that HL fails to attract, retain, develop,
and motivate great people who are aligned
to HL Values.
Potential impact
• Operational inefficiency or poor conduct
• Poor client outcomes
• Reputational damage
Mitigation and controls
• Effective performance and Talent Management
of all employees with flight risk assessments
• Regular review of employee reward offering
to ensure competitive
• Regular staff surveys and employee forums
to understand morale
• People agenda monitored at ExCo and Board.
Key risk indicators
• Colleague retention rates
• Colleague absence monitoring
2021/22 activity
• ‘Breathing Space’ payment for junior colleagues to help with
cost of living
• Improvements in ‘Health & Well-being’ support to all colleagues
• People communications through HL Way to support HL Values
Governance Financial statements Other information
59
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report
GOVERNANCE
Chair’s introduction 61
Board of Directors 63
Corporate governance report 66
Audit Committee report 74
Directors’ Remuneration report 79
Nomination Committee report 107
Risk Committee report 111
Directors’ report 114
Section 172 statement 118
Statement of Directors’ responsibilities 122
Strategic report Financial statements Other informationGovernance
Hargreaves Lansdown
Report and Financial Statements 2022
60
SUPPORTING
LONG-TERM SUCCESS
CHAIR’S INTRODUCTION TO CORPORATE GOVERNANCE
I am pleased to introduce our Corporate Governance Report,
which sets out how the Group’s governance framework supports
and promotes its long-term success, and provides an overview
of the activities of the Board and its Committees.
We apply and report under the 2018 UK Corporate Governance
Code (the Code). Our Compliance Statement confirms our
compliance with the Code during the period under review.
You can read more about how we have applied its principles
throughout our Corporate Governance Report.
Culture
Our culture underpins our approach to governance and risk
management. The Board promotes a culture that encourages
good governance, effective decision making and appropriate risk
management and, this year, has continued to support initiatives
to develop and embed the “HL Way” within the organisation.
Maintaining and strengthening our culture, which promotes
accountability and clarity on responsibilities and ensures that
we can focus on making the right decisions, at the right level,
with the right information, is a key priority for the Board and
essential to the successful delivery our strategy. You can find
out more information on this on page 16 of the Strategic Report.
Board changes
Since the last Report, the Board welcomed two new Directors:
Penny James joined on 1 September 2021 as a new independent
Non-Executive Director and Senior Independent Director; and
Amy Stirling joined on 21 February 2022 as Chief Financial Officer
and Executive Director, replacing Philip Johnson who stepped
down as CFO on 31 January 2022. On 17 June 2022, the Company
was pleased to announce the appointment of Darren Pope
as an independent Non-Executive Director with effect from
1 September 2022.
When deciding on these appointments the Board was able to
benefit from the considerable work done by the Nomination
Committee to identify: the skills and experience required by the
Board to deliver the strategy; and the areas where the Board could
benefit from additional depth of skills or experience to improve
its resilience.
You can find more information about their appointment and the
skills and experience they bring in the Nomination Committee
Report on page 110.
Diversity and Inclusion
It is widely accepted that greater diversity within a business
drives better decision-making and we strongly believe that
building a diverse and inclusive workforce will lead to better
outcomes for clients, colleagues and our business.
You can read more about our approach to building diversity and
inclusion across our workforce and the initiatives that support it
on pages 26 to 30 of the Strategic Report.
The Board recently updated the Group’s diversity policy for Board
appointments to align with new targets set out in the Listing Rules
and is proud to have met those targets. As at 30 June 2022,
fifty percent of our Board is made up of women; three of our four
senior Board positions are held by women and we have at least
one Director from an ethnic minority background.
You can read more about the policy and the importance we place
on diversity in the recruitment of Non-Executive Directors and
across the organisation on pages 107 to 110 of the Nomination
Committee Report.
The role of the Board is to set the
tone from the top on the Group’s
governance, culture and values.
Deanna Oppenheimer
Chair
Strategic report Financial statements Other information
61
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
CHAIR’S INTRODUCTION TO CORPORATE GOVERNANCE
SUPPORTING LONG-TERM SUCCESS CONTINUED
Board Evaluation
Each year, the Board undertakes a formal evaluation of its
performance, and that of its Committees and the Directors,
covering topics such as composition, diversity and how effectively
the Directors work together to achieve objectives.
In August 2021, we carried out an externally facilitated Board
evaluation, supported by Independent Audit, which recognised
much positive change since the last review and identified
a number of key priorities and outcomes, including further
strengthening the senior management team and continued
oversight of the development of the Risk function.
The Nomination Committee has overseen implementation of
the recommendations from the review and more information on
this is provided on page 109 of the Nomination Committee Report.
Stakeholder engagement
We continue to recognise the importance of engaging with and
considering the interests of our stakeholders in promoting the
Group’s long-term success.
We value and appreciate the input of our colleagues and ensure
that we regularly engage with and listen to our colleagues through
a series of initiatives including our workforce advisory panel, the
HL Colleague Forum, regular colleague surveys and a coordinated
internal communications programme.
We spend time nurturing a strong relationship with our
shareholders. We regularly meet with shareholders and Adrian
Collins, a representative of one of our founder shareholders,
has been a member of the Board since November 2020.
We are conscious of our impact on the wider community and
take time to ensure that we are considering the environment and
giving back to the community we work in. This year we launched
our Savings and Resilience Barometer to help our clients and the
wider community better understand the importance of financial
resilience. We are very proud of our relationship with Bristol City
Council and our aim of making Bristol the most financially resilient
city in the UK.
Our relationship with the FCA as our regulator is of fundamental
importance to us and we maintain an open, constructive dialogue
with them to ensure that we are aware of and meet the standards
that they expect.
You can read more about how the Directors have had regard
to the interests of our colleagues and our other key stakeholders
within the context of promoting the success of the Company
in our Section 172 Statement on pages 118 to 121.
Deanna Oppenheimer
Chair
4 August 2022
Compliance statement
A revised version of the UK Corporate Governance Code
(the Code) was published by the FRC in July 2018 and
has been applied by the Company during the period under
review. The Code sets out the standards of good practice
in relation to how the Company should be governed and
can be found on the FRC’s website at www.frc.org.uk.
The Board is satisfied that the Company has complied
in full with the provisions of the Code throughout the period
under review.
The Corporate Governance Report provides details of the
Company’s corporate governance framework and how it has
applied the principles set out in the Code.
Strategic report Financial statements Other information
62
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
BOARD OF DIRECTORS
Chair Executive Directors
Deanna Oppenheimer
Chair and
Non-Executive
Director
Chris Hill
Chief Executive
Officer
Amy Stirling
Chief Financial
Officer
Appointed to the Board
February 2018, independent on appointment
Skills and experience
Deanna has extensive board level governance and
leadership experience in both public and private
financial services businesses having worked in
the industry for over 35 years at executive and
non-executive level. Her rich executive experience
includes, amongst other things, the transformation
of the retail banking division at Barclays. As a
non-executive director, Deanna formerly served as
a director for Tesco plc, Whitbread plc, AXA Group,
Tesco Bank and NCR Corporation. Deanna is a member
of the 30% Club.
Committee membership
Nomination Committee (Chair)
Remuneration Committee
Other current appointments
Director of Thomson Reuters Corporation,
Chair designate of IHG plc.
Appointed to the Board
Chief Executive Officer since April 2017
(Chief Financial Officer from February 2016 to
September 2016, Deputy Chief Executive Officer
from October 2016 to April 2017)
Skills and experience
Chris has led the Company since 2017, driving the digital
transformation of the Group’s business, including the
strategy to expand HL’s position as the UK’s leading
digital wealth management platform and ensuring HL is
at the heart of creating greater engagement with saving
and investing in the UK. Chris came to HL with more than
two decades of experience, across a range of business
sectors. He was previously Chief Financial Officer at
IG Group Holdings plc, a FTSE 250 online trading
platform for retail customers, and Chief Financial Officer
at Travelex following a number of finance leadership
roles at GE Capital. Chris qualified as a chartered
accountant at Arthur Andersen and is an associate
member of the Association of Corporate Treasurers.
Committee membership
None
Other current appointments
Member of the FCA Practitioner Panel
Board member of the Investment Association
Appointed to the Board
February 2022
Skills and experience
Amy has significant financial and strategic leadership
experience in client facing businesses across the
telecommunications and financial services sectors.
She has considerable transformation and M&A
experience at both executive and non-executive level
and is a qualified chartered accountant. Amy was
previously Chief Financial Officer of the Virgin Group
and other previous appointments include non-executive
director and chair of the Audit Committee at RIT Capital
Partners plc, non-executive director at Virgin Money
UK plc, Chief Financial Officer of The Princes Trust and
Chief Financial Officer at TalkTalk Telecom Group Plc.
Committee membership
None
Other current appointments
None
Strategic report Financial statements Other information
63
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
BOARD OF DIRECTORS
CONTINUED
Non-Executive Directors
Roger Perkin
Independent
Non-Executive
Director
Dan Olley
Independent
Non-Executive
Director
John Troiano
Independent
Non-Executive
Director
Andrea Blance
Independent
Non-Executive
Director
Appointed to the Board
September 2017
Skills and experience
Roger is a qualified accountant with recent and relevant
financial experience and competence in accounting and
audit, as well as extensive financial services experience.
He is a former partner of Ernst & Young, and has
previously been a non-executive director at Evolution
Group plc, Friends Life Ltd, Nationwide Building Society,
Electra Private Equity plc and TPICAP plc. Roger chaired
or served on the Audit and Risk Committees of each of
these and additionally was Senior Independent Director
of Nationwide Building Society.
Committee membership
Audit Committee (Chair)
Risk Committee
Nomination Committee
Other current appointments
Non-Executive Director and Chair of the
Audit Committee of AIB Group (UK) plc
Appointed to the Board
June 2019
Skills and experience
Dan is a seasoned senior technology leader with a track
record of driving digital transformations in established
businesses, including financial services, insurance,
business information solutions, research and healthcare.
He brings a problem solving and analytical skillset,
along with experience of successfully implementing
advanced technologies to drive both revenue growth
and operational process efficiency and optimisation.
Committee membership
Risk Committee
Remuneration Committee
Other current appointments
CEO of Dunnhumby Ltd
Appointed to the Board
January 2020
Skills and experience
John has significant investment and asset management
experience. John has spent 38 years at Schroders in
a wide range of roles including investment research
and analysis, fund management, and has worked across
both retail and institutional channels. Most recently,
as Head of Distribution, he was responsible for the
design and implementation of business strategy globally
and the oversight of sales and client service activities.
Committee membership
Risk Committee
Audit Committee
Remuneration Committee
Other current appointments
Independent Non-Executive Director of Hargreaves
Lansdown Fund Managers Ltd
Appointed to the Board
September 2020
Skills and experience
Andrea is a Chartered Accountant and brings extensive
Board and financial services experience having spent
her executive career at Legal & General Group plc where
she was a member of the Group Executive Committee
and held a diverse range of senior leadership roles
including finance, risk and regulation, marketing and
strategy. Andrea’s past non-executive roles include Risk
Committee Chair at Scottish Widows plc and Lloyds
Banking Group Insurance Division, Senior Independent
Director and Audit Committee Chair at ReAssure Group
plc and a member of William & Glyn’s pre-IPO board.
Committee membership
Risk Committee (Chair)
Audit Committee
Nomination Committee
Other current appointments
Senior Independent Director and Chair of the
Remuneration Committee of Provident Financial
Group plc
Non-Executive Director at Aviva plc
Strategic report Financial statements Other information
64
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
BOARD OF DIRECTORS
CONTINUED
Non-Executive Directors Senior Independent Director
Moni Mannings
Independent
Non-Executive
Director
Adrian Collins
Non-Independent
Non-Executive
Director
Penny James
Senior Independent
Director
Appointed to the Board
September 2020
Skills and experience
Moni is a qualified solicitor with a strong background
in international banking and finance and was a Senior
Partner and Board member of law firm Olswang LLP.
She has held a number of non-executive positions
including as a Board member of Dairy Crest Group plc,
Polypipe Group plc, the Solicitors Regulation Authority
(chairing its Equality, Diversity and Inclusion Committee),
Cranfield University and Deputy Chair of Barnardo’s.
Committee membership
Remuneration Committee (Chair)
Nomination Committee
Risk Committee
Other current appointments
Senior Independent Director and Chair of the
Remuneration Committee of Investec Bank plc
Non-Executive Director of easyJet plc
Non-Executive Director and Remuneration Committee
Chair of Cazoo Group Ltd
Appointed to the Board
November 2020
Skills and experience
Adrian has worked in the fund management business
for over 45 years, most recently at Liontrust Asset
Management where he served as Executive Chairman
from 2009 to 2019. During this period, Adrian oversaw
a transformation in the business, broadening its
investment and distribution capabilities and undertaking
numerous acquisitions. Adrian has extensive experience
across fund management and adjacent sectors having
held senior roles at Gartmore, where he was Managing
Director, Trustnet (which he co-founded), Jupiter,
Bestinvest and Lazard Investors. He is an experienced
non-executive director.
Adrian has been appointed to the Board as a
shareholder representative and as such is not deemed
to be independent.
Committee membership
None
Other current appointments
Chairman of Logistics Development Group plc
(formerly Eddie Stobart Logistics plc)
Chairman of CIP Merchant Capital Ltd
Appointed to the Board
September 2021
Skills and experience
Penny brings extensive financial services experience
with strong leadership skills, financial and risk expertise,
strategic thinking and cultural alignment. Since May
2019 Penny has been the Chief Executive Officer
of Direct Line Insurance Group plc, having joined
in November 2017 as Chief Financial Officer. Penny
previously held a number of roles at Prudential plc
including Group Chief Risk Officer and Director of Group
Finance. Prior to this Penny was Group CFO at Omega
Insurance Holdings Limited and CFO, UK General
Insurance, at Zurich Financial Services. She was
previously a non-executive director of Admiral Group plc
from 2015 to 2017.
Committee membership
Nomination Committee
Risk Committee
Other current appointments
CEO of the Direct Line Group plc
Chair of the FCA Practitioner Panel
Co-Chair of FTSE Women Leaders Review
Board member of the Association of British Insurers
Strategic report Financial statements Other information
65
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
CORPORATE GOVERNANCE REPORT
SAFEGUARDING
FUTURE SUCCESS
The Board is responsible for promoting
the sustainable success of the Group,
generating value for the Company’s
shareholders over the long term, and
contributing to wider society by building
strong and lasting relationships with its
other stakeholders.
Board leadership and Company purpose
The Board sets the Group’s purpose, values and strategy,
and is responsible for developing and overseeing its framework
of governance, risk management and internal controls to ensure
that its business is managed effectively in an environment that
promotes and safeguards its future success.
You can read more about the Board’s role in setting and monitoring
the Group’s strategic priorities on pages 4 and 12 to 17 of the
Strategic Report and in the Group’s Section 172 Statement on
pages 118 to 121. Through specific dashboards aligned to the key
focus areas of our strategy, the Board can monitor and review
progress against targets. These dashboards are used throughout
the Group, ensuring alignment on execution and targets.
Additionally, how the Board has considered the Group’s
opportunities and risks, the sustainability of its business model,
and how governance around the Group’s risk management
framework contributes to the delivery of its strategic objectives,
is set out on pages 51 to 59 of the Strategic Report.
The Board also plays a key role in setting the Group’s culture
and monitoring how it is being embedded to ensure alignment
with the Group’s business priorities. The Board has been involved
in a number of ongoing key initiatives including the further
development and evolution of the HL Way (for information on
the HL Way please see page 27), more accessible and effective
communication of the Group’s strategy and vision to create
a clearer sense of purpose and common goals and improvements
to the KPIs used to oversee culture.
You can read more about the Group’s values and how the Group’s
approach to investing in and rewarding its workforce aligns to
those values on pages 3 and 29 of the Strategic Report.
Engagement with stakeholders
The Board recognises that active engagement with the Company’s
key stakeholders is fundamental to promoting the Group’s
long-term success.
Details of how the Group engages with its key stakeholders can
be found on pages 24 to 25 of the Strategic Report, and information
on how stakeholder interests have been considered by the Board
can be found in the Group’s Section 172 Statement on pages 118
to 121.
Investor relations
The Board recognises the importance of maintaining good
communication with the Company’s shareholders and there is a
comprehensive investor relations programme in place to ensure
effective engagement.
The Chief Executive Officer, Chief Financial Officer and Head
of Investor Relations regularly meet with the Company’s major
shareholders to discuss performance and strategy. This includes
a series of investor roadshows following the release of the Group’s
interim and full year results, and other meetings throughout the
year, both one-on-one and in groups at investor conferences.
The Chair also meets or speaks with the Company’s major
shareholders throughout the year, including attending a series
of governance roadshows, and the Senior Independent Director,
Head of Investor Relations and Group Company Secretary are
available to major shareholders who wish to raise questions.
The Committee Chairs are available to meet with shareholders
to discuss matters relevant to their roles.
The outcome of interactions with the Company’s shareholders are
regularly fed back to the Board to ensure that, as a whole, it has
a clear understanding of shareholder views. To provide further
perspective, analyst and broker briefings are regularly provided
to the Board. Following the appointment of Adrian Collins as the
Nominated Director, the Board also benefits from having someone
able to represent a founder shareholder, Peter Hargreaves, on all
issues considered by the Board.
The Board also considers the Report and Financial Statements to
be an important medium for communicating with the Company’s
shareholders. The Board aims to use the narrative sections to
provide detailed reviews of the Group’s business and its future
development in an engaging way that is accessible to all. Similarly,
the Company’s AGM is used as an opportunity to engage directly
with shareholders and share with them the Board’s review of
performance and its vision for the future. Further details will be
set out in the Notice of AGM that will be circulated ahead of
the meeting.
Strategic report Financial statements Other information
66
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
CORPORATE GOVERNANCE REPORT
SAFEGUARDING FUTURE SUCCESS CONTINUED
Colleagues
The Board believes that the Group’s people are key to its long-term
success. It ensures that the Group’s people policies and practices
promote its values to support that success. Further information
on the Group’s people strategy and the policies and procedures
in place to achieve its aims, including the Group’s approach to
investing in and rewarding its workforce, can be found on page 29
of the Strategic Report.
The Board also recognises the importance of engaging with
the Group’s workforce for the long-term success of the business.
The HL Colleague Forum was set up in January 2019 as a
formal workforce advisory panel to create a direct link between
colleagues and the Board on matters of strategic importance.
Further insight is obtained on colleague views through the Group’s
annual colleague survey, and half yearly pulse surveys. The views
of colleagues have been sought on a more regular basis via
additional pulse surveys and focus groups so that we can quickly
respond to colleague sentiment and obtain colleague insights
on particular topics.
Further information on how the Group engages with and considers
the views of colleagues can be found on page 25 of the Strategic
Report and in the Section 172 Statement on pages 118 to 121.
The Board believes in creating a culture of openness and
colleagues are encouraged to share their views, ideas and work
experiences. Similarly, colleagues are encouraged to raise any
concerns in confidence, and the Group has a formal policy on
whistleblowing to ensure colleagues who do speak out are
protected. Further information can be found on page 77 of the
Audit Committee Report.
Conflicts of interest
The Board takes action to identify and manage any conflicts of
interest that arise to ensure that the interests of the Company’s
shareholders as a whole are protected.
All Directors have a duty to avoid situations that may give rise
to conflicts of interest. Directors are responsible for notifying the
Chair and the Group Company Secretary as soon as they become
aware of any actual or potential conflict. The Company’s Articles
of Association permit the Board to consider and authorise any
situations where a Director has an actual or potential conflict,
and a formal procedure is in place for considering, recording and,
if appropriate, authorising conflict situations. Conflicts of interest
are included as a standing agenda item at each Board and
Committee meeting and, in determining whether to authorise
an actual or potential conflict, the Board will take into account
the specific circumstances and whether to impose conditions
on the Director in the interests of the Company.
There is a Conflicts Committee reporting into the CEO which
is responsible for ensuring there is appropriate governance and
ownership around enhancements to the conflicts management
framework within the Group (other than the Company and its
Committees). In addition, conflict management is enhanced through
the separation of investment decisions and broad membership
of investment related oversight committees including external
members as appropriate. Since our last Report, additional training
resources to assist employees in understanding their role in the
management of conflicts have been launched, with online training
to be delivered over the Summer; documentation, ownership and
accountability for conflicts has been improved; and the conflicts
register and process for declaring conflicts updated.
Governance framework
The Board operates within a formal schedule of matters reserved,
with certain responsibilities being delegated to its permanent
Committees. Details of matters reserved for the Board can be
found on page 68. The detailed responsibilities of the Board’s
Nomination, Audit, Risk and Remuneration Committees, along with
an overview of how they have discharged those responsibilities
during the year, can be found in the Committee reports on pages
74 to 113. The Chair of each of the Committees reports to the
Board at each meeting on its activities since the previous meeting,
and the Board keeps under review the terms of reference of each
to ensure it is continuing to operate effectively.
Responsibility for matters that are not specifically reserved to the
Board is delegated to the Chief Executive Officer. This includes
oversight of the Group’s performance, delivery against the strategy
approved by the Board, and the effective management of day-
to-day operations within the governance, risk and internal control
frameworks it has developed. The Chief Executive Officer has
established the Group Executive Committee to assist him in
discharging these responsibilities. The Chief Executive Officer
also receives reports from the Conflicts Committee about
improving the Group’s framework for identifying, mitigating and
protecting against conflicts of interest, and to ensure appropriate
measures are in place to mitigate conflicts of interests between
the Group’s principal operating subsidiaries and between the
Group, its employees and clients.
Details of the roles and responsibilities of the participants in
the Company’s governance framework can be found on pages
69 and 70.
Strategic report Financial statements Other information
67
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
CORPORATE GOVERNANCE REPORT
SAFEGUARDING FUTURE SUCCESS CONTINUED
Hargreaves Lansdown plc Board
Schedule of matters reserved:
• Approval of the Group’s strategic
aims and objectives
• Setting the Group’s values
and standards
• Approval of the Group’s purpose and
ensuring that its purpose, values and
strategy are aligned with its culture
• Approval of annual operating
and capital expenditure budgets
• Overseeing the Group’s operations
and management
• Ensuring the maintenance of a
sound system of internal controls
and risk management
• Reviewing performance in light
of strategic aims and objectives
• Approval of the Group’s annual
report and accounts and interim
financial statements
• Approval of the Company’s dividend
policy and payments
• Approval of major capital projects
• Approval of communications
to the Company’s shareholders
• Ensuring adequate succession
planning, agreeing Board appointments
and the appointment or removal of the
Company Secretary
• Determining remuneration
policy for Executive Directors
Audit Committee
• Monitors the integrity of the
Group’s financial reporting
• Monitors the adequacy and
effectiveness of the Group’s
internal controls
• Oversees the Group’s relationship
with its external auditor and the
effectiveness of the Internal
Audit function
Nomination Committee
• Monitors the composition of
the Board to ensure it remains
appropriate
• Recommends appointments to
the Board and its Committees
• Conducts succession planning for
the Board and senior management
• Oversees the annual evaluation
of the Board’s effectiveness
Remuneration Committee
• Oversees and keeps under review
the remuneration policies for
Executive Directors, Material Risk
Takers and colleagues generally
• Determines total remuneration
for Executive Directors, senior
management and Material Risk
Takers, and associated targets
for performance related pay
Risk Committee
• Reviews and advises the Board on
changes to the Group’s risk appetite,
risk profile and future risk strategy
• Monitors the effectiveness and
improvements being made to the
Group’s risk management framework
• Oversees the delivery of the Group’s
ICAAP/ICARA
Conflicts Committee
• Oversees the Group’s conflicts of interest policy
and framework
• Reviews conflicts of interest within the Group, the
sufficiency of mitigating measures and determines
appropriate action where material conflicts arise
Group Management Committees
• Support the Group Executive Committee in its oversight
of matters including: Risk, Conduct and Client Outcomes,
Product Governance, Remuneration and Operational Resilience
Chief Executive
Officer
Responsible for executive leadership
of the Group in accordance with
Board-approved strategic objectives
Group Executive
Committee
Established by the Chief Executive
Officer to help him discharge his duties
Strategic report Financial statements Other information
68
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
CORPORATE GOVERNANCE REPORT
SAFEGUARDING FUTURE SUCCESS CONTINUED
The Group’s principal operating subsidiaries carry out its business
of providing regulated financial products and services. The boards
of the principal operating subsidiaries include various members of
the Group Executive Committee, with independent Non-Executive
Directors also sitting on the Board of Hargreaves Lansdown Fund
Managers Ltd in line with regulatory requirements. Each board
is responsible for ensuring that its business is operated in
accordance with relevant legal and regulatory requirements, within
the framework of the strategy, culture and policies determined by
the Board. The subsidiary boards are assisted by Group level and
subsidiary level management committees constituted to assist in
the day-to-day management of the business.
Board allocation of time and key Board activities
The Board devoted a significant amount of time during the period
under review to developing the revised Group Strategy which
was launched at our Capital Markets Day on 22 February 2022.
The Board was fully engaged in this process providing input and
challenge throughout the development of the Strategy and more
recently in its move to execution. The Board also spent time
overseeing the Group’s ongoing business performance including
regular updates from the Chief Executive Officer and other
members of the Group Executive Committee with deep dives into
areas of strategic importance, and the review and approval of the
Group’s annual operating plan. The Board has continued to receive
periodic reports relating to events arising out of the suspension of,
and subsequent decision by Link Asset Services to wind up, the
LF Equity Income Fund (formerly Woodford Equity Income Fund).
The following chart illustrates the time spent by the Board
on matters within the categories stated.
10%
Standard items
including updates
from Remuneration
and Nomination
Committees
21%
Finance, reporting
and audit
23%
Governance,
risk and
regulatory
46%
Business
performance
and strategy
Other key matters considered by the Board during the period
under review include:
• Business performance, through regular updates from the
Chief Executive Officer;
• Progress against strategic initiatives, via the Chief Executive
Officer’s regular business priorities updates;
• Deep dives into return to office, ESG, operational resilience,
the HL Way and cyber security – taking into account the
Russian invasion of Ukraine;
• Financial performance and investor relations, via the Chief
Financial Officer’s regular updates;
• The Group’s liquidity and capital adequacy, and the approval
of its 2021 ICAAP;
• Approval of the Group’s operating plan;
• Maintaining oversight of the Group’s risk management
framework, its operational resilience and approval of its risk
appetite statement;
• Monitoring the status of the Group’s reputation;
• Approval of updates to the Group’s key policies, including
conflicts of interest, whistleblowing and Board diversity; and
• Progress of recommended actions from the annual evaluations
of Board performance, including further embedding best practice
and developing the resilience and expertise of the Board.
Division of responsibilities
The Board recognises the importance of a clear division of
responsibilities between Executive and Non-Executive roles, and in
particular a clear delineation of the Chair’s responsibility to run the
Board and the Chief Executive Officer’s responsibility for running
the Group’s business. The roles of Chair, Chief Executive Officer
and Senior Independent Director are clearly defined and have been
approved by the Board.
Role of the Chair
The Chair, Deanna Oppenheimer, is responsible for leading the
Board and ensuring that it is effective in discharging its duties.
Her key responsibilities are to:
• Chair the Board, the Nomination Committee and general
meetings of the Company;
• Set the Board agenda and ensure the Board receives accurate,
timely and clear information, and that adequate time is available
for discussion of all agenda items, in particular strategic issues;
• Set clear expectations concerning the Company’s culture, values
and behaviours and the style and tone of Board discussions;
• Demonstrate ethical leadership and promote the highest
standards of integrity, probity and corporate governance
throughout the Company and particularly at Board level,
and generally ensure the effective governance of the Group;
• Promote a culture of mutual respect, openness and debate by
facilitating the effective contribution of Non-Executive Directors,
develop productive working relationships with the Chief
Executive Officer and Chief Financial Officer, and ensure there
are constructive relations between Executive and Non-Executive
Directors generally;
• Encourage all Board members to engage in Board and
Committee meetings by drawing on their skills, experience,
knowledge and, where appropriate, independence;
• Ensure effective communication with the Company’s
shareholders and other stakeholders, and that the Board
is made aware of their views; and
• Ensure that the performance of the Board, its Committees
and individual Directors is evaluated at least once a year
and that the results of the evaluation are acted upon.
Strategic report Financial statements Other information
69
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
CORPORATE GOVERNANCE REPORT
SAFEGUARDING FUTURE SUCCESS CONTINUED
Role of Chief Executive Officer
The Board delegates responsibility for the executive leadership
of the Group’s business to its Chief Executive Officer, Chris Hill.
His key responsibilities are to:
• Lead the senior management team in the day-to-day running
of the Group’s business in accordance with the Board approved
strategic objectives;
• Chair the Group Executive Committee in its oversight of the
performance of the Group against the Board approved strategic
objectives and communicate any decisions and
recommendations to the Board;
• Review the operational performance and strategic direction
of the Group’s business;
• Ensure that appropriate systems of internal control and
risk management are in place and operating in accordance
with the Group’s risk appetite approved by the Board; and
• Together with the Chair, provide coherent leadership of
the Group and promote adherence to its culture and values.
Role of Senior Independent Director
The Senior Independent Director plays an important role in
supporting the Chair on governance issues, contributing to the
culture of open and honest communication between the Chair
and the other members of the Board, and providing an additional
point of contact for the Company’s shareholders.
The key responsibilities of the Senior Independent Director are to:
• Assist the Chair by being available to discuss and provide insight
and guidance on issues relating to the Group’s governance, the
performance of the Board and individual Directors, and on any
concerns raised by Directors, the Company’s shareholders or
the Group’s employees;
• Lead the Non-Executive Directors in carrying out the Chair’s
annual performance review. This includes meeting with and
obtaining appropriate feedback from the Non-Executive
Directors without the Chair and Executive Directors present,
monitoring the Chair’s performance throughout the year, and
paying close attention to the relationship between the Chair
and Chief Executive Officer to ensure it is functioning well;
• Lead the process for, and chair the Nomination Committee
when considering, the selection and appointment of a new Chair;
• Facilitate the resolution of disputes between the Chair
and other members of the Board; and
• Be available to address the concerns of the Company’s
shareholders in situations where the Chair, Chief Executive
Officer or Chief Financial Officer have failed to resolve
those concerns, or where contact with those individuals
is inappropriate.
Non-Executive Directors
The role of the Non-Executive Directors is to constructively
challenge and help develop proposals on strategy and play
a leading role in monitoring and scrutinising the performance
of the Group’s Executive management in meeting agreed goals
and objectives.
The Non-Executive Directors are also responsible for determining
appropriate levels of remuneration for the Executive Directors,
and play a prime role in appointing and, where necessary,
removing Executive management.
The Nominated Director is an appointee of a shareholder.
However, all the Non-Executive Directors are independent
of management and bring valuable skills, experience and an
external perspective to the business conducted by the Board,
as well as offering specialist advice in their fields of expertise.
The independent Non-Executive Directors also play an important
role as members of the Board’s Committees.
Group Company Secretary
All the Directors have access to the advice and services of the
Group Company Secretary. The Group Company Secretary is
responsible for working with the Chair to develop and maintain
the policies and processes required to enable the Board to
function effectively and efficiently, and for ensuring the Board
has the information, time and resources it needs.
The Group Company Secretary is also responsible for advising
the Board on corporate governance matters and for ensuring
procedures are followed and applicable rules and regulations
complied with.
The appointment and removal of the Group Company Secretary
is a matter reserved for the Board. During the period under review,
the Board appointed Claire Chapman as Group Company Secretary.
Meetings, attendance and information provided
to the Board
Member
Attended
(excluding ad-hocs)
Deanna Oppenheimer 8 of 8
Chris Hill 8 of 8
Philip Johnson
(resigned 31 Jan 2022)
5 of 5
Dan Olley 8 of 8
Roger Perkin 8 of 8
John Troiano 8 of 8
Moni Mannings 8 of 8
Andrea Blance 8 of 8
Adrian Collins 8 of 8
Penny James
(appointed 1 Sept 2021)
7 of 7
Amy Stirling
(appointed 21 Feb 2022)
3 of 3
Board meeting attendance shown for all scheduled Board meetings
during the year noting that on occasion ad-hoc meetings also took
place to deal with timely matters.
Supported by the Group Company Secretary, the Board is satisfied
that it has the policies, processes, information, time and resources
required in order for it to function effectively and efficiently.
Comprehensive Board packs and agendas are circulated prior
to meetings to ensure Directors have the opportunity to consider
the issues to be discussed so that more time at meetings can
be dedicated to constructive challenge and strategic discussion.
Directors are expected to attend all meetings. However, when a
Director is unavoidably unable to attend all or part of a meeting,
he or she is able to provide comments on the papers to the Chair
before the meeting.
Strategic report Financial statements Other information
70
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
CORPORATE GOVERNANCE REPORT
SAFEGUARDING FUTURE SUCCESS CONTINUED
Outside of the scheduled Board cycles, the Board may meet to
discuss or otherwise consider and approve matters on an ad hoc
basis, such as appointments to the Board and other senior
positions within the Group, or other material and time critical
matters. The Non-Executive Directors also meet periodically
without the Executive Directors present. These sessions have
been held via a mixture or remote, hybrid and face to face
meetings to make best use of time and work efficiently.
The Board also met with members of the Group Executive
Committee and other senior management, including an in person
Strategy Day to develop and refine Group Strategy. There have
also been a number of ‘drop in’ sessions during the year for the
Board with members of the Group Executive Committee covering
items including: ICARA; FCA’s Consumer Duty; and a range of
subjects contributing to HL’s Strategy including: technology;
service, advice and growth.
Board independence and time commitments
The structure, size and composition of the Board is regularly
reviewed to ensure that the balance between Executive and
Non-Executive Directors allows it to exercise objectivity and that
no individual or small group of individuals dominates decision
making. Each of the Non-Executive Directors is considered to be
of sufficient calibre and experience to bring significant influence
to decision making.
On her appointment as Chair, Deanna Oppenheimer satisfied
the independence criteria set out in the Code.
The Board considers that each of Andrea Blance, Moni Mannings,
Penny James, Dan Olley, Roger Perkin, Darren Pope and John
Troiano are independent. In each case when assessed against
the criteria set out in the Code. Adrian Collins is not considered
independent because he is appointed by a major shareholder.
Throughout the period under review, the Board has therefore
satisfied the Code requirement that at least half of the Board,
excluding the Chair, comprises Non-Executive Directors
determined to be independent.
The Board considers that each of the Non-Executive Directors has
sufficient time to meet their responsibilities both to the Board and
any Committees of which they are a member. Board members are
required to disclose significant time commitments prior to their
appointment, and candidates’ existing time commitments are taken
into account by the Board when considering new appointments.
Directors are required to consult the Board prior to undertaking
any additional external appointments.
The independence and time commitments of the Non-Executive
Directors are kept under review by the Nomination Committee.
Details of its oversight of these matters can be found on page 110.
Neither of the Executive Directors currently holds any significant
external appointments.
During the year it was announced that Deanna Oppenheimer would
join IHG plc as Chair elect from 1 June 2022. In respect of Deanna’s
appointment, the HL Board considered, as it does when any Board
member takes on a new role, the impact this appointment could
have on her ability to continue her significant contribution to HL
as Chair. Additionally, the Board took into account the views that
major shareholders have generally expressed as part of their
ongoing stewardship obligations, and recognised the observations
made by some that time commitments must allow for the flexibility
for a Non-Executive Director to have capacity for both planned
and for unforeseen events.
Having carried out the review, the Board is satisfied that Deanna’s
new appointment does not have any impact on her ability to
continue as HL Chair. The Board is satisfied that there is no conflict
given the sector IHG plc operates in and, in the last 24 months,
Deanna has freed up her time by stepping down as NED at
both Whitbread plc, where she had also served as Remuneration
Committee Chair, and Tesco plc. At Tesco plc she had served as
both the SID and Remuneration Committee chair and also sat on
the Tesco Bank Board. Deanna’s ability to take up the IHG plc role
and to continue as HL’s Chair was made possible by her reduced
time commitments overall.
Composition, succession and evaluation
Board composition, balance and diversity
The Nomination Committee regularly reviews the size, structure
and composition of the Board and its Committees to ensure
an appropriate and diverse mix of skills, experience, knowledge,
backgrounds and personal strengths. The Non-Executive Directors
have strong and relevant experience across all aspects of financial
services and the Board as a whole is considered to have an
appropriate balance of skills and experience for the requirements
of the Group’s business.
Diverse pools of candidates are considered for vacancies and
in succession planning, and any appointments are based on merit
and objective criteria. Further details on the Group’s approach to
diversity and inclusion when considering Board appointments and
succession planning, and how the approach promotes diversity
of gender, social and ethnic backgrounds, cognitive and personal
strengths, can be found in the Nomination Committee report on
pages 107 to 110.
Board composition
7
Non-Executive
Directors
1
Chair
2
Executive
Directors
Strategic report Financial statements Other information
71
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
CORPORATE GOVERNANCE REPORT
SAFEGUARDING FUTURE SUCCESS CONTINUED
Length of tenure
3
4–6 years
7
0–3 years
Board diversity
Male
Female
On joining the Board, Non-Executive Directors receive a formal
letter of appointment setting out the time commitment expected
of them. Once they have met all approval and induction
requirements, Non-Executive Directors are currently expected
to commit a minimum of 30 days per annum to their roles. This
expectation is calculated based on attendance at and preparing
for Board meetings, meeting with senior management and the
Company’s shareholders, and attending strategy days, Board
dinners and training. Additional time commitments may apply
where a Non-Executive Director takes on an additional role such
as chairing a Committee.
Induction and professional development
The Chair is responsible, with the support of the Group Company
Secretary, for arranging a comprehensive induction programme
for all new Directors. Inductions are tailored to the individual
following a skills gap analysis, and have regard to their
background, knowledge and previous experience both
professionally and as a Director.
Consideration of the length of service of Directors is a key element
of the wider consideration of Board composition and succession
planning, and for Non-Executive Directors it is an important aspect
that is considered in determining continued independence. The
Group maintains clear records of the terms of service of the Chair
and Non-Executive Directors to ensure continued compliance
with the tenure requirements in the Code. The Chair has held the
position since her appointment to the Board in February 2018 and,
as at the date of this report, none of the Non-Executive Directors
has served on the Board for more than nine years from the date
of their first appointment.
Director election and re-election
In accordance with the requirements of the Code and the
Company’s Articles of Association, all Directors will stand for
election or re-election, as relevant, at this year’s AGM. Information
on how the Board evaluates the effectiveness and contribution
of each Director can be found in the Nomination Committee report
on pages 107 to 110. The Notice of AGM will include specific details
of why the Board considers that the contribution of the Directors
seeking election or re-election is, and continues to be, important
to the Group’s long-term sustainable success.
Board appointment process
The Nomination Committee leads the process for Board
appointments, details of which can be found in the Nomination
Committee report on pages 107 to 110.
Non-Executive Directors are appointed for fixed terms of three
years, subject to election or re-election by the Company’s
shareholders at each AGM. At the end of each term, Non-Executive
Directors may be appointed for further three-year terms provided
the Board is satisfied with the individual’s performance and that
he or she remains independent and able to devote sufficient time
to the role.
Induction programmes include meetings with a variety of key
stakeholders to provide the Director with a thorough overview of
the Group’s business and the environment within which it operates.
This includes meetings with the Chair, Chief Executive Officer,
Chief Financial Officer and other members of the Board, as well as
meetings with senior management, heads of business areas and
technical experts, to gain a detailed insight into the operation of
the business and its culture. The Group Company Secretary and
Group Chief Risk Officer will also meet with the Director to provide
an overview of the Group’s corporate governance and risk
management frameworks respectively.
An ongoing programme of training is available to all members of
the Board. During the period under review, this has included a
training session for the Board on the FCA’s Consumer Duty and the
ICARA and support for the Board’s Committees in discussions on
relevant topics such as: developments in audit best practice; and
the impact of the Investment Firm Prudential Regime. The Board
also carries out periodic ‘deep dives’ into specific areas of the
business in order to broaden the Board’s understanding of the
Group’s business and the opportunities and challenges it faces.
The Board carried out deep dive sessions on return to office, ESG,
operational resilience, the HL Way and cyber security – taking into
account the Russian invasion of Ukraine, and held a number of
workshops on a range of subjects contributing to the strategy
including: technology, services, advice and growth.
Training is also arranged to align to any specific development
needs identified by the annual Board evaluations, and individual
Directors are encouraged to devote an element of their time to
self-development.
Strategic report Financial statements Other information
72
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
CORPORATE GOVERNANCE REPORT
SAFEGUARDING FUTURE SUCCESS CONTINUED
Audit, risk and internal control
Audit
The Board is responsible for establishing the policies and
procedures that ensure the independence and effectiveness
of the Group’s Internal Audit function and the external auditor,
and for satisfying itself as to the integrity of the financial and
narrative statements in the Report and Financial Statements.
The Board delegates responsibility to its Audit Committee to
oversee the Group’s Internal Audit function and the Group’s
relationship with its external auditor. The Audit Committee is also
responsible for monitoring the integrity of the Group’s financial
reporting and the processes and controls that support it, and
for advising the Board as to whether the Report and Financial
Statements provide a fair, balanced and understandable
assessment of the Company’s position and prospects.
The main features of the Group’s internal control and risk
management systems that ensure the accuracy and integrity
of its financial reporting include:
• The utilisation of appropriately qualified and experienced
colleagues, and regular knowledge sharing within the team;
• The use of appropriate information security and access
controls around the key systems used in the Group’s financial
reporting processes;
• Appropriate segregation of duties to ensure that no individual
controls the end-to-end process;
• Continuing enhancements to the Group’s Risk Management
Framework including robust risk identification, assessment
and management;
• Detailed processes and controls around the reconciliation
of the Group’s office accounts, the recognition of revenue
and the Group’s tax balances, and payment processes; and
• A detailed process of reconciliation and review by management
of data extracted from the general ledger system for the
production of management accounts.
Further details can be found in the Audit Committee report on pages
74 to 78. Statements from the Board as to the adoption of the going
concern basis for preparing the financial statements and the Board’s
responsibility for preparing the Report and Financial Statements
can be found on page 117 of the Directors’ Report and the
Statement of Directors’ Responsibilities on page 122 respectively.
Risk management and internal controls
The Board is responsible for establishing procedures for risk
management and for monitoring the Group’s risk management
framework and system of internal controls. The Board is also
responsible for determining the nature and extent of the principal
risks the Group is willing to take in order to achieve its long-term
strategic objectives. Supported by the Risk Committee, the Board
carries out a robust assessment of the Group’s emerging and
principal risks when assessing the prospects of the Company over
the longer term. The outcome of that assessment, along with a
description of the Group’s principal risks, the procedures in place
to identify emerging risks, and an explanation of how these risks
are managed or mitigated can be found on pages 51 to 59 of the
Strategic Report.
A description of the main features of the Group’s risk management
and internal control systems, including the ‘three lines of defence
model’, can be found on pages 51 to 59 of the Strategic Report.
The Board delegates responsibility for monitoring those systems
to its Audit and Risk Committees, and each carries out an annual
review of their effectiveness on the Board’s behalf. Together,
this review covers all material controls, including financial,
operational and compliance controls and risk management
systems. Further details can be found on page 77 of the Audit
Committee report and page 112 of the Risk Committee report.
The crossover of membership between the Audit Committee
and Risk Committee assists in the exchange of relevant issues
and the facilitation of associated discussions.
Following review by its Committees, the Board is satisfied that
the Group’s risk management and internal control systems are
adequate and have continued to improve throughout the period
under review. The Board continues to encourage the enhancement
of the Group’s risk maturity, aligned to the Group’s scale and
complexity as it continues to grow and implement the new strategy.
Further information of the enhancements planned can be found
on page 113 of the Risk Committee report.
Remuneration
The Group’s remuneration policies and practices are designed
to support its strategic objectives and promote its long-term
sustainable success. A summary of how the Company has
complied with the remuneration requirements set out in the
Code, along with details of the Remuneration Committee’s
activities during the period under review, the levels of Directors’
remuneration and a summary of the current Directors’
Remuneration Policy, can be found on pages 79 to 106.
Strategic report Financial statements Other information
73
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ENSURING THE CONTINUED
INTEGRITY OF THE GROUP
AUDIT COMMITTEE REPORT
Dear Shareholder
As Chair of the Audit Committee, I am pleased to present this
report on the Committee’s activities in the year under review.
Role of the Audit Committee
The Committee assists the Board in ensuring that the interests
of the Company’s shareholders are protected in relation to the
Group’s financial reporting and internal controls. The Board
delegates responsibility to the Committee to monitor the integrity
of the Group’s financial reporting and the processes and controls
that support it. This includes reviewing and challenging the
appropriateness of accounting policies, significant issues and
judgements, and the assumptions in support of the Company’s
ability to continue as a going concern and its longer-term viability.
A key aspect of the Committee’s role in ensuring the integrity of the
financial reporting is its oversight of the Group’s relationship with the
external auditor. This includes making recommendations to the Board
in relation to the appointment of the external auditor, approving its
scope of work, fees and terms of engagement, as well as regularly
reviewing its independence, objectivity and effectiveness.
More broadly, the Group’s internal control framework is an essential
part of ensuring the integrity of its financial reporting and other
business operations. The Committee oversees the effectiveness
of, and ongoing improvements to, the Group’s internal controls,
as well as having responsibility for monitoring and reviewing the
effectiveness of the Group’s Internal Audit function, which provides
assurance on those controls.
Following a review of the Committee’s terms of reference
in October 2021, the main compliance responsibilities were
transferred to the Risk Committee to align with its existing
responsibilities. The detailed responsibilities of the Committee
are set out in its terms of reference, which are available on the
Group’s website at www.hl.co.uk/about-us/board-of-directors.
This report provides an overview of how the Committee has
discharged its responsibilities during the period under review.
Composition and meeting attendance
Roger Perkin (as Chair), Andrea Blance and John Troiano, each of
whom is an independent Non-Executive Director, are the members
of the Committee as at the date of this report and have been
throughout the period under review.
The Board has satisfied itself that the Committee as a whole
has an effective balance of skills and experience to perform its
responsibilities. Each of Roger Perkin, Andrea Blance and John
Troiano have significant experience of the asset management
sector and the wider financial services industry. Roger Perkin
has recent and relevant financial experience and competence
in accounting and audit.
Ongoing training is provided to assist Committee members
in performing their duties. During the period, this has included
a briefing from the external auditor on developments in relation
to technology controls.
The Committee met seven times in the period under review.
The attendance of members at meetings across the year is set
out in the table opposite. Other individuals attend Committee
meetings at the request of the Committee Chair. This will usually
include the Chair of the Board, the Chief Financial Officer, the
Chief Internal Auditor and the external auditor. The Committee
has access to the Group Company Secretary, whose nominee
acts as secretary to the Committee. The Committee is authorised
to obtain independent professional advice where it considers
it necessary.
Attendance at Committee meetings
during the year to 30 June 2022
Member Position
Eligible
meetings
Attended
meetings
Roger Perkin Chair ••••••• •••••••
Andrea Blance Independent
Non-Executive
Director
••••••• •••••••
John Troiano Independent
Non-Executive
Director
••••••• •••••••
Ensuring oversight of
financial reporting and
the control environment.
Roger Perkin
Chair of the Audit Committee
Strategic report Financial statements Other information
74
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
AUDIT COMMITTEE REPORT
ENSURING THE CONTINUED INTEGRITY OF THE GROUP CONTINUED
Overview of the Committee’s activities
in the year to 30 June 2022
19%
External Audit
17%
Internal Audit
8%
Internal
Controls
6%
Whistleblowing
21%
Financial
Reporting
29%
Governance
and Other
Financial statements
The Committee is responsible for monitoring the integrity of
the Group’s financial statements, including its interim and full
year results. Where practicable, and consistent with regulatory
requirements, it also reviews other statements requiring Board
approval which contain financial information, including the Group’s
Sustainability Accounting Standards Board (SASB) disclosure.
In carrying out this role, the Committee reviews and challenges
the application of significant accounting policies across the
Group that feed into its financial statements, and the methods
used to account for significant or unusual transactions. Significant
examples considered by the Committee during the period include:
• The application of IAS 38 (Intangible Assets) in relation to the
amounts held by the Group’s subsidiaries including internally
developed software and goodwill.
In each case the Committee reviewed and challenged
management on the appropriateness of these accounting policies
and how they were applied to the Group’s financial statements.
The Committee also considers the accounting estimates and
judgements made, and any significant issues that have arisen,
in preparing the Group’s financial statements. It scrutinises the
clarity and completeness of related disclosures to ensure they
are set properly in context. In doing so, it pays due regard to
any related correspondence with the external auditor and any
material adjustments resulting from the external audit. In the
period under review, the Committee has concluded that there
were no significant issues requiring judgements to be made in
relation to the financial statements. In arriving at this conclusion,
the Committee considered the following:
• Revenue recognition. The Committee considered the veracity
of the Group’s revenue streams in the period, which continue to
be non-complex and primarily consist of high-volume, low value
transactions. The Committee receives assurance on revenue
calculations both internally through its oversight of the Group’s
CASS controls and from the external auditor’s approach to
recalculating the Group’s significant revenue streams and
carrying out sample testing on the remainder. In addition, the
external auditors reviewed and sample tested the operational
transactions that drive the revenue to ensure that these were
being booked in a timely and accurate fashion.
• Going concern. The Committee reviewed the going concern
position for each group entity.
• Carrying value of investment in subsidiary. The valuation
model of HLSL was reviewed in detail by the Committee
and they concluded that a £5 million impairment of HL plc’s
investment in HLSL was required. They also reviewed the
capitalised development cost in HLSL against this model and
concluded that no impairment was required. Full details of the
value of intangible assets capitalised and the policies applied
can be found in note 2.2 to the consolidated financial statements
on pages 140 to 141.
• Tax. The Committee received reporting on and considered tax
matters impacting the Group, including overseas withholding tax,
FATCA and HMRC’s Corporate Criminal Offence.
• COVID-19. The Committee continued to consider the potential
impact of the COVID-19 pandemic on the Group’s performance
and financial reporting. In addition, the Committee has spent
additional time with both the Group’s Finance and Internal Audit
functions to receive assurance on the quality of the Group’s
financial reporting and any issues and judgements made in
connection with its preparation.
• Contingent liabilities. The Committee reviewed and carefully
considered the contingent liabilities for the Group. Full details
of the matters considered can be found in note 5.3 to the
consolidated financial statements on page 151.
• FRC Correspondence. During the financial year, the Group
corresponded with the FRC about its 2021 Report and Financial
Statements. In March 2022, as part of its corporate reporting
review function, the FRC requested information about the
accounting implications for potential litigation against the
company in respect of the LF Equity Income Fund (formerly
Woodford Equity Income Fund) that had been reported in the
media. The Group explained in its correspondence with the FRC
that a pre-action letter had been received from a legal firm in
March 2021. The Group clarified that in June 2021, it had issued
a letter in response which rejected all the claims made for lack
of a substantive basis of claim. The Group informed the FRC that
no formal litigation or group legal action had commenced as at
the date of issuing the 2021 Report and Financial Statements,
or since. This remains the case as at the date of this report.
• Remuneration. The Committee considered the accounting
impact of the proposed changes to a new Sustained
Performance Plan within the Remuneration Policy. Changes
relate to deferral rates and vesting periods and are driven
from the requirements of the Investment Firm Regulation and
Investment Firm Directive along with shareholder feedback.
As Hargreaves Lansdown Asset Management Limited is an
enhanced firm under the Senior Managers & Certification Regime
but does not have a separate Audit Committee, the Committee
reviewed the Hargreaves Lansdown Asset Management Limited
accounts for recommendation to the board of that company.
Alternative Performance Measures
The Committee reviewed and challenged the classification
and monitoring of costs related to our updated strategy.
Report and Financial Statements and interim results
In addition to considering significant accounting issues, policies
and judgements throughout the year, the Committee plays an
important role in the production of the Report and Financial
Statements and interim results. This includes reviewing and
challenging the assumptions that support the use of the going
concern basis for the preparation of the financial statements
and the statement given by the Directors as to the Company’s
longer-term viability, which can be found on page 54.
The Committee also undertakes a wider review of the content
of the Report and Financial Statements to advise the Board as to
whether, taken as a whole, it is fair, balanced and understandable
and provides the information necessary for shareholders to
Strategic report Financial statements Other information
75
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
AUDIT COMMITTEE REPORT
ENSURING THE CONTINUED INTEGRITY OF THE GROUP CONTINUED
assess the Group’s performance, business model and strategy.
This supports the Board in providing the confirmations set out
on page 122.
In considering the wider content of the Report and Financial
Statements, the Committee pays particular attention to ensuring
the narrative sections provide context for, and are consistent with,
the financial statements, and that an appropriate balance is struck
between the articulation of successes, opportunities, challenges
and risks. In addition to considering its content, the Committee
also oversees the process for preparing the Report and
Financial Statements.
In particular, the Committee has ensured that an appropriate
senior manager is accountable for the preparation of each section,
with overall responsibility for coordinating production being
assigned to the Chief Financial Officer.
External Audit
The Committee is responsible for overseeing the Group’s
relationship with its external auditor, PwC, which has been retained
since the Group’s last competitive tender process run in relation
to the financial year ended 30 June 2014.
In addition to oversight of the audit process itself, the Committee
is responsible for monitoring the Group’s other interactions with
the external auditor to ensure that its independence and
objectivity are maintained.
External audit process
During the period, the Committee has overseen the end-to-end
audit process. The Committee reviewed and approved the external
auditor’s engagement letter and the detailed audit plan to ensure
appropriateness of scope. In approving the proposed audit fees,
the Committee paid particular attention to ensuring they were
appropriate to enable an effective and high-quality audit.
The external auditor provided an update to the Committee at its
June meeting on progress of the audit, before submitting a formal
report in August following the completion of the audit process.
The Committee reviewed the findings with the external auditor,
which included a discussion of key audit and accounting matters
including significant judgements of which there were determined
to be none, and its views on its interactions with management.
The Committee also reviewed and recommended to the Board that
it signs the representation letter requested by the external auditor
in respect of its audit of the financial statements. The views of
the external auditor were also sought at the Committee’s meetings,
which included sessions without management present to discuss
its remit and any issues arising from the audit.
External auditor effectiveness and independence
The Committee is responsible for assessing the qualifications,
expertise and resources of the external auditor, and for reviewing
the effectiveness of the audit process. In discharging these
responsibilities, the Committee has considered information
from a variety of sources. It received a report from the external
auditor on its own internal quality control procedures, which
included reference to the outcome of the FRC’s 2021/22
AQR inspection report.
The Committee regularly receives reports from the external auditor
on the progress of its audit activities. The Committee reviews the
contents of these reports and the level of professional scepticism
and challenge of management judgements. Where appropriate,
the Committee tracked the management response to external
audit findings to ensure a satisfactory outcome to any challenges
raised. The views of management and the Committee members
were also sought on the efficiency of the year end process and
the performance of the external auditor. In conclusion, it was
noted that the external auditor has demonstrated challenge
and professional scepticism in performing its role.
In addition to its effectiveness, the Committee is responsible for
monitoring and assessing the independence and objectivity of the
external auditor. In doing so, the Committee has considered the
FRC’s Revised Ethical Standard 2019, and paid particular attention
to the Group’s wider relationship with the external auditor through
its provision of non-audit services to the Group, to the rotation
of the senior audit partner, and to the external auditor’s tenure
with the Group, further information on which can be found below.
The Committee received a report from the external auditor
confirming that, in line with the FRC’s Revised Ethical Standard
2019 and having regard to the threats and safeguards to
independence, it had concluded that there were no matters
that impaired or restricted its objectivity as auditors to the Group.
Having considered the information and views presented to it,
the Committee has concluded that the external audit process
was effective, that it is satisfied with the performance of the
external auditor, and that there are policies and procedures in
place adequately to protect the independence and objectivity
of the external auditor. Accordingly, the Committee has
recommended to the Board that a resolution is put to the
Company’s shareholders at the upcoming AGM for the
reappointment of the external auditor.
Non-audit fees
The Committee considers its oversight of the non-audit services
provided to the Group to be a key component of discharging its
responsibility for monitoring the independence and objectivity
of the external auditor. In addition to the report the Committee
received from the external auditor concerning the threats and
safeguards to its independence, the Committee received and
reviewed reports from the Group’s Finance function prior to the
publication of the Group’s interim and full year results on all
non-audit services provided to the Group by the external auditor
during the period under review.
The Committee has responsibility for developing and
recommending to the Board the Group’s policy on non-audit
services supplied by the external auditor. The policy is specifically
designed to ensure that the external auditor’s independence
and objectivity is maintained. It sets out a number of permissible
non-audit services which the external auditor may carry out
in line with the FRC’s Revised Ethical Standard. In particular,
the Committee considers that it is desirable that the external
auditors also perform the assurance services required by
regulation in respect of CASS and Safeguarding as this provides
significant efficiencies in the audit process and, in its judgement,
the threats to the auditors’ independence are clearly insignificant.
All non-audit services must be approved in advance by
the Committee.
The policy also specifies, in line with the FRC’s Revised Ethical
Standard 2019, that the maximum non-audit fees that the external
auditor can receive from the Group is 70% of the average of the
audit fees incurred by the Group over the previous three years.
Assurance services in relation to CASS and Safeguarding are
specifically excluded from the fee cap. The full policy can be
found on the Group’s website at www.hl.co.uk/about-us/
board-of-directors/corporate-governance.
During 2022, the Group paid PwC £1,036,000 (FY21: £806,000)
for audit and related assurance services and £101,000 (FY21:
£90,000) for other assurance services, giving a total fee to PwC
of £1,137,000 (FY21: £896,000). Further information on Auditors’
Remuneration is set out in Note 1.4 to the Financial Statements.
Strategic report Financial statements Other information
76
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
AUDIT COMMITTEE REPORT
ENSURING THE CONTINUED INTEGRITY OF THE GROUP CONTINUED
Tenure of the external auditor
The Company has complied throughout the period under review
with the provisions of The Statutory Audit Services for Large
Companies Market Investigation (Mandatory Use of Competitive
Tender Processes and Audit Committee Responsibilities) Order
2014, including the tenure of the Group’s external auditor, the
tender process for auditor appointments and Audit Committee
responsibilities.
The lead audit partner for the period under review was Darren
Meek, in his second year of appointment. The Company considers
that, taking account of the controls in place to maintain the
external auditor’s independence and objectivity, the relationship
the Group has developed with PwC is conducive to an efficient
and effective audit, and that it is therefore in the best interests of
the Company’s members as a whole to maintain that relationship
for the financial year ending 30 June 2023.
Given the Group appointed PwC as its external auditor following
a tender process in respect of the financial year ending 30 June
2014, the Group was required to undertake a formal, competitive
tender process in respect of the financial year ending 30 June
2024 at the latest. To allow sufficient time for a transition period,
should it be needed, and to enable an incoming auditor to become
independent following any appointment decision, the Company
conducted the tender process during the period under review.
Audit quality was of paramount importance in key selection
criteria. The Committee retained ultimate authority over the tender
process and the scope of the tender consisted of the HL Group
audit and statutory audits of all Group companies (excluding
dormant companies and those subject to exemption from audit),
as well as the performance of assurance services required by
regulation in respect of CASS and Safeguarding.
To ensure a transparent and robust selection process, a panel
was established to manage the process, chaired by the Committee
Chair and including the Chief Financial Officer. The panel was
responsible for overseeing the design and execution of the audit
tender, including agreeing the key objectives and evaluation
criteria. All firms were requested to confirm their independence
on acceptance of the request for proposal and to provide details
of any matters of which they were aware that could have an
impact on independence, which were reviewed against internal
agreements and proposals in place.
In order to be successful in the audit tender, the firms were
evaluated on the following selection criteria:
• Audit quality;
• Strength and experience of the audit team;
• Understanding of HL, its business and industry;
• Audit approach;
• Ability to create effective working relationships; and
• Commercials.
The tender resulted in a recommendation to the Board in June in
respect of the audit of the financial statements for the year ending
30 June 2024 and subject to member approval at the 2023 AGM.
Subject to continuing satisfactory performance, members will be
invited to vote, at the Company’s AGM, to reappoint PwC. The next
tender process will be mandatory after no more than ten years.
Internal controls
In conjunction with the Risk Committee, the Committee provides
assurance to the Board on the Group’s system of internal controls.
A key aspect of this is the review of the financial control systems
that identify, assess, manage and monitor financial risks, which
are an important aspect of ensuring the integrity of the Group’s
financial statements as a whole.
As part of its oversight of the Group’s wider system of internal
controls, the Committee receives reports from management
on the effectiveness of those controls, as well as independent
assurance on the effectiveness of controls by the Group’s Internal
Audit function and the external auditors. During the period,
the Committee has:
• Received regular reports from the Group’s Internal Audit function
on the sufficiency of the internal controls in those areas of
the business included in the Internal Audit Plan for the period.
Specific areas of focus in the period have included operational
resilience, IT, governance and the systems and controls that
support regulatory changes. Reporting to the Committee has
also included updates on progress against management actions
identified and a root cause analysis of internal audit observations
over the preceding 12-month period.
• The Committee has also received the Chief Internal Auditor’s
annual assessment of the Group’s internal control framework;
and
• Monitored the status of the Group’s CASS control environment
and the improvements being made. In doing so it has considered
the report from the external auditors on client assets held by the
Group’s regulated subsidiaries and received regular reports from
the Group’s CASS function on the completion of CASS assurance
activity, status updates on remediation activity carried out
as part of the CASS action plan, and management information
on any breaches of significance and associated remediation.
Overall, the Committee is satisfied that the Group’s internal
control and risk management framework comprises adequate
arrangements, actions and mitigating controls. The Committee
recognises that in order to support the continuing growth and
increasing complexity of the Group, there is a need to continue
to invest in improving and strengthening the Group’s risk
culture and the risk management and internal control systems.
Further information on the enhancements can be found on page
113 of the Risk Committee Report. The Committee has reviewed
and approved the statements included in this Report and Financial
Statements relating to risk management and longer-term viability
on page 54 of the Strategic Report and on the adequacy of the
Group’s internal control and risk management arrangements on
page 73 of the Corporate Governance Report.
Whistleblowing
The Group is committed to creating a culture of openness, integrity
and accountability. A formal policy is in place which encourages
colleagues and contractors to raise concerns, in confidence,
about possible wrongdoing in relation to financial reporting or
other matters. Changes to the policy require the approval of the
Board, and the Committee has responsibility for regularly reviewing
the adequacy of arrangements to ensure the proportionate and
independent investigation of matters raised and appropriate follow
up action. These arrangements are viewed as an important internal
control for the Group and the Committee regularly updates the
Board on their operation and instances of concerns raised.
During the period, the Committee received regular reporting on
the Group’s whistleblowing arrangements, including management
information on concerns raised and completion rates for
internal training.
Strategic report Financial statements Other information
77
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
AUDIT COMMITTEE REPORT
ENSURING THE CONTINUED INTEGRITY OF THE GROUP CONTINUED
Internal Audit
The role of the Group’s Internal Audit function is to provide
objective assurance and advice to both the Board and
management on the Group’s internal control and risk management
framework. The Committee plays an important role both in
overseeing the programme of work carried out by the function,
and in monitoring and reviewing its role and effectiveness,
including its objectivity.
The role of the Group’s Internal Audit function is defined by the
Internal Audit Charter, which sets out its objectives, responsibilities
and scope of work.
The function’s detailed work programme is set out in a rolling
12-month Internal Audit Plan, which is reviewed and approved by
the Committee every six months. In doing so, the Committee has
ensured that the Plan is aligned to the Group’s key risks and to
the assurance work being carried out by the Group’s second line
functions and the external auditor. Any modifications to the Plan
are also approved by the Committee.
The Committee monitors the effectiveness of the function
throughout the year to ensure that it is appropriate in the context
of the Group’s overall risk management system and its current
needs. The Chief Internal Auditor is a permanent invitee to the
Committee’s meetings and meets regularly with both the
Committee Chair and its members without management present.
During the period, the Committee received regular reports on
progress against the Internal Audit Plan, the responsiveness
of management in addressing recommended actions, and the
function’s requirements for resource and access to management
and information. The Committee uses this information to assess
the function’s effectiveness and to ensure that it is adequately
resourced and fully equipped to fulfil its mandate and perform
in accordance with the Internal Audit Charter and relevant
professional standards.
Having considered the information provided to it throughout the
period under review, the Committee remains satisfied that the
quality, experience and expertise of the function is appropriate
and that it is operating effectively.
The Committee continues to support the maintenance of the
function’s objectivity. It ensures the Chief Internal Auditor has
direct access to both the Chair of the Board and the Committee
Chair, in each case without the involvement of management,
and they receive reporting directly from the function.
It is also the responsibility of the Committee Chair to set
objectives for the Chief Internal Auditor, appraise his
performance (with support from the Chief Executive Officer)
and recommend his annual remuneration for approval by the
Remuneration Committee.
Audit Committee evaluation
The Committee is required to undertake a review of its
performance at least annually to ensure it is operating effectively
and in line with its terms of reference. This review was undertaken
in April 2022 which confirmed that activities during the period
have been in line with its remit.
Audit Committee priorities for 2022/23
Looking ahead to the next financial year, it is anticipated that
the Committee will focus in particular on:
• Assurance from the Group’s Internal Audit function on the
Group’s governance arrangements and changes to the Group’s
risk profile as a result of the updated strategy;
• The continued impact of changes to the macroeconomic
situation in the UK and globally; and
• Preparations for changes to processes and procedures arising
from the response statement by the Department for Business,
Energy and Industrial Strategy on the future of audit and
corporate governance.
Roger Perkin
Chair of the Audit Committee
4 August 2022
Strategic report Financial statements Other information
78
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
DIRECTORS’
REMUNERATION REPORT
ANNUAL STATEMENT BY THE CHAIR OF THE REMUNERATION COMMITTEE
Dear Shareholder
As remuneration Chair, I am pleased to present this Directors’
Remuneration Report for the year ended 30 June 2022 that
sets out how the committee has addressed its responsibilities
during the year and explains the rationale for our decision making.
In doing so, I would also like to thank our shareholders for their
overwhelming support of last year’s remuneration report.
1
Our purpose is to empower people to save and invest with
confidence. To achieve our purpose, we need to perform well
whilst doing the right thing for all our stakeholders. Over the
last two years Hargreaves Lansdown, like many businesses,
has worked hard to support our people in the aftermath of the
pandemic, shortly followed by the war in Ukraine and cost of
living crisis, and whilst managing a journey towards embedding
our strategy and new ways of working together.
I have set out below an overview of our remuneration philosophy
which is aligned to our values and is designed to support the
strategic priorities of Hargreaves Lansdown by encouraging
client-centric sustainable business performance in the context
of the social and environmental impacts experienced by our
colleagues, our clients and our shareholders.
As announced at our Capital Markets Day in February, we have
reached an inflection point in UK wealth management – now is
the time for HL to move forward in this huge and growing market
opportunity. We look forward to a period of transformation and
over the next year we will reflect on our approach to remuneration,
with input from our wider workforce as well as feedback from our
shareholders, to ensure that it fully aligns with our strategic goals.
This is the beginning of a time of review before we submit our
policy again to shareholders at the 2023 AGM, three years since
shareholders approved it in 2020. I look forward to engaging with
our major shareholders during the forthcoming financial year to
hear your reflections on our approach to executive remuneration
as we determine whether our current remuneration policy remains
appropriate for the coming years and what, if any, aspects could
work better in ensuring our approach to pay reflects and supports
the strategy and purpose of Hargreaves Lansdown in future.
A purpose centred on our clients and the long term
Our purpose is to empower people to save and invest with
confidence and our pay philosophy for all colleagues aligns
to this and aims to:
• Reward client-centric sustainable performance aligned
to our purpose and values;
• Share in the success of the Company and align colleagues’
interests with those of shareholders;
• Recognise our colleagues who deliver exceptional client
service the HL Way;
• Attract, retain and motivate a diverse range of talented
colleagues who live our culture and values;
• Encourage colleagues to save over the long term, in line
with our Company purpose; and
• Offer flexibility to meet the needs of a diverse workforce.
Alignment of performance metrics to transparently evidence
delivery of our strategy will remain important anchors, particularly
in the context of our strategy of transformation announced at
our Capital Markets Day in February. We will reflect any further
adjustments to the Directors’ Remuneration Policy and present
this to shareholders at next year’s AGM.
1 Votes cast for the 2021 report 95.52%.
Strategic report Financial statements Other information
79
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL STATEMENT BY THE CHAIR OF THE REMUNERATION COMMITTEE
CONTINUED
Business context in 2022
This year has been a difficult year for so many and the uncertain
and challenging external environment has led to reduced market
and investor confidence. Whilst we cannot control the external
factors impacting our business outcomes, management have
acted on what they can control and have delivered a healthy
statutory Profit Before Tax (PBT) (albeit below threshold) and
dividend outcome, through a focus on key revenue drivers,
our client service excellence and robust cost control.
Despite reduced investor confidence, we have continued to
grow both in terms of net new business and client numbers, whilst
also ensuring strong client retention and satisfaction. In addition,
the executive team have delivered a significant amount of activity
aligned with our strategic priorities, notably the launch of the HL
Growth Fund, partnering with two new banks in Active Savings,
and driven operational resilience improvement in line with
regulatory deadlines. We are also continuing to deliver against
a stretching ESG agenda in line with the values of our business.
In determining Executive Director bonuses, the Committee
reviewed the formulaic out-turns based on financial and
non-financial performance in key areas of focus. Given the targets
were set before the strategy was set and did not take account
of a planned £175 million strategic spend, the Committee
considered whether to adjust targets to reflect strategic spend.
However, in order to maintain transparency and consistency,
it determined this was not the right approach this year but
acknowledged it was appropriate to take account of strategic
spend when setting FY23 targets. The Committee also
considered carefully:
• Whether the overall outcomes aligned with the wider
stakeholder experience;
• The change in share price over the period;
• The intention by the Board to pay a full year dividend; and
• The progress this year against key strategic priorities crucial
to the long-term success for the Company.
Finally, the Committee noted wider workforce bonus outcomes
were stronger than those determined for Executive Directors,
which are substantially lower than in the previous year.
This is the first year that we have assessed outcomes under the
Sustained Performance Plan (SPP). This plan was introduced to
reinforce alignment of the interests of participants with those of
our shareholders as well as to support our focus on long-term
stewardship. Awards were subject to underpinning performance
conditions reflecting upon Group financial, risk and personal
performance over a five-year period and I am pleased to announce
that, after careful consideration by the Remuneration Committee,
the underpin has been met in full.
Further details on how awards have been determined for the 2022
performance year as well as grants made during the year are set
out in the annual report on remuneration.
Executive Director changes
On 31 January 2022, Philip Johnson stepped down from the
Board due to personal reasons and he left Hargreaves Lansdown
on 31 May 2022. His pay on leaving was determined in accordance
with his service contract and our remuneration policy. He was
eligible to receive a pro-rated bonus reflecting relevant performance
and his period of employment this year. The bonus outcome
in relation to the outgoing CFO was carefully considered in the
context of performance in the round prior to stepping down from
the Board. In line with the discretion granted to the Committee
under the plan rules he was treated as a good leaver in relation to
his outstanding share awards. Awards remain subject to the extent
performance conditions are met and vest in accordance with their
original time frames. In accordance with the policy, he will maintain
a post-employment shareholding for a period of two years.
Further details of the treatment of Philip Johnson’s remuneration
on stepping down including assessment of his bonus outcome
are provided on page 98.
Amy Stirling has been appointed as CFO with effect from
21 February 2022. Amy joined from Virgin Group where she has
been part of the senior leadership team since September 2016.
When determining the remuneration package of the new CFO,
the Committee took into consideration the wider talent market,
the calibre of the candidate and the experience she brings to the
role. As such her salary has been set at £525,000 and all elements
of her ongoing package are aligned to our Directors’ Remuneration
Policy. For 2022 she received a pro-rated bonus for time in role
during the year.
Further details on her incoming package are provided on page 105
where it is also noted that no buy-out of deferred or share-based
awards was made.
Wider Workforce
Whether it concerns the global pandemic, war in Ukraine, cost of
living crisis or the volatile stock market this financial year has been
an unprecedented time for most colleagues. Whilst we have been
fortunate to have high demand for our services, our colleagues
had to deal with the significant pressure that this has put on our
teams, alongside navigating the unprecedented challenges of the
wider environment.
In August 2021, we made a one-off special award to thank our
colleagues for working together and supporting our clients through
this challenging pandemic period. In May 2022, in recognition of
the unprecedented combination of factors impacting the finances
of colleagues, we provided a one-off ‘breathing space’ payment
to those we concluded would be most impacted (based on salary
level) and to address the effect on their financial resilience.
Strategic report Financial statements Other information
80
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL STATEMENT BY THE CHAIR OF THE REMUNERATION COMMITTEE
CONTINUED
As a responsible market-leading employer, we regularly review
and benchmark salaries in line with our market comparators.
In response to the most recent review, this year, we made some
immediate changes to the pay levels of our entry level roles.
Building and maintaining a strong colleague value proposition that
ensures colleagues are rewarded fairly and that we are competitive
in the market is fundamental to ensuring the success of HL. I am
excited about the proposed programme aimed at evolving our
colleague value proposition to support our new strategy and look
forward to providing further updates next year.
The colleague voice plays a key role in our decision making
process, to ensure that we do the right thing for our clients,
colleagues, and community. This year, we launched pay and
culture employee listening sessions where members of the Board,
ExCo and the Senior Management Team listen to what colleagues
have to say on topics around pay, progression and culture at HL.
The HL Colleague Forum (set up in January 2019) focuses on
gathering colleague feedback on key strategic decisions including
remuneration, culture and strategy. Additional operational focused
forums, such as our policy user group, help us to successfully
implement our response to the feedback gathered during the
Colleague Forum. In 2021, the Colleague Forum provided feedback
on HL’s culture, strategy and pay (including Executive remuneration
approach) where colleagues were generally excited about the
direction of the strategy. However, they also expressed a desire
for more granular detail so they could better understand their part
in delivery against the strategy and performance expectations
across all levels.
Areas of focus for the forthcoming year
In 2022 we announced the evolution of our strategy and we
have a very clear vision of the future service that HL can provide.
The delivery of this strategy will encompass the whole business,
as we optimise the way we work together to execute on the next
stage of HL’s growth.
In respect of the 2023 financial year, I would like to highlight
the following:
• The Committee determined that with the addition of underlying
cost as a new measure, the existing Executive Director bonus
metrics were relevant for assessment of performance in the
year ahead. As such, these metrics have been aligned to the
five strategic pillars that support the strategy, ensuring that
at least 50% is weighted to financial/growth measures as
prescribed in the policy.
• In addition, the Committee determined that assessment of
ESG considerations should become part of Group performance
(instead of as part of personal performance as for 2022).
• For 2023, personal contribution (20%) will be assessed with
reference to the achievement of strategic delivery.
• In accordance with the policy and IFPR (the Investment Firm
Prudential Regime), bonus awards granted in respect of 2023
will be subject to a six-month retention period.
• The CEO will receive a 4.3% salary increase; the second part of
a two-stage salary increase agreed by shareholders in October
2020. This is less than the average increase to the wider
workforce below Executive Director. Furthermore, this year’s
pay review has focused on those colleagues below our senior
leadership who are experiencing the impact of cost of living and
inflationary pressures. The CFO’s salary is unchanged having
only recently been set at appointment.
• As set out in last year’s Report and Financial Statements,
the CEO’s bonus opportunity for 2023 will be 400% of salary,
with target opportunity reducing to 200%. The CFO’s bonus
opportunity will be 350% in line with 2022. Opportunities are in
line with the maximum under the Directors’ Remuneration Policy.
Any bonus awarded will be delivered in a combination of cash
and shares as required by regulation.
• The changes to the CEO’s base salary and bonus opportunity
represent final steps of increases in response to a redesign
of the bonus in 2021 to reduce the target payment to 50% of
the maximum opportunity previously agreed by shareholders.
• The current intention is for SPP award levels to remain
unchanged from prior years and in line with the shareholder
approved Remuneration Policy at 50% of salary, subject to
the Committee’s consideration of wider context at the time of
vesting. Where the Committee considers that there has been
a misalignment between outcomes and business performance
during the period, the Committee has the discretion to amend
vesting of outcomes. See page 86 for further details regarding
the underpin criteria for the SPP award.
The approach to Executive Director remuneration is set out in
greater detail including detail on performance measures in the
annual report on remuneration.
We continue to review our remuneration approach throughout the
organisation to ensure we remain compliant with our governance
and evolving regulatory requirements. As part of this, although
significantly aligned already, we have continued to undertake a
review of our internal processes and documentation in response
to the changes in the Investment Firm Prudential Regime in order
to implement these requirements in line with the required
time frames.
Strategic report Financial statements Other information
81
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL STATEMENT BY THE CHAIR OF THE REMUNERATION COMMITTEE
CONTINUED
Gender pay and diversity
At HL, we believe that building a diverse and inclusive culture
is not simply because it is the right thing to do, but because we
believe it will lead to better outcomes for clients, colleagues, our
community and our business. We believe inclusion and diversity
is everyone’s responsibility, so every colleague has this in their
objectives, ensuring we all play our part.
Our inclusion and diversity strategy has three priority areas and
an aligned action plan to drive progress. This strategy will enable
us to continue to build an inclusive culture and brand where
colleagues feel engaged whilst attracting a broad pool of talent.
Two of our priority areas relate to the progression and retention
of female and ethnic minority talent at HL. We continue to build
accountability into our approach through setting inclusion and
diversity objectives with target metrics for Executive Directors,
Executive Committee members and senior leaders, and through
the regular tracking of progress at the Executive Committee.
In 2022 Executive Directors’ objectives included quantitative
gender and ethnicity targets at a Group-wide level.
Alongside our focus on female and ethnic minority representation,
we have a strong focus on creating an inclusive culture at HL,
recognising that is key to retaining, engaging, and getting the
best out of our colleagues. Progress this year includes winning
a Stepping Up award acknowledging the leadership and support
HL is providing to changing diversity and inclusion across Bristol
and launching the Strive internship scheme, aimed at providing
paid work experience opportunities to Black, Asian and Minority
Ethnic students across the region. The scheme has won an
Institute of Student Employers award for our outstanding
partnership with the University of the West of England.
A full summary of our inclusion and diversity approach, progress
and initiatives can be found on pages 94 to 97. Our 2021 Gender
Pay Gap (GPG) figures show that we reduced all our Mean Gender
Pay Gap, Median Gender Pay Gap and Median Bonus Gap since
the last submission. Our Median Gender Pay Gap continues to
improve year-on-year, from 19.1% to 14.5%, with continued positive
movement since the figures from 2018. Our Mean Bonus Gap has
widened slightly, by 1.2 percentage points in the last year.
These figures reflect the increases in female representation at
Board and Director level because of our strategic focus on hiring
more, promoting more and losing fewer senior women. The trend
for median GPG is forecast to narrow even further next year,
predominantly driven by increased female representation at senior
levels. However, we need to ensure this level of success
permeates down into the organisation to drive long-term change.
We have supported the attraction, retention and progression of
diverse talent through several external partnership, engagements
and representation programme including our ongoing participation
in the 30% Club’s Women Ahead Mentoring programme; nominating
colleagues to participate in the Stepping Up programme, an
award-winning diversity leadership programme, and sponsorship
of RISE2Inspire black-led mentorship programme to support
aspiring entrepreneurs.
Progress in the inclusion and diversity space requires long-term
focus and commitment to drive change; but we have made
significant strides this year:
• We continue to gather data to better understand the experiences
of colleagues at HL through regular colleague surveys.
• We have introduced a new Service Graduate Scheme alongside
our existing rotational scheme, a range of apprenticeships for
school/college leavers and career changers. We also now offer
12-month industrial placements for undergraduates, internships,
and work experience.
• This year we launched a series of Executive Committee Listening
Sessions so they could get deeper insight into our colleagues’
lived experiences and the different colleague groups at HL. To
date we have held sessions with senior women, ethnic minority
colleagues, women on helpdesk and women in digital, with
further sessions planned for other colleague groups this year.
• Raising the profile of our award-winning colleague networks
in driving engagement and awareness.
We will continue to report back in next year’s Directors’
Remuneration Report on the further progress we have made
during the year.
Contents of this report.
On the following pages we set out:
• A summary of the Directors’ Remuneration Policy which
was approved at the 2020 AGM on 8 October 2020; and
• The annual report on remuneration will be subject to an
advisory vote at the 2022 AGM.
I look forward to meeting with our major shareholders over
the coming months. In the meantime, I would like to recommend
this remuneration report for approval at the upcoming Annual
General Meeting.
Moni Mannings
Chair of the Remuneration Committee
4 August 2022
Strategic report Financial statements Other information
82
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
DIRECTORS’ REMUNERATION POLICY (SUMMARY)
The Directors’ Remuneration Policy was subject to a binding vote and approved by shareholders
at our 2020 AGM held on 8 October 2020. It is intended that it should apply for three years,
until our 2023 AGM.
The full Directors’ Remuneration Policy can be found on pages 78 to 85 of the 2020 Report and
Financial Statements, which is available to view on our website at www.hl.co.uk/investor-relations.
The tables below summarise the key elements of pay for Executive and Non-Executive Directors.
The Company’s Directors’ Remuneration Policy (‘the Policy’) is designed to ensure that remuneration
supports the Company’s strategic objectives, is appropriately positioned against the external market,
and provides fair rewards that will attract, retain, and motivate individuals of the highest calibre
required to run a group of the scale and complexity of Hargreaves Lansdown.
The policy is divided into separate sections for Executive and Non-Executive Directors.
Executive Directors
Component/purpose
and link to strategy Operation and performance measures Maximum opportunity
Base salary
Reflects the individual’s
responsibilities, experience
and contribution.
Supports the recruitment
and retention of the calibre
of individuals required to
lead the Company.
Base salaries are reviewed annually, with any increase usually effective from 1 July.
Base salaries are set taking into account a range of factors including external remuneration levels and
remuneration levels within the Group, as well as an individual’s responsibilities, experience and contribution.
Base salary will ordinarily increase by no more than the average of relevant employee increases. Any increase
beyond this would only be made in exceptional circumstances, which would be explained by the Remuneration
Committee. Circumstances in which the Committee may award increases outside this range may include:
• A change in the scope and/or size of the Executive Director’s role and/or responsibilities;
• Performance and/or development in role of the Executive Director; and
• A material change in the Group’s size, composition and/or complexity.
No absolute maximum increase.
Benefits
An ‘across the board’
benefits package is
available both to employees
and Directors alike.
Supports the recruitment
and retention of the calibre
of individuals required to
lead the Company.
The Committee’s policy is to provide Executive Directors with competitive levels of benefits, taking into
consideration the benefits provided to all eligible employees and the external market.
Where costs are necessarily incurred in the performance of duties on behalf of the Company, those costs
will be reimbursed in full, e.g. travel, accommodation, subsistence, relocation, and any tax and social
costs arising.
Provision of tax efficient benefits such as additional holiday, childcare vouchers and workplace parking
is available through a salary sacrifice mechanism.
Other benefits include (but are not limited to) Group life insurance and Group income protection,
as well as participation in the Save As You Earn scheme.
Whilst no absolute maximum level of benefits has been set,
the level of benefits provided is determined taking into
account individual circumstances, overall costs to the
business and market practice.
In approving the benefits paid, the Committee will ensure
that they do not exceed a level which is, in the Committee’s
opinion, appropriate given the Executive Director’s
particular circumstances.
Strategic report Financial statements Other information
83
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
DIRECTORS’ REMUNERATION POLICY (SUMMARY)
CONTINUED
Component/purpose
and link to strategy Operation and performance measures Maximum opportunity
Pension
Provides adequate pension
saving arrangements for
Directors and employees.
Supports the recruitment
and retention of the calibre
of individuals required to
lead the Company.
Pension provision is provided in line with the pension provision available for all employees.
Any changes made to the employee arrangements will be carried across to the Directors.
The Committee may amend the form of any Director’s pension arrangements in response to changing pension
legislation or similar developments, so long as any amendment does not increase the cost to the Company of a
Director’s pension provision by any greater percentage than the increase to the provision for all other employees.
The Company will contribute, on the same basis as the pension provision available to all employees to a
savings vehicle where a Director has reached the Lifetime Allowance, would exceed any pension contribution
limits in any year, or has elected to protect their Lifetime Allowance. Alternatively if, in these circumstances,
the Director does not wish to contribute to a savings vehicle, a cash allowance will be paid.
All employees and Directors may waive an element of their Annual Performance Bonus in return
for a corresponding employer’s contribution into their pension.
The Group provides a matched employer contribution of 5%
of base salary.
Where employees make additional contributions of over 5%
of salary, these will be double matched by the Company,
up to a maximum of 11% of salary.
The maximum contribution available to the Directors is 11%
of salary, in line with the wider workforce rate. The maximum
cash alternative is 5%.
Any contribution paid as a result of waiver of the cash
element of an Annual Performance Bonus will not be counted
towards these maxima and will not attract matched funding.
Strategic report Financial statements Other information
84
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
DIRECTORS’ REMUNERATION POLICY (SUMMARY)
CONTINUED
Component/purpose
and link to strategy Operation and performance measures Maximum opportunity
Annual Performance
Bonus
Rewards achievement of
the Group’s business plan,
key performance indicators
and the personal
contribution of Directors.
Aligns the interests of
Directors with those
of shareholders.
The level of annual performance bonus payable is linked to key financial and non-financial metrics as well as
corporate and individual performance against objectives.
The on-target bonus for each Director as a percentage of base salary will be disclosed in advance in the
annual report on remuneration for each year. The on-target award level for the CEO will be reduced to 50%
of the maximum opportunity over the life of this policy.
For each performance element of the bonus, 25% of the maximum opportunity will be paid for the attainment
of threshold performance.
Performance will be assessed against a combination of financial/growth, non-financial and individual performance
measures with at least a 50% weighting allocated to financial/growth measures, and no more than 20%
allocated to individual performance. In assessing the overall performance outcome, the Remuneration
Committee will use its judgement to consider:
• The extent to which market movements, investor sentiment, interest rates and regulation, all of which are
beyond the control of the Directors, have impacted the performance. This may result in either reductions
or increases in the awards that would otherwise have been granted;
• The extent to which management has operated within the agreed risk parameters; and
• The extent to which the bonus outcome reflects the overall performance of the business, including in the
context of the shareholder experience.
A minimum of 40% of the Annual Performance Bonus is subject to compulsory deferral over three years.
Where required by regulation, deferral will be increased to ensure compliance with regulatory deferral levels
for all variable pay.
Awards will be delivered in an appropriate combination of cash and shares, in line with prevailing regulatory
requirements, with a minimum of 50% delivered through HL plc shares. The combination of cash and shares
will be determined each year by the Committee.
Vesting will occur over a period of three years. Vested shares will be subject to a further retention period
as required under regulation.
Subject to regulatory requirements, dividend alternatives will accrue on deferred awards up to the vesting date
and will be paid as soon as practical after exercise of the award.
Awards are subject to a formal malus mechanism until vesting. Awards are subject to clawback until the later
of three years from the date of award or the end of any post-vesting retention period. Further details of malus
and clawback provisions are set out on page 81 of the 2020 Report and Financial Statements.
The maximum bonus opportunity for Directors
under the current policy is as follows:
• CEO: four times base salary.
• CFO: three and a half times base salary.
Strategic report Financial statements Other information
85
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
DIRECTORS’ REMUNERATION POLICY (SUMMARY)
CONTINUED
Component/purpose
and link to strategy Operation and performance measures Maximum opportunity
Sustained
Performance Plan
Aligns the interests of
Directors with those of
shareholders and rewards
long-term stewardship
of the Company.
Annual awards over HL plc shares will vest over a five-year period, subject to the achievement of underpinning
performance conditions over a period of three financial years beginning from the financial year in which awards
are granted. Vested shares will be subject to a further retention period as required under regulation.
The grant of awards will be subject to satisfactory personal performance of each Director in the period prior
to grant. The underpinning performance conditions applicable for each award will be disclosed up front in the
remuneration report.
Subject to regulatory requirements, dividend alternatives will accrue on unvested awards up to the vesting
date and will be paid as soon as practical after exercise of the award.
Awards are subject to a formal malus mechanism until vesting. Awards are subject to clawback until the end
of any post-vesting retention period. Further details of malus and clawback provisions are set out on page 81
of the 2020 Report and Financial Statements.
The maximum award each year under the Policy is half times
base salary.
Shareholding Guideline
Aligns the interests
of management and
shareholders to the
success of the Group.
All Executive Directors are expected to hold a number of shares in the Company, with a specific market
value expressed as a percentage of their salary, within a reasonable time frame (typically within six years
of appointment).
The current shareholding guideline for Directors is a minimum value of three times base salary.
Vested and unvested (net of tax) awards under the annual performance bonus are included in the calculation
of a Director’s shareholding for this purpose. Unvested awards, no longer subject to performance conditions
(net of tax) under the Sustained Performance Plan are also included.
Reflecting best practice, there is a post-cessation shareholding guideline in place, which applies for two
years following cessation of employment. Upon ceasing to be employed, Directors will be required to retain
a shareholding equal to their shareholding guideline, or the number of shares actually held on departure,
whichever is the lower, for twenty-four months. This will not include shares purchased or awarded to Directors
upon recruitment in respect of any buyout award. Nor will it include shares vested prior to the 2020 AGM.
Not applicable.
Strategic report Financial statements Other information
86
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
DIRECTORS’ REMUNERATION POLICY (SUMMARY)
CONTINUED
Illustration of application of Remuneration Policy
The Committee discloses each year in the Group’s Report
and Financial Statements a bar chart that models the potential
remuneration for each of the Executive Directors for the
forthcoming year using a range of assumptions. The chart
shows the potential value of the current Executive Directors’
remuneration for the forthcoming year for three scenarios;
minimum, mid-point and maximum scenario as follows:
• The minimum amount represents the unconditional
component of the remuneration package: salary, pension
and employee benefits;
• The mid-point amount is the amount the Executive Director
would receive if they achieve an on-target bonus level and
awards under the Sustained Performance Plan vest in full.
It would include both fixed and variable components of
remuneration; and
• The maximum level is the maximum amount of remuneration
each Executive Director can be awarded in the year.
The maximum is subject to remuneration caps that have been
established for each component. Within the scenario charts,
the final scenario on the right hand side sets out the impact
on the SPP award of a 50% appreciation in the Company’s
share price during the relevant period.
Chris Hill – Remuneration opportunity for 2022/23
(£’000s)
4,500
3,000
1,500
0
Minimum Mid Maximum
SPP
Bonus
Fixed pay
100% 31% 20%
71%
9%
55%
14%
19%
68%
9%
4%
Maximum +
share price
appreciation
Share price appreciation
£817k
£2,642k
£4,102k
£4,284k
Notes
1 Chart for Chris Hill shows that on-target bonus for the 2022/23 performance year will decrease to 200% and maximum bonus opportunity will increase slightly to 400% of applicable salary
for 2022/23.
2 Chart for Amy Stirling shows that on-target and maximum bonus opportunity, based on applicable salary for 2022/23, remain the same for the 2022/23 performance year.
Amy Stirling – Remuneration opportunity for 2022/23
(£’000s)
3,000
2,000
1,000
0
Minimum Mid Maximum
SPP
Bonus
Fixed pay
100% 33% 22%
68%
10%
52%
15%
21%
65%
9%
5%
Maximum +
share price
appreciation
Share price appreciation
£587k
£1,768k
£2,687k
£2,818k
Strategic report Financial statements Other information
87
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
DIRECTORS’ REMUNERATION POLICY (SUMMARY)
CONTINUED
Non-Executive Directors
Component/purpose
and link to strategy Operation and performance measures
Base Salary
Supports the attraction and
retention of high performing
individuals, considering both
the market value of the position
and the individual’s skills,
experience and performance.
Non-Executive Directors are paid an annual base fee with fees for additional roles (for example, Senior Independent Director or Chair of a Board Committee and/or Chair
or member of a Group company board).
The Chair’s and Non-Executive Directors’ basic fees are reviewed annually and any increases, if applicable, are normally effective from 1 July.
The fee levels are set taking into account relevant factors, such as time commitment and market data for comparable positions, and taking account of the time
commitment required for the role.
All Non-Executive Directors’ fees including those below are paid in cash on a monthly basis or such other frequency as determined by the Board.
The Non-Executive Directors are not eligible for bonuses, pension or to participate in any Group employee share plan.
Committee Chair fees
Recognises the additional time
commitment and responsibility
involved in chairing a
Committee of the Board.
Each Non-Executive Director receives an additional fee for each Committee for which they are Chair.
The Committee Chair fees reflect the additional time and responsibility in chairing a committee of the Board, including time spent liaising with management and preparing
for a committee of the Board.
Senior Independent
Director (SID) fee
Recognises the additional time
commitment and responsibility
involved in holding the role of
the SID.
The SID receives an additional fee for his or her role.
The fee reflects the additional time and responsibility in fulfilling the role of Senior Independent Director.
Benefits and expenses
To appropriately reimburse
the Chair and Non-Executive
Directors for out-of-pocket
expenses incurred in
the fulfilment of their
responsibilities and any
tax and social costs arising.
Non-Executive Directors may be eligible to receive benefits such as travel and other reasonable expenses.
Where costs are necessarily incurred in the performance of duties on behalf of the Company, those costs will be reimbursed in full, e.g. travel, accommodation,
subsistence, relocation, and any tax and social costs arising.
Expenses may be claimed by the Chair and Non-Executive Directors in line with the Company’s expenses policy.
Appropriate Director insurance and indemnity cover is provided by the Company.
Some Group services are provided at a reduced cost, on the same basis as for all other employees.
Where benefits are provided to Non-Executive Directors, they will be provided at a level considered to be appropriate, taking into account individual circumstances.
In accordance with the Company’s Articles of Association, the maximum aggregate remuneration for
the Non-Executive Directors is £1,500,000 per annum. This limit will be reviewed by the Board from
time to time to ensure that it remains appropriate.
External Board appointments
The Company recognises that external Non-Executive Directorships are beneficial to both the
Director and the Company and that its Executive Directors may be invited to become Non-Executive
Directors of other companies. Such non-executive duties can broaden experience and knowledge
which can benefit the Company. Subject to approval by the Board, Executive Directors are allowed to
accept two non-executive appointments (limited to one in the FTSE 100) and retain the fees received,
provided that the appointment is not likely to lead to conflicts of interest.
Strategic report Financial statements Other information
88
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL REPORT ON REMUNERATION
This report has been prepared in accordance with the provisions
of the Companies Act 2006 and the Large and Medium-Sized
Companies and Groups Regulations 2013, as amended. It also
meets the requirements of the UK Listing Authority’s Listing Rules
and the Disclosure and Transparency Rules. The Remuneration
Committee confirms throughout the financial year that the
Company has complied with these governance rules and best
practice provisions.
Role of the Remuneration Committee
The Board remains ultimately accountable for executive
remuneration but has delegated this responsibility to the
Remuneration Committee.
The Remuneration Committee is therefore responsible for
determining the Remuneration Policy for the remuneration of
the Executive Directors of the Company and of the subsidiary
companies, the Chair, other members of executive management
and all other employees who are deemed to be Material Risk
Takers. The Committee shall also review workforce remuneration
and related policies, and the alignment of incentives and rewards
with the Group’s culture and defined behaviours, taking these
into account when setting the policy for plc Executive Director
remuneration. The policy is determined with due regard to the
interests of the Company, the shareholders and the Group,
with the objective of being able to attract, retain and motivate
executive management of the quality required to run the Group
successfully without paying more than is necessary.
The performance measurement of the Executive Directors and
key members of senior management and the determination of
their annual remuneration packages is also undertaken by the
Committee. For individuals below the Executive Committee,
there is a sub-committee (the Reward Governance Committee)
for the review of remuneration structures and outcomes consisting
of the Chief Executive Officer, Chief Financial Officer, Chief People
Officer, Group Chief Risk Officer and Group Head of Colleague
Proposition and Capability, which reports and refers decisions
to the Committee for final approval where relevant.
The Committee also ensures that the remuneration relationship
between the Executive Directors and senior employees of the
Group is appropriate and that the Remuneration Policy complies
with the relevant FCA Remuneration Codes. Any exceptional
remuneration arrangements for senior employees are approved
by or advised to the Committee.
UK Corporate Governance Code
When considering the policy, the Committee was mindful of the
UK Corporate Governance Code and believes that the executive
remuneration framework addresses the following principles:
• Clarity – The Committee believes that the remuneration
framework should be clear and transparent. In the Report and
Financial Statements we have enhanced disclosure on variable
pay and the performance measures for the annual bonus have
been simplified, with attached weightings for each measure
being disclosed going forward.
• Simplicity – The remuneration arrangements for Executive
Directors are well understood by both participants and
shareholders. The structure consists of fixed pay, annual bonus
award (including deferral) and the SPP (restricted share award).
• Risk – The remuneration framework has been designed to
mitigate risk where appropriate. The Committee reviews
adherence to the Group’s risk parameters as part of its
determination of variable pay outcomes and malus and clawback
provisions apply to both the annual bonus and SPP award. In the
current policy, these provisions have been enhanced to include
corporate failure.
• Predictability – In the Report and Financial Statements,
the potential value of the Executive Directors’ remuneration
packages at threshold, target and maximum scenarios (plus with
50% share price appreciation) have been provided. In addition,
the Policy also states the maximum annual bonus and SPP
opportunity as a percentage of salary.
• Proportionality – The Committee strongly believes that poor
performance should not be rewarded. The annual bonus requires
performance against stretching measures and the SPP award
has a robust underpin. The underpin measures both financial
and non-financial performance, reflecting the Group’s
strategic priorities.
• Alignment to culture – The remuneration framework has been
designed to support both the Group’s culture, purpose and
values. The performance measures and underpins of the variable
pay awards have been chosen to drive desired behaviours the
HL Way and are aligned to the strategy of the business.
Strategic report Financial statements Other information
89
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
Meetings during the year
There were six scheduled meetings during the year and occasional
ad hoc meetings where required. Meetings were chaired by Moni
Mannings; other members were Deanna Oppenheimer and Dan
Olley for the full year and John Troiano for part of year having
joined the Committee on 26 January 2022.
None of the Committee has any personal financial interest
(other than as shareholders), conflicts of interests arising from
cross-directorships or day-to-day involvement in running
the business.
Member Position
Eligible
meetings
Attended
meetings
Moni Mannings Chair •••••• ••••••
Deanna Oppenheimer Non-Executive
Director
•••••• ••••••
Dan Olley Non-Executive
Director
•••••• ••••••
John Troiano Non-Executive
Director
•• ••
During the year the Committee has undertaken activities as set out
below and, in doing so, confirm that there have been no deviations
from the procedure for implementation of the policy in this
financial year:
• Reviewing and implementing the Directors’ Remuneration Policy
and considering our remuneration approach for 2022/23;
• Consideration of the Directors’ Remuneration Report in the 2021
Report and Financial Statements, and the feedback received
from shareholders and proxy agencies;
• Reviewing our approach to business and individual performance
measures, targets and weightings, with a particular focus on
ensuring they evidence delivery against our strategic priorities;
• Receiving and noting regulatory and governance updates
to keep abreast of best practice;
• Considering a formal assessment of risk performance in relation
to remuneration;
• Reviewing and agreeing performance bonuses for the Executive
Directors as well as other Material Risk Takers (MRTs);
• Reviewing and approving Executive Directors’ objectives and
performance measures;
• Reviewing the approach to the new Investment Firm Prudential
Regime (IFPR) and the approach for the identification of, and pay
out process for MRTs under IFPR, Alternative Investment Fund
Managers (AIFMD) and Undertakings for the Collective
Investment in Transferable Securities V (UCITS V);
• Reviewing the remuneration policy for the wider workforce,
including assessing progress towards achieving Director
shareholding requirements, and approving new policies in
accordance with the IFPR requirements;
• Approving the annual Save As You Earn scheme invitation
and terms;
• Receiving reports and overseeing decisions and
recommendations made by the Reward Governance Committee;
• Reviewing and approving the required Remuneration Code
disclosures;
• Reviewing colleague feedback on remuneration, culture and
strategy via the Colleague Forum;
• Reviewing the gender pay gap reporting covering the snapshot
date of 5 April 2021 and noting management’s action plan to
address the gender pay gap; and
• Reviewing and approving an updated Terms of Reference
for this Committee.
The detailed responsibilities of the Committee are set out in its
terms of reference, which are available on the Group’s website
at www.hl.co.uk/about-us/board-of-directors.
Advice to the Committee
During the year, the Committee has been supported by the
Company Secretary, Chief People Officer, Group Head of
Colleague Proposition & Capability, Head of Performance and
Reward, and Chief Executive Officer who are invited to attend
Committee meetings to provide further background information
and context to assist the Committee in its duties. The Group
Chief Risk Officer also provides a formal risk assessment to the
Committee at mid-year and at the end of the financial year which
assesses performance of the business against risk appetite,
key risk indicators, and includes an assessment of risk events
and conduct breaches to ensure second line input into proposed
remuneration outcomes. No Director was involved in decisions
regarding the determination of their own remuneration.
Deloitte LLP, a signatory to the Remuneration Consultants Group’s
Code of Conduct were reappointed by the Committee during 2021
and remain engaged for the provision of independent remuneration
advice, and throughout the year the Committee has been advised
by them. The advisers review all committee papers and provide
input on matters directly to the Committee as well as attend
committee meetings. As such, the Remuneration Committee
is satisfied that the advice it has received was objective and
independent. The fees payable to Deloitte for this advice were
based on services provided against a scope of services approved
by the Committee and amounted to £95,965 plus VAT on a time
and material basis. Other services provided to Hargreaves
Lansdown by Deloitte LLP during the year consisted of risk
advisory, tax, financial advisory, consulting and internal audit
services on a co-sourced basis.
Strategic report Financial statements Other information
90
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
Consideration of employment conditions elsewhere
in Company
The Committee considered the Company’s remuneration principles
which apply across the Group when determining the Executive
Director Policy outlined above. In particular, the approach taken
to salary increases and that the structure of the annual bonus
aligns closely to the approach generally taken across the wider
workforce, and the same SPP structure is used for all participants
within the plan. This year our pay review has focused more on
increases to colleagues below our senior leadership who need it
most and the average salary to colleagues in this population was
5.88% for colleagues below senior leadership compared to 4.15%
for senior leadership.
Over the year we have continued to practice our ‘Always Listening’
approach to enable us to better consider the voice of our
colleagues when making decisions.
The Committee is regularly updated on the pay and employment
conditions for the wider workforce through reports from the
Reward Governance Committee and this provided context for
its decisions regarding the remuneration policy.
The Committee also considers the wider salary increase,
remuneration arrangements and employment conditions across
the wider employee population when considering Directors’
pay and awards.
Executive Director Remuneration for 2022
Remuneration payable for the 2022 financial year (1 July 2021 to 30 June 2022) (Audited)
The remuneration policy operated as intended in the financial year with remuneration received by Executive Directors in relation
to performance in 2022 set out below:
Single Total Figure Table
Name of Director Year
Gross Basic
Salary
£’000
Other
taxable
benefits
1
£’000
Annual Bonus
LTIP/SPP
2
£’000
Employer
Pension
contribution
3
£’000
Total
£’000
Total Fixed
Remuneration
£’000
Total Variable
Remuneration
£’000
Upfront
cash
£’000
Deferred
shares
£’000
Chris Hill 2022 700 1 578 385 161 77 1,902 778 1,124
2021 648 1 1,175 783 – 71 2,678 720 1,958
Philip Johnson 2022 477 1 170 114 114 49 925 527 398
2021 459 1 785 523 – 50 1,818 510 1,308
Amy Stirling 2022 187 5 143 95 – 7 437 199 238
Notes
1 This includes Medical, PMI and SAYE discount value over the term of the savings contract in respect of Amy Stirling.
2 Sustained Performance Plan (SPP) is our Long Term Incentive Plan (LTIP), which was approved at the 2017 AGM and granted in November 2017. The formulaic outcomes of the 2017 SPP award
has been assessed by the Committee to ensure it was appropriate and the Committee confirmed it will vest in full with no discretion applied. The value has been calculated using the share price
of £8.482 as at 20 July 2022. As the SPP award was granted using a share price of £15.83, none of the SPP value is attributable to share price appreciation. See page 98 for further details of the
assessment of the underpin conditions.
3 This includes employer pension contributions and any pension allowance paid in lieu of pension contributions.
Overview of activities during the financial year 2022
17%
Wider workforce policy
and gender pay
36%
Executive remuneration
and policy
18%
Business performance and
risk assessment review
13%
Other including
management admin
16%
Regulatory
and governance
Consultation with employees
The HL Colleague Forum was set up to create a feedback channel
directly between colleagues and the Board on matters of strategic
importance. Over the year, this included HL’s culture, strategy
and approach to pay and performance measurement, including
Executive remuneration. The Forum discussed proposed changes
to our approach to pay, the embedding of the strategy and ways
to build on our general culture following the results of our biannual
engagement surveys.
Colleagues were generally excited about the direction of the
strategy. However, they also expressed a desire for more granular
detail so they could better understand their part in delivery
against the strategy. At the following forum on the pay approach,
similar themes came through with colleagues expressing a desire
for greater clarity and transparency around objectives and
performance expectations across all levels.
Strategic report Financial statements Other information
91
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
Other than SAYE options (which are available to Executive Directors on the same basis as all
employees and included in other cash benefits), and the awards made to Chris Hill on joining,
no share options without performance criteria have been granted to Executive Directors since
7 March 2012.
Where eligible, benefits in kind are available to Executive Directors on the same basis as other
employees. For 2022, benefits include Life Insurance, Income Protection, Private Medical Insurance,
Save As You Earn (SAYE) scheme, reduced platform fees for holding assets on the Group’s investment
platform, reduced dealing charges for self and connected persons and access to a range of voluntary
benefits such as Critical Illness cover.
No Executive Director has a prospective entitlement to a defined benefit pension by reference to their
length of qualifying service.
Assessment of annual performance for the 2022 financial year
(1 July 2021 to 30 June 2022)
The value of any bonuses payable to Executive Directors was determined by the Committee based on:
• An assessment of the performance of the Group against financial/growth and client and delivery
measures, including an assessment of risk performance and risk events as detailed below;
• Each individual’s performance against Environment, Social and Governance (ESG) measures,
including progress against the specific objectives set for them as well as an assessment of risk
management and compliance and their behaviours aligned to the Group’s values; and
• The Committee approved the retention of the simplified three key metrics for the 2021/22 award,
with 50% of the award based on financial/growth metrics, 30% based on client and delivery metrics
and 20% against individual objectives. However, given the importance of ESG, the individual
objectives element has been focused on key personal and collective goals in this area for the
relevant financial year. Further details are set out below.
For each Executive Director, the Committee determined their overall bonus, taking all factors into
account and using all relevant information, by reference to the following target and maximum levels,
as disclosed in the 2021 Report and Financial Statements:
On-target bonus opportunity
(% of base salary)
Maximum bonus opportunity
(% of base salary)
Chris Hill 212.5% 375%
Amy Stirling 175% 350%
Philip Johnson 175% 350%
Notes
1 The maximum bonus opportunity for Chris Hill is 375% for the 2021/22 performance year, and will increase to 400% for the 2022/23
performance year.
2 The maximum bonus opportunity for Amy Stirling is 350% of salary. As Amy was appointed to the Board on 21 February 2022,
her bonus has been pro-rated to reflect her time in role during the relevant performance year.
3 The maximum bonus opportunity for Philip Johnson was 350% of salary for the 2021/22 performance year. As Philip stepped down
from the Board on 31 January 2022, his bonus has been pro-rated to reflect his time in role during the relevant performance year.
Group performance has been considered in relation to the following measures:
Performance category Weighting Objective Descriptor Measure
Financial/growth 50% Define and shape the business to
thrive at scale, deliver sustainable
long-term financial results, and evolve
our market-leading client service to
exceed market expectations
Net New Business
Client Numbers
Profit Before Tax
Client and Delivery 30% Client retention
Client Advocacy
Strategic Delivery
Personal
Environment
20%
Reduce our impact on the
environment, evolve our sustainable
and responsible investment
proposition and provide the tools and
information to enable clients to invest
in line with their preferences
Assess and develop
the footprint of HL,
agree with the Board
steps to help clients be
responsible investors
and understand the
footprint of their
investment portfolio
Social Evolve and communicate the strategy,
and proactively manage the
reputation of the Group across
all stakeholders
Reputation/Strategy
Develop a diverse, inclusive and
innovative culture with colleagues
who are engaged, empowered,
work together and live our values
Diversity & Colleague
Engagement
Governance Shape a well governed organisation
that operates within the Board’s
risk appetite
Effective controls
and processes
Note 1 Assessment of performance will take account of both delivery (what) and demonstrations of behaviours aligned to HL’s values (how).
Strategic report Financial statements Other information
92
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
Further details of performance in each of these areas is set out below:
Financial/Growth
(50% weighting) Threshold Target Stretch Actual Achievement Commentary
Net new business £7.3bn £8.0bn £8.7bn £5.5bn 0% Net new business targets were set at the beginning of the performance year in a different environment
and, in setting them, the Committee recognised this was an ambitious stretch target based on prior year
(£8.7bn). Although this year’s outcome fell short of threshold (and therefore no bonus was attributable to
this metric), the Committee recognised this represented a good level of growth in an environment of low
investor confidence and challenging market conditions, particularly in the second half of the year.
Client numbers 1,779,000 1,824,000 1,869,000 1,737,000 0% Similar to net new business, client growth targets were set at the beginning of the performance year against
an environment of high investor confidence. Despite a very different landscape to that anticipated, this year
has resulted in a further 92,000 net new clients, representing 6% growth in client numbers (although just
below the threshold and therefore no bonus was attributable to this metric).
Profit before tax £272.25m £302.5m £366.0m £269.2m 0% The Committee recognised that PBT at £269.2m was close to threshold of £272.25m as a result of the
strategic spend incurred during the year. As the targets were set at the beginning of the financial year,
before the strategy was set and investment quantified, this spend was not taken into account in the target
setting. However, the Committee determined that, despite this, threshold would not be adjusted and
therefore no bonus would be attributable to this metric.
Overall achievement 0% of 50% weighting
Client, colleague and delivery
(30% weighting) Threshold Target Stretch Actual Achievement Commentary
Client retention 90% 92% 94% 92.1% 52.5% A very strong performance in the context of external factors. The Committee noted the significance of
maintaining strong client retention reflecting our high quality client service and agreed that client retention
is at a high level as we focus on the FY23 strategic initiatives.
Client satisfaction 79% 81% 83.0% 80.7% 46.3% A strong performance supported by a reduction in complaints and an increase in external satisfaction
measures. The Committee noted both the strong performance in client satisfaction and the broader
indicators in support of this outcome.
Strategic delivery 0% 50% 100% 100% 100%1 The Committee noted the success of Capital Markets Day in February and, although market conditions
changed soon afterwards, the executive team have set out a clear and ambitious timeline of strategic
delivery through the integrated plan and execution over the year has been outstanding. In addition, the
Committee noted the excellent delivery of the FY22 priorities, including launch of the HL Growth Fund,
partnering with two new banks in Active Savings, and driving operational resilience improvements in line
with regulatory deadlines.
Overall achievement 19.9% of 30% weighting
Notes
1 As Philip Johnson stepped down as CFO on 31 January 2022, the Remuneration Committee considered strategic delivery against plan up to this date. It was determined that the objective was on track to achieve 75% against plan based on performance during this period,
as opposed to the 100% achieved for the full financial year. Therefore, it was agreed that the overall outcome for the client, colleague and delivery objective should be 17.4% of 30% for Philip Johnson.
Strategic report Financial statements Other information
93
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
The Committee assessed each individual Executive Director’s performance during the financial year, including against their personal objectives, as follows:
Chris Hill
Personal (20% weighting) Threshold Target Stretch Actual Achievement Commentary
Environmental – assess
and develop the footprint
of HL, agree with the
Board steps to help clients
be responsible investors
and understand
the footprint of their
investment portfolio.
Progress towards responsible business,
responsible fund manager and responsible
investment and savings provider.
Strong
progress made
Above
target
Significant progress made towards implementing the ESG strategy across:
1. Responsible Business – Continued progress towards becoming a net zero business through
increasing the efficiency of our building operations and investing in greener transport options
for colleagues.
2. Responsible Fund Manager – Assessed the carbon footprint of our portfolio to progress plans
in FY23 for our net zero commitments and on track to launch ESG integrated building block and
portfolio funds.
3. Responsible Investment and Savings provider – Launch in FY22 of Responsible Investment
Hub and new ESG investment policy, and increased the number of research articles reflecting
consumer interest trends.
Social – reputation
(dashboard)
Amber Amber/Green Green Amber/Green Target Achieved an above target rating on our reputational risk scorecard assessment.
Savings and Resilience Barometer (developed with Oxford Economics and covering managing debt,
protecting your family, building emergency savings, pension provisions and managing broader
investments) has received 19,500 engagements and 27 press mentions.
Significant improvement across all brand metrics, with market-leading gains across the whole
awareness-interest-desire-action brand funnel.
Trustpilot star rating increased from 3.1 (November 2020) to 4.3 (April 2022).
Significant increase in positive sentiment across all our core media targets.
Social – diversity Progress towards 2025 gender
and ethnicity targets.
Strong
progress made
Above
target
Material progress evidenced through improvements in gender diversity and the Gender Pay Gap.
Women in Finance Charter data shows that we have improved representation of women at senior
management level from 30.4% in August 2020 to 31.5% in August 2021. Female representation has
increased to 44% on the Group Executive Committee. Our 2022 colleague survey response to ‘HL
Values and promotes colleague diversity and inclusion’ was 83% favourable (up from 72% in 2021).
In addition, clear progress has been made in addressing broader inclusion and diversity, including
ethnic diversity. Building on meeting the requirements of the Parker review, the Committee noted
(amongst other initiatives) the launch of HL’s largest internship programme, with 10 interns coming
through programmes which specifically focus on Black, Asian and Minority Ethnic students.
Strategic report Financial statements Other information
94
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
Personal (20% weighting) Threshold Target Stretch Actual Achievement Commentary
Social – colleague
engagement
62% 66% 70% 64% Below
target
Colleague engagement fell below target and slightly behind last year’s score (when it peaked) and
sits alongside some strong scores in culture and also manager engagement. Taking account of
significant changes in the colleague population and the management team, where we are on our
transformation journey, alongside cost of living pressures and adapting to new ways of working
post pandemic, the outcome was not unexpected and the Committee noted management plans
to address this.
Governance – effective
controls and processes
Improvement in control environment, processes,
risk management and assurance actions.
Strong
progress made
Below
stretch
Very strong progress across audit actions, significant improvement in controls and risk
effectiveness and positive interaction with our regulator.
Overall assessment
The Committee concluded that the CEO had achieved strong delivery and contribution to performance and strategic direction against a challenging market environment,
guided by vision, talent and a strong set of values. He should also be commended for building a strong Executive team and leading them to shape HL’s transformational
strategy. The outcome reflects weightings on this as well as excellent stewardship of improvement in controls and risk effectiveness and notable progress in gender diversity
statistics, in particular female pipeline. The Committee also noted his visible sponsorship of diversity and inclusion.
Overall achievement: 15% out of 20% weighting
Strategic report Financial statements Other information
95
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
Amy Stirling
Personal (20% weighting) Threshold Target Stretch Actual Achievement Commentary
Environmental – assess
and develop the footprint
of HL, agree with the
Board steps to help clients
be responsible investors
and understand
the footprint of their
investment portfolio.
Progress towards responsible business,
responsible fund manager and responsible
investment and savings provider.
Good
progress made
Above
target
Significant progress made towards implementing the ESG strategy across:
1. Responsible Business – Continued progress towards becoming a net zero business through
increasing the efficiency of our building operations and investing in greener transport options
for colleagues.
2. Responsible Fund Manager – Assessed the carbon footprint of our portfolio to progress plans
in FY23 for our net zero commitments and on track to launch ESG integrated building block and
portfolio funds.
3. Responsible Investment and Savings provider – Launch in FY22 of Responsible Investment
Hub and new ESG investment policy, and increased the number of research articles reflecting
consumer interest trends.
Social – agreement of the
Strategic and Financial
plan and delivery of FY22
plan. Investor outreach
post Capital Markets Day.
Effective management of the strategic plan
and positive engagement with shareholders.
Excellent
progress
and results
Stretch Significant impact in delivery of the FY22 plan, with strong approach to cost control. Outstanding
stewardship of the strategic plan and focus on FY23 priorities with the Executive team. Excellent
outreach and dialogue with investors to articulate the commercial and financial strategy.
Social – diversity Progress towards 2025 gender
and ethnicity targets.
Good
progress made
Above
target
Material progress evidenced through improvements in gender diversity and the gender pay gap.
Women in Finance Charter data shows that we have improved representation of women at senior
management level from 30.4% in August 2020 to 31.5% in August 2021. Female representation has
increased 44% on the Group Executive Committee. Our 2022 colleague survey response to ‘HL
Values and promotes colleague diversity and inclusion’ was 83% favourable (up from 72% in 2021).
In addition, clear progress has been made in addressing broader inclusion and diversity, including
ethnicity diversity. Building on meeting the requirements of the Parker review, the Committee
noted (amongst other initiatives) the launch of HL’s largest internship programme, with 10 interns
coming through programmes which specifically focus on Black, Asian and Minority Ethnic students.
Social – colleague
engagement
62% 66% 70% 64% Below
target
Colleague engagement fell below target and slightly behind last year’s score (when it peaked) and sits
alongside some strong scores in culture and also manager engagement. Taking account of significant
changes in the colleague population and the management team, where we are on our transformation
journey, alongside cost of living pressures and adapting to new ways of working post-pandemic,
the outcome was not unexpected and the Committee noted management plans to address this.
Governance – effective
controls and processes
Improvement in control environment, processes,
risk management and assurance actions.
Strong
progress made
Below
stretch
Very strong progress across audit actions, significant improvement in controls
and risk effectiveness and positive interaction with our regulator.
Overall assessment
The Committee concluded that the CFO has made an outstanding contribution to the business since joining, whilst also showing excellent leadership in engaging with investors
and stakeholders to articulate the commercial and financial plan. The CFO has created a step change in the planning process and demonstrated a strong set of values,
leadership and talent and the outcome also reflects weighting on strong improvements in internal processes and governance in particular.
Overall achievement: 16.5% out of 20% weighting
Strategic report Financial statements Other information
96
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
Philip Johnson
Personal (20% weighting) Threshold Target Stretch Actual Achievement Commentary
Environmental – assess
and develop the footprint
of HL, agree with the
Board steps to help clients
be responsible investors
and understand
the footprint of their
investment portfolio.
Progress towards responsible business,
responsible fund manager and responsible
investment and savings provider.
Good
progress made
Above
target
Significant progress made towards implementing the ESG strategy across:
1. Responsible Business – Continued progress towards becoming a net zero business through
increasing the efficiency of our building operations and investing in greener transport options
for colleagues.
2. Responsible Fund Manager – Assessed the carbon footprint of our portfolio to progress plans
in FY23 for our net zero commitments and on track to launch ESG integrated building block and
portfolio funds.
3. Responsible Investment and Savings provider – Launch in FY22 of Responsible Investment
Hub and new ESG investment policy, and increased the number of research articles reflecting
consumer interest trends.
Social – investor
feedback, impact of
engagement with
shareholders and
evolution of share register
Effective management of the strategic plan
and positive engagement with shareholders.
Acceptable
progress made
Threshold Progress was evidenced prior to the date the CFO stepped down from the Board through
a combination of individual meetings, conferences and other interactions.
Social – diversity Progress towards 2025 gender and
ethnicity targets.
Good
progress made
Above
target
Material progress evidenced through improvements in gender diversity and the gender pay gap.
Women in Finance Charter data shows that we have improved representation of women at senior
management level from 30.4% in August 2020 to 31.5% in August 2021. Female representation has
increased 44% on the Group Executive Committee. Our 2022 colleague survey response to ‘HL
Values and promotes colleague diversity and inclusion’ was 83% favourable (up from 72% in 2021).
In addition, clear progress has been made in addressing broader inclusion and diversity, including
ethnicity diversity. Building on meeting the requirements of the Parker review, the Committee
noted (amongst other initiatives) the launch of HL’s largest internship programme, with 10 interns
coming through programmes which specifically focus on black, Asian and minority ethnic students.
Social – colleague
engagement
62% 66% 70% 64% Below
target
Colleague engagement fell below target and slightly behind last year’s score (when it peaked)
and sits alongside some strong scores in culture and also manager engagement. Taking account
of significant changes in the colleague population and the management team, where we are on
our transformation journey, alongside cost of living pressures and adapting to new ways of working
post pandemic, the outcome was not unexpected.
Governance – effective
controls and processes
Improvement in control environment, processes,
risk management and assurance actions.
Good
progress made
Above
target
Good progress within the time period across audit actions and improvements in controls and
risk effectiveness.
Overall assessment
The Committee concluded that the CFO had made a valued contribution in the time period before stepping down from the Board, and thank him for his support during this time,
and his support to the new CFO.
Overall achievement: 11% out of 20% weighting
Strategic report Financial statements Other information
97
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
Overall assessment and bonuses awarded for the financial year
(1 July 2021 to 30 June 2022)
The Committee considered all of the above (including assurance against environmental, social and
governance risk factors) in making their bonus determination for Chris Hill, Amy Stirling and Philip
Johnson for the 2022 financial year.
In addition, it also considered the extent to which performance (both Group and individual) has
been achieved within the agreed risk parameters, based on an assessment from the Group Chief Risk
Officer, and the extent to which the bonus outcome reflects the overall performance of the business
in the context of the client and shareholder experience (as discussed in the Remuneration Committee
Chair’s letter).
The Committee concluded that the bonus outcomes for Chris Hill, Amy Stirling and Philip Johnson
reflect Company performance, effective management of costs, risks and governance, together with
a strong focus on the strategic transformation plans. The Committee has also appropriately reflected
the individual performance, contribution and behaviours in line with Company values.
The resulting bonuses determined by the Committee for the year ending 30 June 2022 are set out below:
(Audited)
Cash £’000 Deferred £’000 Total £’000 % of maximum
Chris Hill 2021 1,175 783 1,958 86%
Chris Hill 2022 578 385 963 37%
1
Philip Johnson 2021 785 523 1,308 81%
Philip Johnson 2022 170 114 284 28%
2
Amy Stirling 2022 143 95 238 36%
3
Notes
1 Having applied the performance outcome to the CEO’s bonus opportunity (on a straight-line basis), this results in a bonus of 138% of salary
which is 37% of his maximum opportunity.
2 Having applied the performance outcome to the prior CFO’s (Philip Johnson) bonus opportunity (on a straight-line basis), this results in a bonus
of 99% of salary earned over the performance period (1 July 2021 to 31 January 2022) which is 28% of his maximum available opportunity and
17% of the policy maximum.
3 Having applied the performance outcome to the CFO’s (Amy Stirling) bonus opportunity (on a straight-line basis), this results in a bonus of 127%
of salary earned for FY22 which is 36% of her maximum available opportunity and 13% of the policy maximum.
Deferral of annual performance bonuses
40% of the annual performance bonus is subject to compulsory deferral into nil-cost options over
shares which vest in equal tranches over a period of three years. Dividend alternatives will accrue
on the deferred share element of bonuses up to the time of vesting and will be paid at exercise.
Individuals have a right to exercise deferred awards after their respective vesting date provided
they remained employed by the Group at exercise.
Assessment of 2017 Sustained Performance Plan (SPP) Awards
(1 July 2017 to 30 June 2022)
The Committee assessed the achievement of the following underpinning performance conditions
over a period of five financial years as follows:
Condition Achievement
The average assets under administration (as determined by the
Board) for the complete Financial Year prior to Vesting exceeds the
average assets under administration (as determined by the Board)
for the Financial Year immediately before the beginning of the
Performance Period.
Fully met
(FY17 average AuM: £71.8m,
FY22 average AuM: £135.1m)
The Board determines that a satisfactory risk, compliance and
internal control environment has been maintained during the
Performance Period.
Fully met
Management has driven
significant and continued
improvement
The Board determines that the Participant’s personal performance
has been satisfactory during the Performance Period.
Fully met for all participants
The Committee concluded that all underpinning performance conditions were fully met and therefore
they were satisfied that the awards should vest in full. (Audited)
Malus and clawback
Annual bonus and SPP awards are subject to malus and clawback provisions in exceptional
circumstances. In addition, the Committee can defer a decision to award bonuses, or award and
suspend payment of bonuses, and/or vesting of deferred bonus and/or SPP awards for any individual
in scope of an investigation into their conduct or responsibility, accountability or knowledge and/or
influence over any material risk event identified during or after the performance year. The triggers
that apply to malus and clawback under all incentive plans are set out on page 81 of the 2020 Report
and Financial Statements.
Strategic report Financial statements Other information
98
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
Share awards made during the year ending 30 June 2022 (audited)
Name of Director
Type of
award
Market
value of
maximum
award at
date of
grant
£
Exercise
price
£
Share
price on
day of
grant
5
£
Number of
shares over
which the
award was
granted
5
Face value
1
of award
£
Fair value
2
at date
of grant
£
% of face
value that
would vest
at threshold
Performance
period
Chris Hill SPP
3
324,000 Nil cost
option
14.29 22,673 323,997 323,997 n/a 1 July 2021
to 30 June
2024
Deferred
bonus
4
783,237 Nil cost
option
14.29 54,810 783,235 783,235 n/a n/a
Philip Johnson Deferred
bonus
4
523,257 Nil cost
option
14.29 36,617 523,257 523,257 n/a n/a
Notes
1 Face value is calculated as the share price at grant date (being 20 September 2021) multiplied by the number of options granted.
2 Fair value is calculated as the difference between market value and the exercise price at the original date of grant.
3 Awards under the SPP were granted on 20 September 2021 as nil cost options, at 50% of base salary subject to the achievement
of underpinning performance conditions assessed over a three-year performance period. The awards, once vested, will be subject
to a two-year retention period. The underpinning performance conditions are:
• A requirement for average AUA for the last complete financial year prior to vesting to be above the average AUA for the last
complete financial year prior to award;
• Maintenance of a satisfactory risk, compliance and internal control environment across the plan period; and
• Satisfactory personal performance throughout the plan period.
4 Awards under the deferred bonus were granted at 40% of bonus as nil cost options. The aggregate exercise price for awards under
the deferred bonus scheme is £1 and awards were granted on 20 September 2021.
5 The number of shares to be awarded is calculated by reference to the average of the mid-market value of HL shares on the three
days preceding the date of award.
All-employee share plans
The Company operates a SAYE share option scheme on the same terms for all employees. All employees are encouraged to become shareholders, both through direct ownership or through participation
in the share scheme. At the end of the latest financial year, 22.6% of the Group’s employees owned shares in the Company. The CEO opted to participate in the 2020 cycle of the SAYE scheme and the CFO
opted to join the 2022 cycle.
Sourcing shares
The Investment Association guidelines on sourcing shares have been followed and, in line with the scheme rules, the Company has not issued shares under all employee schemes which, when aggregated
with awards under all of the Company’s other schemes, exceed 10% of the issued ordinary share capital in any rolling 10-year period. The Company has also not issued new shares under executive
(discretionary) schemes which exceed 5% of the issued ordinary share capital of the Company in any rolling 10-year period.
Executive Directors’ shareholding and share interests (audited)
The current guideline for Executive Directors to accumulate minimum personal holdings in Hargreaves Lansdown plc shares amounts to a value of three times base salary within six years of appointment
to the Board. Current shareholdings are summarised in the following table:
Name of Director
Beneficially
owned
at 30 June 2021
Beneficially
owned
at 30 June 2022
1
Outstanding share options
subject to continued
employment arising from
SAYE scheme
Outstanding share options
subject to continued
employment arising from
deferred bonus
Outstanding share options
subject to performance
conditions and continued
employment arising from
sustained performance plan
No. of share options
exercised in year
No. of share
options vested
but unexercised
at 30 June 2022
Shareholding
guideline (multiple
of base salary)
Shareholding as
a multiple of base
salary achieved
at 30 June 2022
Shareholding
guideline met
2
Chris Hill 51,639 67,908 1,547 54,421 71,678 30,699
3
9,810
4
Three Times 149% No
Amy Stirling 0 9,126 2,227 0 0 0 0 Three Times 14% No
Philip Johnson
5
40,348 49,889 0
6
37,184 34,703 18,004
3
6,949
4
Three Times 151% No
Notes
1 Includes shares held by the Executive Directors and their connected persons.
2 Unaudited – at present the Executive Directors have not currently met their shareholding guideline. As the CFO only joined this financial year, she will continue to build her shareholdings during the relevant time period. It is noted that the CEO has not yet achieved the guideline level,
which is largely attributable to the recent reduction in share price. The Committee has reflected upon this accordingly and determined it was appropriate to allow additional time to achieve the guideline. This approach will be reviewed over the coming year.
3 Options exercised granted under 2018 Deferred Bonus Plan. The market value at the date of exercise was £14.20 per share and the option exercise price in aggregate was £1.00.
4 This relates to options awarded under the Sustained Performance Plan (SPP) granted in November 2017 and which have been assessed by the Committee to vest in full and are included since, as at 30 June 2022, they are no longer subject to performance conditions.
5 Philip Johnson’s share interests are shown as at 31 May 2022, being the date he left the Company. Following his departure, Philip Johnson’s continuing interest in performance shares have been pro-rated to the period he was employed during each performance period. SAYE options lapsed
upon cessation of employment.
6 SAYE options lapsed upon cessation of employment.
All Executive Directors are subject to post-cessation shareholding requirements. See page 100 for details on Philip Johnson’s termination arrangements.
There has been no subsequent change in Executive Directors’ shareholding and share interests as of 4 August 2022.
Strategic report Financial statements Other information
99
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
Pension
No Directors or employees participate in a defined benefit pension scheme.
The Group operates its own Group Self Invested Personal Pension (the GSIPP) which applies to
Executive Directors and employees. The Company requires a minimum employee contribution of 5%
of reference salary and in exchange the Company will contribute 5%. Employees who contribute up to
3% more than the 5% receive double matching. This means that for an 8% employee contribution the
Company contribution is 11%.
Colleagues wishing to make additional contributions to the GSIPP can do so via salary exchange or
bonus waiver ensuring that they benefit from the maximum, immediate relief from income tax and
National Insurance.
Additionally the Group has introduced a pension redirection mechanism from July 2020 where
colleagues who have maximised their pension tax relief can contribute, on a post-tax basis, to a Fund
& Share Account and continue to receive matching in the same way as the current pension matching,
up to a maximum 11% employer contribution, net of appropriate taxes. Where a colleague, who has
maximised their pension tax relief does not wish to contribute to a savings vehicle, the Group will
make an additional monthly payment equivalent to the employer’s pension contribution amount
forsaken up to a maximum of 5% of reference salary. The Committee confirms that no excess
retirement benefits have been paid to current or past Executive Directors.
Payments to third parties
The Committee confirms that no amounts have been paid to third parties in respect
of Directors’ services.
Payments to past Directors/loss of office
As announced on 29 July 2021, Philip Johnson stepped down from the Board as Chief Financial
Officer on 31 January 2022 for personal reasons. In order to ensure an orderly handover of
responsibility, it was agreed that Philip would remain available to assist the business up to the end
of his notice period and he left the Company on 31 May 2022. He continued to receive his salary
and contractual benefits up to this date. In line with the shareholder approved Remuneration Policy,
the Remuneration Committee approved good leaver status for Philip in relation to his outstanding
deferred bonus and SPP awards. Accordingly, his unvested SPP awards will vest on their original
vesting dates to the extent that performance conditions are met. His deferred bonus awards will also
vest in full and in accordance with their original time frames. Unvested awards will remain subject to
the terms of their plan rules and to malus and clawback provisions. For the FY22 annual bonus, Philip
was eligible to receive a pro-rated bonus for the period worked during his notice period. The award
was determined in line with the bonus framework set out in the 2021 Directors’ Remuneration Report
and further details of the performance assessment are provided on page 97. In accordance with the
Remuneration Policy, the award will be subject to deferral and released at the normal time.
As Philip had not reached his in-employment shareholding guideline at the point of departure, he is
currently required to retain a shareholding equal to the number of shares actually held on departure
for twenty-four months post-cessation. His shareholding during this period will be monitored by the
Company, and shares may only be sold with the prior consent of the Board Chair or by compulsory
purchase. There were no further payments made for loss of office.
Remuneration in context
Total shareholder return
The following graph shows the Company’s performance measured by total shareholder return (TSR),
which is the capital growth and dividends paid. This is compared with the performance of the FTSE
350 Financial Services Index for the last 10 years.
This chart shows the value of £100 invested in the Company on 1 July 2012 compared with the value
of £100 invested in the FTSE 350 Financial Services Index for each of our financial year ends to
30 June 2022. We have chosen the FTSE 350 Financial Services Index as we believe it is the most
appropriate comparator for benchmarking our corporate performance over the 10-year period.
500
400
300
200
100
0
2012
2022
Hargreaves Lansdown
FTSE 350 Financial Services Index
Strategic report Financial statements Other information
100
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
Chief Executive Officer remuneration for the past ten years
CEO Total remuneration Annual bonus as a percentage of maximum Shares vesting as a percentage of maximum
4
2013 Ian Gorham £6,751,557 (£1,500,000)
3
100%
2014 Ian Gorham £10,608,359 60% (£1,350,000) 100%
2015 Ian Gorham £2,058,642 52% (£1,170,000) nil
2016 Ian Gorham £2,070,861 78% (£1,550,000) nil
2017 Ian Gorham
1
/Chris Hill
2
£1,167,549/£1,035,211 43%/81% (£600,000/£790,625) 66%
2018 Chris Hill £2,454,048 81% (£1,700,000) 39%
2019 Chris Hill £648,278 0% nil nil
2020 Chris Hill £2,739,520 94% (£2,072,000) nil
2021 Chris Hill £2,678,581 86% (£1,958,092) nil
2022 Chris Hill £1,902,406 37% (£963,375) 100%
Notes
1 Emoluments for Ian Gorham for 2017 are shown for the period to 9 February 2017 when he stepped down as Chief Executive Officer.
2 Emoluments for Chris Hill for 2017 reflect his emoluments for the period from 9 February 2017, and exclude his earnings as Chief Financial Officer and Deputy Chief Executive Officer prior to that date.
3 Prior to 2014, there was no individual cap on annual bonus payable, other than the overall bonus pool cap as a percentage of profit before tax. Bonus figures shown are gross of any sacrifice into pension and before any compulsory deferral.
4 Options vesting in 2014 and 2013 pre-dated the LTIP and therefore had no performance criteria. The 2017 SPP award was assessed to vest at 100% based on assessment of performance conditions over the performance period 1 July 2017 to 30 June 2022.
Percentage change of all Directors and all employees
The table below shows the average percentage change in remuneration of each Executive and Non-Executive Director against the Group’s employees as a whole for the last three years,
between the year ended 30 June 2020 and the year ended 30 June 2021, and between the year ended 30 June 2021 and the year ended 30 June 2022.
Element of pay
Average employee
(% change)
1
Executive Directors (% change) Non-Executive Directors (% change)
C Hill A Stirling
2
P Johnson D Oppenheimer J Troiano M Mannings A Blance A Collins R Perkin
5
D Olley P James
2
Base Salary 2022 6.59% 8.02% – 4.03% 0% 1.92% 27.01% 31.99% 55.15% -2.30% 2.99% –
2021 6.85% 2.86% – 2.91% 2.92% 103.64% – – – 11.33% 2.86%
2020 6.41% 2.9% – 2.9% 0% – – – – 4.3% 0%
Benefits 2022 -11.13%
7
0% – 0%
2021 -7.15% -78.72%
3
– -86.08%
3
-100%
4
-100%
4
– – – -100%
4
-100%
4
2020 2.82 0% – 366% – – – – – – –
Annual Bonus 2022 -6.7% -50.82% – -78.29%
2021 0.8% -5.50% – -9.78% N/A N/A – – – N/A N/A N/A
2020 11.8% – – – N/A N/A – – – N/A N/A N/A
Notes
1 This table shows the average percentage change in salary, benefits and bonus (on a full-time equivalent basis) delivered to eligible colleagues in the last three years.
2 The table includes Penny James who was appointed as a Non-Executive Director on 1 September 2021 and Amy Stirling who was appointed as an Executive Director on 21 February 2022. It is therefore not possible to reflect a percentage change figure.
3 The decrease in benefits for C Hill and P Johnson is due to the exclusion of the SAYE discount value over the full three-year contract term which was reported last year (in accordance with the single figure methodology).
4 As there were no taxable expenses reimbursed for the Non-Executive Directors for the 2020/21 performance year, it is not possible to show the percentage change to the 2021/22 performance year.
5 As Roger Perkin stepped down as interim SID on 31 August 2021, total base salary has decreased.
6 This table includes Philip Johnson who stood down an Executive Director on 31 January 2022.
7 The decrease in average taxable benefit percentage change is due to an increased number of employees but no increase to benefit take-up, and rates remained the same.
Strategic report Financial statements Other information
101
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
CEO pay ratio
The table below sets out the ratio at median, 25th and 75th percentile of the total remuneration
received by the CEO for the last three years compared to the total remuneration received by our
UK colleagues. For the past three years, we have published our CEO pay ratio using the same
methodology as set out below.
Year Method Lower Quartile Median Upper quartile Change in median
2020 Option A 103:1 73:1 47:1 n/a
2021 Option A 101:1 73:1 47:1 0%
2022 Option A 73:1 52:1 32:1 -29%
Notes to the calculations:
1 The median, 25th and 75th percentile colleagues were determined based on calculating total annual remuneration up to and including
30 June 2022 for colleagues employed at 30 June 2022.
2 Basic salary for part-time colleagues and new joiners within the calculation year have been converted into full-time annualised equivalent
values for the purposes of the calculations.
3 ‘Option A’ was chosen from the options available in the reporting regulations since it is the most robust and statistically accurate method.
4 Benefits are provided on the same terms to Executive Directors and all employees alike and as such are not included within the table above.
The methodology used in these calculations is consistent with those in the single figure table, with the same approach being taken for 2020
and 2021.
5 Set out separately in the table below is the basic salary and total remuneration figures (including bonus) for each of the percentiles in each year.
6 2020 and 2021 calculations have been included to allow for a relative comparison of the 2022 outcomes to be evaluated.
Year Pay element UK employee lower quartile UK employee Median UK employee upper quartile
2021 Basic salary 21,600 28,619 45,000
Total remuneration 26,422 36,796 57,055
2022 Basic salary 21,890 28,500 46,428
Total remuneration 25,973 36,497 58,977
The pay ratio has reduced due to the impact of business performance on the CEO’s bonus award.
There have been no material changes in pay or benefits of UK employees nor changes in the
proportion of employees working outside the UK or employed under contracts for service.
The remuneration policies and practices at HL are consistent across both our Executive Directors
and the wider workforce and are designed to promote the long-term success of the Company,
promoting both high individual and team performance. The same considerations and criteria apply
across a consistent framework during the assessment of performance and pay outcomes, noting
that the quantum of (risk-based) variable pay is higher for the CEO than across the wider workforce.
Having overseen the application of performance and pay policies, and reviewed reports from the
Reward Governance Committee and Colleague Forum throughout the period, the Committee is
satisfied that our 2022 median pay ratio is consistent with the Company’s wider pay, reward and
progression policies for our UK employees.
Relative importance of the spend on remuneration
The table below shows the actual expenditure of the Group in terms of total employee remuneration,
profit before tax, and total dividends for this and the previous year together with the percentage
change between the years. Profit before tax has been chosen as a metric in this instance to
demonstrate the profits generated for shareholders and the relationship between this and the overall
cost of employee remuneration.
Total dividend paid
£m
Profit
before tax
£m
Employee costs
£m
Total dividend declared
(pence per share)
2022 241.1 269.2 155.5 39.7p
2021 263.5 366.0 119.8 50.5p
% change -8.5% -26.4% 29.8% -21.4%
Strategic report Financial statements Other information
102
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
All employees across the Group are subject to the same process in respect of annual salary reviews.
Consideration is given to the scope of each role, the level of experience, responsibility, progress in
role, and pay levels for similar roles in comparable companies. The performance and potential of the
individual is also considered.
All permanent employees employed on or before 1 April of the performance year are considered for
an annual performance bonus, or equivalent, with individual performance metrics used to determine
awards and similar metrics to those used for the Executive Directors guiding the overall bonus pool.
All eligible employees (under the rules of the scheme) may also participate in the Group’s Save As
You Earn.
External Directorships of Executive Directors in the year
On appointment, Amy Stirling held two non-executive directorships. She stepped down from RIT
Capital Partners Plc on 4 May 2022 and from Virgin Money UK Plc on 5 May 2022 as a result of her
appointment to the HL plc Board.
Chair and Non-Executive Director remuneration
Fees for Non-Executive Directors are structured with a base fee payable to all Non-Executive
Directors, with additional fees paid for the role of Senior Independent Director and for the Chairs
of Board sub-committees.
Fees for Non-Executive Directors for the 2022 financial year are as follows:
Fee policy
Fees from 1 July 2022 (£ p.a.) Fees from 1 July 2021 (£ p.a.)
Chair £334,500 £334,500
Base fee for Non-Executives £74,150 £74,150
Senior Independent Director £15,850 £15,850
Chair of Audit Committee £21,100 £21,100
Chair of Remuneration Committee £21,100 £21,100
Chair of Risk Committee £21,100 £21,100
Chair of Nomination Committee
1
£10,000 £10,000
Note
1 Under current arrangements the Chair fulfils this role for no additional fee.
Fees have not been increased this year.
Remuneration payable for the 2021 financial year (1 July 2021 to 30 June 2022) (audited)
The remuneration received by Non-Executive Directors in 2022 is set out below.
2021 fees
(£)
2021 Taxable
Benefits i.e.
expenses
(£)
4
2021 Total
(£)
2022 fees
(£)
2022 Taxable
Benefits i.e.
expenses
(£)
2022 Total
(£)
D Oppenheimer 334,500 – 334,500 334,500 28,100 362,600
S Garrood
1
53,950 – 53,950 – – –
F Clutterbuck
2
30,833 – 30,833 – – –
S Robertson
2
39,833 – 39,833 – – –
R Perkin 100,200 – 100,200 97,892 1,008 98,900
D Olley 72,000 – 72,000 74,150 905 75,055
J Troiano 112,000 – 112,000 114,150 1,242 115,392
A Blance 72,166 – 72,166 95,250 3,986 99,236
M Mannings 74,992 – 74,992 95,250 2,109 97,359
A Collins 47,793 – 47,793 74,150 1,012 75,162
P James
3
– – – 75,000 1,102 76,102
Notes
1 Stood down 31 December 2020.
2 Stood down 31 October 2020.
3 Joined 1 September 2021.
4 No expenses were claimed during the year due to ongoing travel restrictions as a result of COVID-19.
Non-Executive Directors received no other benefits or other remuneration other than reimbursement
of all reasonable and properly documented travel, subsistence and other incidental expenses incurred
in the performance of their duties and any tax and social costs arising thereon, the benefit of officers’
liability insurance and reduced fees for the use of Hargreaves Lansdown services for themselves and
connected persons, on the same basis as all other Hargreaves Lansdown employees.
Strategic report Financial statements Other information
103
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
The table below shows, as at 30 June 2022; the Company shares held by the Non-Executive
Directors and connected persons:
Shares
D Oppenheimer 30,572
M Mannings Nil
A Blance Nil
A Collins Nil
R Perkin Nil
D Olley Nil
J Troiano 14,400
P James Nil
Note
1 There has been no subsequent change in current Non-Executive Directors’ shareholdings as of 4 August 2022.
Non-Executive Directors’ Service Contracts
Details of the Non-Executive Directors’ terms of appointment are set out below
Commencement
of appointment Date of contract
Expiry/review date
of current contract
D Oppenheimer 2 February 2018 2 February 2021 1 February 2024
M Mannings 1 September 2020 1 September 2020 31 August 2023
A Blance 1 September 2020 1 September 2020 31 August 2023
A Collins 2 November 2020 2 November 2020 1 November 2023
R Perkin 1 September 2017 1 September 2020 31 August 2023
D Olley 1 June 2019 1 June 2022 31 May 2025
J Troiano 1 January 2020 1 January 2020 31 December 2022
P James 1 September 2021 1 September 2021 31 August 2024
Non-Executive Directors are appointed for a three-year term, subject to confirmation by shareholders
at the following annual general meeting (AGM) and annual re-election at each subsequent AGM.
Consideration of shareholder views
The Committee recognises that Director remuneration is an area of particular interest to our
shareholders and in setting and considering changes to remuneration, it is critical that we listen to,
and take into account, their views.
The Committee considers shareholder feedback received in relation to the AGM each year at its first
meeting following the AGM. This feedback, as well as any additional feedback received during any
other meetings with shareholders, is then considered as part of the Company’s annual review of the
implementation of the Remuneration Policy. We also regularly engage with our largest shareholders
to ensure we understand the range of views which exist on remuneration issues.
When any material changes are made to the Policy or its implementation, the Committee will discuss
these in advance with our major shareholders wherever practical. The Committee will also consult
with professional advisers to ensure we consider regulatory requirements and current market and
industry practices, where appropriate.
We will be engaging again with our major shareholders during the forthcoming financial year to hear
reflections on our approach to executive remuneration.
Strategic report Financial statements Other information
104
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
Implementation of the Remuneration Policy in 2022/23 – Executive Directors
Salary
The Executive Directors’ base salaries were reviewed in June 2022. In reviewing base salaries
the Committee takes into account salaries paid elsewhere across the Group, relevant market data
and information on remuneration practices in peer companies in the financial services sector.
In accordance with the two-stage salary proposal set out to shareholders in 2021, the Committee
has determined it remains appropriate to award the CEO the second of this two-stage salary increase
of 4.3% for 2022/23. This increase is lower than the wider workforce average.
The CFO was appointed in February 2022. In determining her remuneration package, the Committee
took into consideration the calibre of the candidate and the experience she brings to the role. As a
result, her salary was set at £525,000.
Given her time in role, the Committee has determined that no salary increase will be awarded
for 2022/23.
Name of Director Salary as at 1 July 2021 (£) Salary as at 1 July 2022 (£) % increase
Chris Hill 700,000 730,000 4.3%
Amy Stirling n/a 525,000 0.0%
Annual bonus
At the Capital Markets Day in February, we set out our strategic plan to transform the savings
and investment experience, combine the best of human expertise augmented by digital capability,
and deliver a uniquely personalised service to management of our clients’ health and wealth.
Delivery of the strategy will be focused around five strategic pillars with the management team
setting out their priorities against these pillars each year. The committee has therefore determined
that it would be more appropriate to align the assessment of annual bonus awards against the
strategic pillars whilst maintaining a strong focus on financial performance (55% across profit before
tax, underlying costs, total clients and net new business).
The performance assessment will include the following measures:
Weighting Strategic Pillar Shared Objective Measure
20% Growth Develop our client proposition to retain
and attract clients and accelerate our
growth.
Net New Business (NNB)* (10%)
Total Clients* (10%)
27.5% Client Service
and Efficiency
Improve our client experience efficiently
enabling us all to add more value and
reduce our costs.
Client Service NPS (10%)
Underlying Cost* (17.5%)
25% Digital Backbone Use new tech and data to improve our
client and colleague proposition,
becoming product led to empower us all
to innovate.
Strategic Delivery (20%)
Client Retention (5%)
5% People and Culture Make HL a great place to work for
everyone with clear ways of working,
joined up thinking and a focus on our
own development.
Colleague engagement and Diversity
(2.5%)
ESG (2.5%)
22.5% Foundations Work together to improve our resilience
as a business, support our growth, drive
efficiency and embrace lessons learned.
Profit Before Tax (Statutory)* (17.5%)
Risk and Controls (5%)
* These are financial or growth measures and make up 55% of the overall performance assessment.
The assessment of any award will include an overlay that takes account of the conduct, behaviours
and culture evidenced by each Executive Director in line with the Hargreaves Lansdown values.
Risk and compliance considerations will also be taken into account at both Company and
individual levels.
In addition, performance will be assessed against how they have demonstrated behaviours aligned
to our values: Put the client first | Go the extra mile | Make it easy | Do the right thing | Do it better.
Targets have been set at the start of the financial year based (where applicable) on agreed operating
plan and taking account of consensus. The targets set in relation to these measures are considered
to be commercially sensitive, but will be disclosed in next year’s Annual Remuneration Report.
In making an assessment of performance, the Committee will give due consideration to market
movements, investor sentiment, interest rates and the impact of regulation, all of which are beyond
the control of the Executive Directors. They will also consider the extent to which management has
operated within the agreed risk parameters and the extent to which the bonus outcome reflects the
overall performance of the business in the context of client and shareholder experience. Details of
the Committee’s assessment will be given in the Annual Remuneration Report next year.
Strategic report Financial statements Other information
105
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
As referred to on page 92, the maximum bonus opportunity for the CEO was increased to 400%
of salary which was approved by shareholders at the 2020 AGM. The Committee agreed that this
increase would be introduced in phased increments, with the on-target opportunity also reducing
to 50% of maximum over the life of the policy.
For 2022/23, in line with the Remuneration Policy, the following on-target and maximum bonus
opportunities will therefore apply:
On-target bonus opportunity
(% of base salary)
Maximum bonus opportunity
(% of base salary)
Chris Hill 200% 400%
Amy Stirling 175% 350%
In line with the approved policy, any bonus awarded to each Executive Director will be delivered in a
combination of cash and shares as required by regulation and following the end of the financial year
with a minimum of 40% of any bonus deferred over HL plc shares vesting in equal tranches over a
period of three years, subject to continued employment and relevant post-vesting retention period.
In line with the policy, dividend alternatives will accrue on the deferred share element of bonuses
up to the time of vesting and will be paid at exercise. Bonus awards are subject to a formal malus
mechanism until vesting and clawback until the later of three years from the date of award or until
the end of any post vesting retention period. The Committee can defer a decision to award bonuses
or award and suspend payment of bonuses for any individual in scope of an investigation into their
conduct or responsibility, accountability or knowledge and/or influence over any material risk event
identified during or after the performance year. For further details of the relevant malus/clawback
triggers, please see page 81 of the 2020 Report and Financial Statements.
Sustained Performance Plan (SPP)
For 2022/23, each Executive Director is to receive an award over HL plc shares with a face value
of 50% of base salary, subject to satisfactory personal performance in the period prior to grant.
Awards will vest, subject to the achievement of the following underpinning performance conditions
assessed over a three year period:
• A requirement for average AUA for the last complete financial year prior to the third anniversary
of grant to be above the average AUA for the last complete financial year prior to award;
• Maintenance of and continued management focus to improve risk, compliance and internal control
environment across the performance period; and
• Satisfactory personal performance throughout the performance period.
The Committee will review performance against these underpinning conditions in the round,
giving due consideration to market movements, client and shareholder experience, and the impact of
regulation, all of which are beyond the control of the Executive Directors. They will also consider the
extent to which management has operated within the agreed risk parameters in assessing the extent
to which awards should vest. The Committee retains discretion to make adjustments to the vesting
outcome if it is not considered to be appropriate taking into account overall financial and non-financial
performance of the business over the period or share price performance including consideration of
any windfall gains arising and any other significant events which may have impacted the Company’s
share price or the market as a whole.
Dividend alternatives will accrue up to the time of vesting and will be paid at exercise.
Awards are subject to a formal malus mechanism until vesting. Awards are subject to a two-year
holding period and clawback until the end of this post-vesting retention period.
Under the Group’s variable pay plans, the Committee can defer a decision to award bonuses or award
and suspend payment of bonuses or suspend vesting of deferred bonuses or SPP awards for any
individual in scope of an investigation into their conduct or responsibility, accountability or knowledge
and/or influence over any material risk event identified during or after the performance year. For
further details of the relevant triggers, please see page 81 of the 2021 Report & Financial Statements.
Statement of voting at the AGM
At the AGM held in 2021, votes cast by proxy and at the meeting in respect of the Directors’
remuneration report were as follows:
Resolution
Votes for (including
discretionary votes) % for
Votes
against % against
Total votes
cast excluding
votes withheld
Votes
withheld
Total votes
cast including
votes withheld
Approve Directors’
Report on
Remuneration 393,010,235 95.52 18,443,239 4.48 411,453,474 46,945 411,500,419
Approve Directors’
Remuneration
Policy 386,802,133 96.30 14,850,824 3.70 401,652,957 1,516,450 403,169,407
We will be reviewing the remuneration policy in advance of submitting to shareholders at the 2023
AGM, three years since shareholders approved the policy in 2020.
Moni Mannings
Chair of the Remuneration Committee
4 August 2022
Strategic report Financial statements Other information
106
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
SIGNIFICANT AND
POSITIVE CHANGE
NOMINATION COMMITTEE REPORT
Dear Shareholder
As Chair of the Nomination Committee, I am pleased to present
this report on the Committee’s activities in the year under review.
The Committee has overseen another year of significant and
positive change both at Board level and within the Group’s senior
management. The Committee continues to ensure that there is
alignment with the Group’s overall Strategy resulting in oversight
of a number of high calibre appointments.
Role of the Nomination Committee
The Committee plays a key role in reviewing and monitoring
the composition of the Board and its Committees to ensure that
each has the right balance of skills, knowledge and experience
to function effectively and support the Group in achieving its
strategic objectives. In doing so, it conducts ongoing succession
planning to ensure there is a diverse pipeline of talent for
appointments to the Board and senior management to meet
the Group’s current and anticipated future business needs.
The Committee leads the process for appointments to the Board
and re-election of Directors, having regard to the skills and
experience required and the need to promote diversity throughout
the Group. Our recruitment during the year demonstrates the
effectiveness of the processes we have implemented.
As part of its role in ensuring the Board and its Committees are
functioning effectively, the Committee also oversees the annual
evaluation of the Board’s performance and monitors the Group’s
progress in implementing recommendations. Other areas of
responsibility covered by the Committee are detailed over the
following pages.
The detailed responsibilities of the Committee are set out in its
terms of reference, which are available on the Group’s website
at www.hl.co.uk/about-us/board-of-directors.
This report provides an overview of how the Committee has
discharged its responsibilities during the period under review.
Composition and meeting attendance
At the date of this report, Committee members are Deanna
Oppenheimer (Chair), Andrea Blance, Penny James, Moni Mannings
and Roger Perkin, each of whom are independent Non-Executive
Directors. With the exception of Penny James, who has been
a member since her appointment in September 2021, all have
been members throughout the period under review. The Code
requirement that a majority of members are independent
Non-Executive Directors has therefore been satisfied throughout
the period under review.
Committee appointments are made for three-year terms and can
be extended for no more than two additional three-year terms,
provided that the member still meets the criteria for membership
and annual re-election at the AGM by shareholders. The Board
regularly reviews the composition of the Committee and makes
appointments accordingly.
Attendance at Committee meetings
during the year to 30 June 2022
Member Position
Eligible
meetings
Attended
meetings
Deanna Oppenheimer Chair • • • • • • • •
Andrea Blance Independent
Non-Executive Director
• • • • • • • •
Penny James Independent
Non-Executive Director
• • • • • • • •
Moni Mannings Independent
Non-Executive Director
• • • • • • • •
Roger Perkin Independent
Non-Executive Director
• • • • • • • •
Committee meeting attendance shown for all scheduled meetings
during the year noting that on occasion ad-hoc meetings also took
place to deal with timely matters.
The Group’s objective is to build a
diverse workforce at all levels and
create an inclusive culture for all.
Deanna Oppenheimer
Chair of the Nomination Committee
Strategic report Financial statements Other information
107
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
NOMINATION COMMITTEE REPORT
SIGNIFICANT AND POSITIVE CHANGE CONTINUED
The Committee held four scheduled meetings in the period under
review. The attendance of members is set out in the table on page
107. Other individuals attend Committee meetings at the request
of the Committee Chair and usually include the Chief Executive
Officer and Chief People Officer and, where relevant, the Group’s
external advisers. The Committee has access to the Group
Company Secretary, who also acts as secretary to the Committee.
The Committee is authorised to obtain independent professional
advice where it considers it necessary.
Committee activities during the period under review
Succession planning
The Committee has responsibility for ensuring appropriate
succession planning for both the Board and the Group’s senior
management. During the year the Committee has:
• Worked with external advisers to focus on succession planning
for the Executive Director roles.
• Further developed the succession planning and talent pipeline
for members of the Executive Committee who hold Senior
Manager Functions (SMFs) to ensure there is increased
resilience in these key areas.
• Taken account of key drivers such as recommendations
from Board evaluations, feedback from meetings with key
stakeholders including the FCA, investors, the Committee’s
own reviews of Board size, structure and composition, and
developments in corporate governance good practice.
• Actively considered mechanisms for staggering Board tenure
to manage evenly the distribution of change amongst the Board.
• Received and reviewed reports on short-term contingency
planning to prepare for unexpected periods using existing talent.
This has comprised of an annual report on Non-Executive
Director contingency planning, as well as in-depth contingency
planning for the Senior Management Functions across the
Group’s regulated subsidiaries that are subject to the SMCR
regime, which includes plans for the Executive Directors on
the Board.
Board size, structure and composition (incl. skills matrix)
During the year the Committee has:
• Regularly reviewed the size, structure and composition of the
Board, as well as conducting annual reviews of the composition
of its Committees. This resulted in John Troiano being appointed
to the Remuneration Committee, to increase its resilience. His
extensive industry experience will be particularly beneficial in the
functioning of this committee – particularly with the introduction
of the Investment Firms Prudential Regime (IFPR).
• Considered the tenure of the Non-Executive Directors. Potential
gaps in skills, knowledge and experience when Directors rotate
off are taken into account when developing succession planning
for both the Board and its Committees.
• Reviewed the detailed skills matrix to aid it in identifying the
present and future needs of the Board, taking into account
findings of the Board Effectiveness Review to help identify
the skills and expertise needed in future Board members.
• Enhanced the recognition given to skills acquired outside the
corporate board environment and refined the analysis of ESG
skills to ensure better alignment with the needs of the Group.
• Taken an active role in considering the development of talent
and balance of skills within the Group’s subsidiary boards.
Board induction and training
• The Board recognises that the breadth and depth of knowledge
and experience required for the boards of listed companies
continues to expand.
• Newly appointed Directors receive robust induction and training.
Further details are provided on page 72.
• Directors attend collective training events on topics of interest
for the Board as a whole, such as key regulatory changes,
business developments, cyber security and market updates,
and have access to bespoke training events for individuals based
on specific development needs, background or changing roles.
For example, this has included detailed ICARA training for Risk
Committee members.
• Training is offered via a range of mediums such as deep dives at
Board or Committee meetings, group or one-on-one sessions at
the office or remotely, as well as more formal courses or training
sessions offered by third-party providers.
• Details of the training provided to the Board during the period
under review are provided on page 72.
Diversity
The Board believes that building a diverse and inclusive
workforce is important not just because it is the right thing to do,
but because it is good for the Group’s clients, its business and
its people. The Group’s objective is to build a diverse workforce
at all levels and create an inclusive culture for all. The Board is
committed to creating a culture where people treat each other
with dignity and are encouraged to realise their full potential.
The Group’s inclusion and diversity policy supports this by making
clear the Group’s aspirations and commitment to inclusion and
diversity, and by defining the roles and responsibilities that will
support it in attaining its objectives. The Group’s inclusion and
diversity strategy outlines the priority areas of focus which
are currently:
• To build a culture of inclusion where colleagues feel safe,
respected and like they belong.
• To increase ethnic minority representation, recognising the
need to accelerate progress in this area to better align to the
local demographic.
• To maintain our commitment to increase female representation
and close the gender pay gap.
During the period, the Committee reviewed progress against the
Group’s inclusion and diversity strategy and action plan including
a number of key achievements details of which can be found on
pages 26 to 30 of the Strategic Report.
Gender balance
The Board continues to focus on gender diversity both at Board
level and in the Group’s senior management. The Committee has
overseen the development of specific strategic initiatives in this
respect, including to hire more, promote more and lose less women
in senior positions.
As at 30 June 2022, the Board numbered ten in total, five of
whom are women with three of the four senior Board positions
(defined as Chair, Senior Independent Director Chief, Chief
Executive Officer and Chief Financial Officer) being held
by women.
Strategic report Financial statements Other information
108
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
NOMINATION COMMITTEE REPORT
SIGNIFICANT AND POSITIVE CHANGE CONTINUED
The Board is proud to have met the targets set out in the revised
Listing Rules (LR 9.8.6R(9) and LR 14.3.33R(1)) which came into
force on 20 April 2022 and has revised its Diversity Policy to take
account of these targets. The Board recognises that there is
always more to do with regards to diversity in all its elements
and continues to focus on promoting diversity as part of its
recruitment processes.
The Group continues to promote diversity across the organisation
and is proud to be a signatory to the Women in Finance Charter,
a government initiative to promote inclusion and diversity. As at
30 June 2022, female representation across the Group’s senior
management (as per the Code definition) was 37.5%. For these
purposes ‘senior management’ comprises members of the Group
Executive Committee, the Group Company Secretary, and each of
their direct reports (including administrative staff). If administrative
staff are removed then female representation across the Group’s
senior management as per the Companies Act 2006 definition
(which only includes those responsible for planning, directing
or controlling the activities of the Group or a strategically significant
part) was 33.3%. Further information on how the Group is seeking to
promote diversity can be found on page 27 of the Strategic Report.
Ethnic diversity
The Committee is pleased to report that the Company continues
to meet the recommendation from the Parker Review that there
should be at least one Director of colour on the Board by 2021.
During the period under review, the Committee implemented
new ethnicity targets and embedded them into the senior
leadership team’s personal objectives. The launch of the Strive
programme, participation in the 10,000 Black interns programme,
our award-winning involvement in the Stepping Up programme
alongside our ongoing support for St Pauls Carnival, all help to
promote HL as a potential employer to a more diverse slate of
candidates, alongside the continuation of internal mentoring and
sponsorship initiatives. For more information about the Group’s
approach to ethnic diversity please see the People section
on page 27.
Board effectiveness
The Committee oversees progress on the implementation of
recommendations and actions from the annual evaluation of the
performance of the Board and its Committees. During the period,
an externally led Board evaluation was carried out, facilitated by
Independent Audit, an external consultancy with no connection
to the Group, who were appointed following a tender process.
In carrying out its review Independent Audit undertook four main
strands of work:
• A review of board and committee papers.
• Interviews with all members of the Board, the Group Company
Secretary, members of the executive team and external advisors.
• Observation of Board Committee meetings in June 2021.
• The drafting of a report with quality assurance by an
independent individual from within Independent Audit which was
then shared with the Chair of the Board before being presented
at the August 2021 Board meeting.
Key priorities and outcomes from the 2021 external evaluation,
identified in Independent Audit’s report included the following:
• Oversight of management. Further strengthening senior
management within the Company to ensure a full complement of
skills with clarity over accountabilities and areas of responsibility.
• Strategy. Oversight of the development of a revised Group
Strategy with deep dives into key areas such as product, pricing
and services to support thinking. The need for clarity of targets
and milestones to track execution was also identified with the
importance of supporting papers highlighted.
• Risk. Continued oversight of the development of the Risk
Function and the Risk & Control Framework and the need
to hold the First Line to account within this framework.
• Subsidiary governance. It was suggested that the Group’s
structure be reviewed to identify opportunities for streamlining
and clarification of responsibilities.
• Other. A number of other suggestions were made in relation
to the number of Board meetings per year and the size of the
Company Secretariat Team to support the Group’s governance.
The report also recognised that there had been much positive
change since the last externally led review with the Board
having undergone a substantial refresh and strengthening of
the Executive Team. Independent Audit also highlighted that
the Board and Committees worked effectively together, with the
Board being well chaired and embodying HL’s positive culture.
During the period under review, the Committee has overseen the
implementation of recommendations relating to its effectiveness
from the externally facilitated 2021 evaluation. This has included
increasing the clarity of roles, responsibilities and governance
within the organisation, which has supported the development
of the revised Strategy and associated execution plans to improve
effective Board oversight of the Executive.
Approach to recruitment
The Committee leads the process for appointments to the Board
other than for the Nominated Director (Adrian Collins) whose
appointment nonetheless requires Board approval. It uses the
output of its detailed succession planning, contingency planning
and regular assessment of Board and Committee composition
to identify the skills, knowledge and experience required in
candidates to meet the Group’s current and future requirements.
The Committee engages external search firms for all Board
appointments (other than for the Nominated Director), using
their networks and expertise to identify a list of candidates that
meet the capability requirements developed by the Committee.
Shortlisted candidates are invited to interview with various
members of the Board and senior management. Summaries of
the outcome of interviews, along with candidate CVs, are then
provided to the Committee for detailed consideration.
In line with the Group’s Board diversity policy, the Committee
reviews broader aspects of diversity as part of its reviews of Board
composition and succession planning, and when searching for
candidates, the Committee takes into account a number of factors,
including the benefits of diversity and balance of composition of
the Board, including in terms of ethnicity and gender. The Group’s
policy is to work with search firms who have signed up to the
Standard Voluntary Code of Conduct for Executive Search Firms
on diversity and best practice, and reject candidate lists that are
not suitably diverse without sufficient reason. The overriding
requirement is that recommendations for appointments are based
on merit against objective criteria, and that the best candidates
are put forward for consideration. Such criteria will usually include,
but is not limited to: previous experience within financial services
experience in a regulated environment, consumer business being
preferred; a track record of success in a senior leadership role of
a substantial company; prior non-executive director experience
or equivalent; strong regulatory relationships and understanding
of key themes and trends; experience of large scale transformation
programmes – specifically relating to technology; and the ability
to contribute broadly at a strategic and commercial level.
The Committee recommends its preferred candidate to the Board
for approval.
Strategic report Financial statements Other information
109
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
NOMINATION COMMITTEE REPORT
SIGNIFICANT AND POSITIVE CHANGE CONTINUED
Search for a new independent Non-Executive Director
During the period under review, the Committee carried out a
detailed search for one new Non-Executive Director (with the
search for Penny James having been carried out in the previous
reporting year). The focus of this search was to further build
resilience into the membership of the Board’s Committees and
aid succession planning.
The Committee engaged the Lygon Group, an independent
external search agency who are signatories to the Voluntary Code
of Conduct for Executive Search Firms, to assist with the search.
Following a rigorous process involving initial interviews with
a range of potential candidates, Darren Pope was identified
as the preferred candidate. Further interviews were conducted
by all members of the Board and selected senior management.
Having received detailed feedback from the interview process
the Company was pleased to announce the appointment of
Darren Pope as Non-Executive Director with effect from
1 September 2022. He will also join the Board’s Audit and
Risk Committees from the same date as Audit Chair designate.
Search for a new Executive Director
Following a rigorous process involving initial interviews with
a range of potential candidates, Amy Stirling was identified
as the preferred candidate. Further interviews were conducted
by all members of the Board and selected senior management.
Having received detailed feedback from the interview process,
the Committee was pleased to recommend Amy’s appointment
to the Board. Amy was appointed as Executive Director with effect
from 21 February 2022. The Committee engaged Spencer Stuart,
an independent external search agency who are signatories to the
Voluntary Code of Conduct for Executive Search Firms, to assist
with the search.
Director independence, time commitment and re-election
The Committee conducted its annual review of the independence
of the Non-Executive Directors, and time commitments of the
Directors generally, at its June meeting. In reviewing the
independence of the Non-Executive Directors, the Committee
considered in detail whether any circumstances have arisen,
including those set out in Provision 10 of the Code, which are
likely to impair, or could appear to impair the independence of
each Non-Executive Director. This included consideration of length
of tenure, existing and proposed external directorships and other
similar appointments, and any other conflicts recorded by the
Company in respect of each Non-Executive Director.
The Committee concluded that it considered each of the
Non-Executive Directors other than the Nominated Director to
be independent under the provisions of the Code. As an appointee
of a shareholder, the Nominated Director is not considered to be
independent but he is considered to be a valuable addition to the
Board because he provides a link to Peter Hargreaves’ experience
as well as his own wealth of experience in the fund management
industry. The Nominated Director does not sit on any of the
Committees and given that the majority of the Non-Executive
Directors are independent, the Committee considers this
adequately compensates for any potential imbalance that
may arise from the presence of the Nominated Director.
In concluding that each of the Non-Executive Directors has
sufficient time available to allocate to the Company as set out
in their letters of appointment, the Committee considered the
detailed requirements of the Code and the Senior Management
Arrangements, Systems and Controls (SYSC), attendance records
for each Director and responsiveness to Company business,
as well as the confirmations given to the Chair by each of the
Non-Executive Directors that they continue to have sufficient
time to discharge their responsibilities effectively. In addition to
each Non-Executive Director’s current responsibilities, the Chair
has reviewed and discussed plans and timing for adding new or
deleting current responsibilities to ensure each individual’s time
commitment remains consistent.
As part of its review of the size, structure and composition of the
Board, and taking into account its assessment of independence
and time commitments, the Committee is satisfied that the Board
continues to be effective. Based on its assessment of each
Director’s performance and ability to continue to contribute to the
Board in light of the knowledge, skill and experience they possess,
the Committee has recommended to the Board that each of the
Directors is put forward for election or re-election at the 2022
AGM as appropriate.
Overview of the Committee’s activities
in the year to 30 June 2022
20%
Governance
and other
25%
Recruitment
41%
Talent, leadership,
succession, diversity
& inclusion
14%
Board composition
and effectiveness
Nomination Committee priorities for 2022/23
Looking ahead to the next financial year, it is anticipated that the
Committee will focus in particular on:
• Succession planning for the Group’s Executive Director and ExCo
membership with a key focus on further developing a diverse
talent pipeline.
• Continuing with the ‘evergreen’ approach to succession planning
at the Board level to proactively anticipate successional demands
and to develop a pipeline of talent with the skills and capabilities
that align to the future strategic needs of the business.
• Overseeing the implementation of recommendations from the
2021 external Board evaluation and overseeing the 2022 process.
• Continuing to build a diverse and inclusive workforce.
• Developing the Committee from a Nomination Committee into
a Nomination & Governance Committee.
Deanna Oppenheimer
Chair of the Nomination Committee
4 August 2022
Strategic report Financial statements Other information
110
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
CONTINUOUS DRIVE
FOR IMPROVEMENT
RISK COMMITTEE REPORT
Dear Shareholder
As Chair of the Risk Committee, I am pleased to present this
report on the Committee’s activities in the year under review.
The Group’s approach to risk management and how it evaluates
and manages the principal risks and uncertainties the Group
faces are set out within the risk management section of the
Strategic Report.
The Committee has reviewed continued evidence of
enhancements to risk management and maturity, particularly
in operational resilience. The Committee has also overseen the
Group’s 2021 Internal Capital Adequacy Assessment Process
(ICAAP) and the Group’s response to the introduction of
Investment Firm Prudential Regime (IFPR).
Role of the Risk Committee
The Board as a whole remains responsible for the Group’s risk
management and strategy, and for determining an appropriate
risk appetite. The Committee assists the Board in its oversight
of risk within the Group. It has a particular focus on reviewing
and advising the Board on changes to the Group’s risk appetite,
and monitoring the effectiveness of, and improvements being
made to, the Group’s risk management framework. The Committee
also advises the Board on changes to the Group’s risk profile and
future risk strategy.
The Committee plays a key role in overseeing the management
of capital adequacy and liquidity through the ICAAP and from
2022 the Internal Capital Adequacy and Risk Assessment (ICARA).
The Committee advised the Remuneration Committee on risk
considerations to be taken into account when determining
Executive remuneration.
This year the Committee has reviewed the Group’s updated
strategy. The Committee reviewed core mobilisation priorities
to ensure scalable growth and noted the planned investment
in technology and infrastructure which would enable HL to further
support clients. As part of its review of the ICAAP and ICARA
capital adequacy documentation the Committee ensured HL
has sufficient capital for its future growth strategy.
In October 2021, the main compliance responsibilities were
transferred from the Audit Committee to this Committee. The
detailed responsibilities are available on the Group’s website.
Composition and meeting attendance
As at the date of this report, the members of the Committee are
Andrea Blance (Chair), Penny James, Moni Mannings, Dan Olley,
Roger Perkin and John Troiano, each of whom are independent
Non-Executive Directors. With the exception of Penny James,
who has been a member since her appointment in September
2021, all those listed have been members throughout the period
under review. Ongoing training is provided to assist Committee
members in performing their duties. This year the training included
sessions on ICARA and the FCA’s new Consumer Duty.
The Committee met six times in the period under review.
The attendance of members is set out in the table opposite.
Other individuals attend Committee meetings at the request
of the Committee Chair.
Attendance at Committee meetings
during the year to 30 June 2022
Member Position
Eligible
meetings
Attended
meetings
Andrea Blance Chair •••••• ••••••
Penny James Independent
Non-Executive Director
(from 1 September 2021)
••••• •••••
Moni Mannings Independent
Non-Executive Director
•••••• ••••••
Dan Olley Independent
Non-Executive Director
•••••• ••••••
Roger Perkin Independent
Non-Executive Director
•••••• ••••••
John Troiano Independent
Non-Executive Director
•••••• ••••••
Strong risk management
is central to sustainable
performance.
Andrea Blance
Chair of the Risk Committee
Strategic report Financial statements Other information
111
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
RISK COMMITTEE REPORT
CONTINUOUS DRIVE FOR IMPROVEMENT CONTINUED
Committee activities during the period under review
Risk management framework and risk appetite
• Oversaw the continued strengthening of the risk management
framework, including greater use of the Group risk taxonomy
and increased integration of emerging and strategic risk analysis
in risk profile reporting.
• Reviewed the further development of the risk appetite
framework with specific focus on metrics related to strategy.
• Reviewed and challenged the Group’s strategic risk appetite
statements, which bring together the core risk profile, including
strategic, operational and financial risk.
• Supported the strengthening of risk management responsibilities
in the operational teams in the first line, to enable the Group’s
Risk function to further focus on oversight.
• Reviewed and challenged reporting for evidence of continued
evolution of risk management in the first line and received
assurance on risk management via updates to the risk profile
from the Group Chief Risk Officer (GCRO).
• Oversaw the continued improvement of risk management
responsibilities via the Risk Transformation Plan to ensure
continuous improvement of the Group’s risk maturity, aligned
to the scale and complexity of an organisation the size of HL.
• Received the annual report from the GCRO on the adequacy
and operating effectiveness of risk management, the internal
control environment, and risk embedding across the Group.
• Monitored a robust assessment of the principal and emerging
risks facing the Group which included those that could threaten
its business model, future performance, solvency or liquidity.
• Received regular updates on the status of the Group’s risk
profile supported by reference to the Board approved risk
appetite, reviews of risk and compliance events and status
of control effectiveness.
ICAAP/ICARA
• Reviewed and challenged the ICAAP results in December 2021
prior to recommending to the Board for approval. This included
the assumptions and scenarios used, including those used
to calculate the Pillar 2 capital requirement and the risk
assessments aligned to business risks such as regulatory
compliance, data management, technology and financial crime.
• Oversaw the introduction of the new IFPR regime including
preparation, mapping and delivery of new requirements to
the Group’s ICARA process regime together with provisional
arrangements.
Information security and fraud risk
• Received a report on the current compliance position with
respect to GDPR and investments in people, processes and
technology as part of the Data Strategy.
• Reviewed an update on IT security and the cyber risk control
environment, including a view on the cyber threat landscape
in light of the Russian invasion of the Ukraine.
• Received regular updates on enhancement activities within
the Group’s financial crime framework and controls to enable
continued compliance with the legislative requirements and
the efficient management of increasing client volumes.
• Considered the annual report from the Money Laundering
Reporting Officer (MLRO) which specifically addressed the
adequacy and effectiveness of the Group’s anti-money
laundering and counter terrorist financing systems and controls.
Operational resilience
• Considered areas of focus to deliver compliance with the
FCA’s policy statement on operational resiliency expectations.
Recommended the operational resiliency thresholds for approval
by the Board.
• Scrutinised the Group’s approach to operational resilience and
crisis management planning, including management preparations
for tail risk events. Management’s response to the conflict
between Russia and the Ukraine, enabled the Committee to
monitor and oversee the Group’s preparedness to emerging risks
and stress tests completed as part of the ICARA were considered
and challenged as part of understanding possible impacts.
Compliance monitoring
• Received reports from the Compliance Monitoring function on
the effectiveness of measures designed to ensure compliance
with the Group’s regulatory obligations. This included the annual
report from the Compliance Director on the adequacy and
effectiveness of the Compliance function.
• Oversaw the management review of Compliance effectiveness
and the defined enhancement plan to ensure the continuous
improvement of Compliance capabilities aligned to the size
and complexity of the Group.
Oversight of Risk function
• Reviewed and approved the Group’s second line Risk Charter
and assurance plan.
• Received regular updates from the GCRO on resourcing and
workload, and a detailed report on the operational effectiveness
of the function.
Remuneration and risk
• Reviewed the GCRO’s paper to the Remuneration Committee
relating to risk adjustments to senior management reward
based on accountability for risk events. The paper covered
the Group, Clients, compliance issues and audit findings.
Disclosures and attestations
The Committee reviewed the Director attestation process
which has been refocused to specifically serve the Corporate
Governance Code requirement. It also reviewed and approved
the disclosures and statements in the Report and Financial
Statements relating to risk management.
Systems outages and oversight of lessons learned
During the period under review the Group experienced a brief
outage on the Group’s platform on 21 December and a brief period
of certain holdings not being viewable on the mobile app on
31 January.
Committee members were briefed on the investigations into
platform outages in December and January. Lessons have been
learned and actions identified to improve change controls to
mitigate the risk of similar procedural issues occurring again.
Strategic report Financial statements Other information
112
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
RISK COMMITTEE REPORT
CONTINUOUS DRIVE FOR IMPROVEMENT CONTINUED
Risk assessment of updated strategy
The Committee reviewed an independent second line assessment
of the updated strategy looking at the target state, the risk profile
and planning required to achieve the target state.
Execution risk was scrutinised and the Committee encouraged
management to ensure the financial assumptions were robust, the
key capabilities were in place and planned for and the focus areas
were clearly defined. The Committee has been provided with an
update on mobilisation of the strategy and is particularly focused
on overseeing the management of any heightened change
execution risks.
Risk maturity
The Committee continues to encourage the enhancement of the
Group’s risk maturity, aligned to the scale and complexity of an
organisation the size of HL.
Areas of improvement during the period included improved
use of risk data and reporting, the introduction of an enhanced
risk taxonomy, continued evolution of the Group’s governance
structures and horizon scanning to ensure a proactive approach
to the management of emerging risks.
The final phase of the Risk Transformation Plan which the
Committee will oversee will focus on delivering further maturity
in risk management, including implementation of a Group
Governance, Risk and Compliance tool. This will support the
creation of a single source for risk data, risk events and issues,
risk appetite monitoring and reporting.
The reporting and escalation of specific matters or risk events
through the GCRO’s report enabled the Committee to request
reports on areas such as the transfer of investments to assess
how management deal with any issues identified, including root
cause analysis.
Environmental, Social and Governance (ESG)
HL is managing ESG from a corporate, investment, client and
regulatory perspective. HL has enhanced the governance around
ESG and in particular with the implementation of a dedicated Task
Force and the collation of a dedicated ESG dashboard. The key
risks associated with ESG were covered during the year through
an assessment of emerging risks that identified key vulnerabilities
and their impacts.
Committee performance
The Committee is required to undertake a review of its
performance at least annually to ensure it is operating effectively
and in line with its terms of reference. This review was undertaken
in April and confirmed that activities during the period have been
in line with its remit.
Overview of the Committee’s activities
in the year to 30 June 2022
33%
Risk maturity,
management
and framework
13%
ICAAP
and ICARA
38%
Risk exposures
and reporting
16%
Governance
and other
Risk Committee priorities for 2022/23
Looking ahead to the next financial year, it is anticipated that
the Committee will focus in particular on:
• Delivering further maturity in risk management and
compliance controls;
• Approval of the first full ICARA report under the new IFPR regime;
• Oversight and challenge of the transformation plans to support
HL’s strategic objectives;
• Ensuring an enhanced change management framework
is embedded and governance in place to manage the
transformation;
• The Group’s response to the FCA’s new Consumer Duty; and
• Oversight of the Group’s risk management approach to
climate risk.
Andrea Blance
Chair of the Risk Committee
4 August 2022
Strategic report Financial statements Other information
113
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
DIRECTORS’ REPORT
The Directors present their report on the affairs of the Group,
together with the audited consolidated financial statements for
the year ended 30 June 2022.
The Company is the holding company for the Group. The Group’s
regulated operating subsidiaries carry out its business of providing
financial products and services, principally to retail clients. The
Group operates predominantly in the United Kingdom, with one
operating subsidiary (HL Tech) located in Poland that provides
IT development services to the rest of the Group.
The Directors’ Report for the period under review comprises pages
114 to 117 of the Report and Financial Statements, as well as other
sections incorporated by reference.
As permitted by legislation, certain information required to be
included in the Directors’ Report has instead been included in
the Strategic Report, on the basis that the Board consider those
matters to be of strategic importance. Commentary on the
development and performance of the Group’s business, including
in the field of research and development, and an indication of
likely future developments can be found on pages 1 to 50 of the
Strategic Report. Disclosures relating to the Group’s greenhouse
gas emissions, energy consumption and the measures being taken
to increase energy efficiency can be found on pages 37 to 43 of
the Strategic Report.
Details of how the Group engages with its key stakeholders,
including its shareholders, can be found on pages 24 to 25 of
the Strategic Report and on page 66 and 67 of the Corporate
Governance Report. Details of how the interests of stakeholders
are considered in the Board’s decision making can be found in
the Section 172 Statement on pages 118 to 121.
The Strategic Report and the Directors’ Report together form
the Management Report for the purposes of DTR 4.1.8R. For the
purposes of DTR 7.2.1R:
• A statement as to the Company’s compliance with the Code and
details of where the Code is publicly available can be found in
the Chair’s Introduction to Corporate Governance on page 62;
• A description of the main features of the Group’s internal control
and risk management systems in relation to the financial
reporting process can be found on page 73;
• Information regarding significant shareholders, special rights
regarding control of the Company, restrictions on voting rights,
the appointment and replacement of Directors and changes to
the Company’s articles of association, and the powers of the
Directors can be found on pages 114 to 117;
• A description of the composition and operation of the
Group’s corporate governance framework can be found on
pages 67 to 69; and
• A description of the Group’s diversity and inclusion policy,
its objectives, how it has been implemented and the results
in the period under review can be found on pages 27 to 30
and 108 to 109.
Information to be disclosed under LR 9.8.4R
Listing Rule 9.8.4R requires listed companies to include in their
annual financial report all information required under Listing Rule
9.8.4R in a single identifiable section, or otherwise in a cross
reference table indicating where that information is set out.
The following cross reference table sets out where the relevant
disclosures can be found in the Report and Financial Statements.
Listing Rule Disclosure Page reference
LR 9.8.4R (1)
to (11)
Not applicable Not applicable
LR 9.8.4R (12) Current year
dividend waiver
agreements
Note 3.2 to consolidated
financial statements on
page 148
LR 9.8.4R (13) Future dividend
waiver agreements
Note 3.2 to consolidated
financial statements on
page 148
LR 9.8.4R (14) Information
regarding
controlling
shareholder
The Company does not have
a Controlling Shareholder.
Details of the ongoing
relationship with the
Company’s former
Controlling Shareholder
can be found under the
heading Shareholder
Agreement on page 116
Strategic report Financial statements Other information
114
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
DIRECTORS’ REPORT
CONTINUED
Share capital structure
The Company’s share capital consists of a single class of ordinary
shares of 0.4p each. As at 30 June 2022 and the date of this
report, there were 474,318,625 ordinary shares in issue, each of
which is fully paid up, amounting to an aggregate nominal share
capital of £1,897,274.50. Each ordinary share is listed on the
Official List maintained by the FCA and admitted to trading on
the Main Market of the London Stock Exchange. Further details
of the Company’s share capital can be found in note 3.1 to the
consolidated financial statements on page 148. There were no
changes to the Company’s share capital during the period
under review.
Rights attaching to shares and restrictions on transfer
The ordinary shares have attached to them full voting, dividend
and capital distribution rights, and rank pari passu in all respects.
Save for deadlines for voting by proxy, there are no restrictions
on voting rights attaching to, or on the transfer of, the Company’s
ordinary shares. Full details regarding the exercise of voting rights
at the 2022 AGM, whether in person or by proxy, will be set out
in the Notice of AGM. To be valid, the appointment of a proxy to
vote at a general meeting must be received not less than 48 hours
before the time of the meeting.
The Company is not aware of any agreements between the
holders of ordinary shares that may restrict their transfer or the
voting rights attaching to them.
None of the Company’s ordinary shares carry any special rights
regarding control of the Company.
Authority to allot or buy back shares
The Company was granted authority at the 2021 AGM to purchase
in the market its own shares up to an aggregate nominal value
of 10% of its issued ordinary share capital. No shares were
purchased under this authority in the year to 30 June 2022 and
up to the date of this report. This authority expires at the end
of the 2022 AGM, at which a special resolution will be proposed
for its renewal. This is a standard authority that the Directors
have no present intention of exercising.
The Directors were granted authority at the 2021 AGM to allot
relevant securities up to an aggregate nominal amount of
£632,424.83, representing approximately one third of the
Company’s issued ordinary share capital. No shares were allotted
under this authority in the year to 30 June 2022 and up to the date
of this report. This authority expires at the end of the 2022 AGM,
at which an ordinary resolution will be proposed for its renewal.
This is a standard authority that the Directors have no present
intention of exercising.
Shares held in trust for employee share schemes
Hargreaves Lansdown EBT Trustees Limited (the EBT Trustee)
holds ordinary shares in the Company in trust under the terms of
the Hargreaves Lansdown Employee Benefit Trust (the EBT) to
satisfy the exercise of options granted to the Group’s employees
under its approved and unapproved share option schemes. Under
the rules of the EBT, the EBT Trustee has discretion as to the
exercise of voting rights attaching to ordinary shares held within
the EBT. As at 30 June 2022, the EBT Trustee held 424,035
ordinary shares, equating to approximately 0.09% of the
Company’s issued ordinary share capital.
Hargreaves Lansdown Trustee Company Limited (the SIP Trustee)
holds ordinary shares in the Company in trust under the terms of
the Hargreaves Lansdown plc Share Incentive Plan (the SIP) to
satisfy the exercise of options granted to the Group’s employees
under the SIP. Save where the Company notifies it that such
waiver does not apply, the SIP Trustee must refrain from exercising
the voting rights attaching to ordinary shares held in the SIP trust
that have been allocated to employees. The SIP Trustee has no
express power under the terms of the SIP to exercise voting rights
attaching to ordinary shares held in the SIP trust that have not
been allocated to employees. As at 30 June 2022, the SIP Trustee
held 33,475 ordinary shares, equating to approximately 0.007%
of the Company’s issued ordinary share capital.
Substantial shareholdings
Notifications received by the Company in accordance with DTR 5
are published on a Regulatory Information Service and on the
Company’s website. As at 30 June 2022, the Company had been
advised of the following voting interests in the Company’s ordinary
shares amounting to more than 3% of the Company’s issued
share capital.
Name Ordinary shares Percentage holding
Peter Hargreaves 93,838,474 19.78%
Lindsell Train Limited 60,568,590 12.77%
Stephen Lansdown 27,087,419 5.71%
Baillie Gifford 23,888,812 5.04%
Blackrock, Inc 35,222,041 7.41%
In the period between 30 June 2022 and the date of this report,
the Company received no further notifications.
Strategic report Financial statements Other information
115
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
DIRECTORS’ REPORT
CONTINUED
Shareholder Agreement
The Company announced on 7 February 2020 that Peter
Hargreaves had reduced his shareholding to 24.35% and therefore
ceased to be a controlling shareholder of the Company. Peter
Hargreaves has since reduced his shareholding further and now
holds 19.78%.
In October 2020, the Board announced that in order to reflect
Peter Hargreaves’ continuing interest in the Company whilst
respecting the strong independent governance principles of the
Board, the Company had agreed with Peter Hargreaves to enter
into a new shareholder agreement (the Agreement) to govern their
ongoing relationship. Pursuant to the Agreement, Peter Hargreaves
is entitled to nominate one non-independent, Non-Executive
Director for appointment to the Board, subject to the applicable
regulatory and governance framework that is observed by the
Company. Peter Hargreaves exercised this right and Adrian Collins
was appointed to the Board on 2 November 2020. This Agreement
and nomination right shall remain in place for so long as Peter
Hargreaves and his Associates’ (as such term is defined in the
Listing Rules) control or are entitled to control the exercise of
at least 10 per cent of the Company’s voting rights.
The Agreement intends to ensure that any transactions or
arrangements with him are conducted at arm’s length and on
commercial terms, and that neither he nor his associates would
prevent the Company complying with its obligations under the
Listing Rules or propose or procure a shareholder resolution
intended to circumvent the proper application of the Listing Rules.
Dividends
The Board recommends a final ordinary dividend of 27.44 pence
per ordinary share to be paid in respect of the period ending
30 June 2022. Subject to shareholder approval at the 2022 AGM,
it is proposed that this ordinary dividend is paid on 24 October
2022 to all shareholders on the register at close of business on
23 September 2022.
For further information on the dividend, including the suspension
of the special dividend see page 50 of the Strategic Report.
Board of Directors
Powers of the Directors
The Company’s articles of association (the Articles) set out the
powers of the Directors. Subject to UK company law, the Articles
and any directions given by special resolution of the Company,
the Directors have been granted authority to exercise all the
powers of the Company.
The Articles may only be amended by special resolution
at a general meeting of the Company’s shareholders.
Appointment and replacement of Directors
The appointment and replacement of Directors is governed
by the Articles, the Code and the Companies Act 2006 and
related legislation.
Under the Articles, Directors may be appointed, either to fill
a vacancy or as an addition to the existing Board, by ordinary
resolution of the Company or by resolution of the Board.
If appointed by the Board, a Director must retire and, if willing
to act, seek election at the next AGM following appointment.
In addition, the Articles require all Directors to retire at each AGM
and, if willing to do so, offer themselves for re-election. This aligns
to the requirements of provision 18 of the Code. Further details
can be found on page 72 of the Corporate Governance Report.
In addition to the powers set out in the Companies Act 2006, the
Articles provide for the removal of a Director before the expiration
of their period of office by ordinary resolution of the Company.
The Board
The names of the Directors of the Company as at the date of this
report, along with their biographies, are set out on pages 63 to 65.
Appointments to and departures from the Board during the period
under review are set out in the table below.
In June 2022, the Company announced that Darren Pope would
join as an Independent Non-Executive Director with effect from
1 September 2022. Darren brings extensive financial services and
risk expertise, strategic thinking, governance and regulatory
experience with strong leadership skills. He is currently a Director
of Virgin Money UK PLC, Network International PLC, Silicon Valley
Bank UK Ltd and formerly a Director of Equiniti PLC.
Name Role Date of appointment/departure
Penny James Independent
Non-Executive Director
Appointed 1 September 2021
Philip Johnson Chief Financial Officer
and Executive Director
Resigned 31 January 2022
Amy Stirling Chief Financial Officer
and Executive Director
Appointed 21 February 2022
Directors’ interests
Details of the Directors’ interests in the Company’s ordinary shares
can be found on pages 99 and 104 of the Annual Report on
Remuneration.
During the period under review, no Director had any material
interest in a contract to which the Company or any of its subsidiary
undertakings was a party (other than their own service contract)
that required disclosure pursuant to the Companies Act 2006.
Directors’ indemnities
As permitted by the Articles, the Directors have the benefit of an
indemnity which is a qualifying third-party indemnity provision as
defined by Section 234 of the Companies Act 2006. The indemnity
was in place throughout the period under review and remains in
place as at the date of this report.
The Company also maintains Directors’ and Officers’ liability
insurance cover to protect the Directors from loss resulting from
claims against them in relation to the discharge of their duties.
This cover was in place throughout the period under review
and remains in place as at the date of this report.
Compensation for loss of office
There are no agreements in place between the Company and
its Directors or employees for compensation for loss of office
or employment as a result of a takeover bid.
Strategic report Financial statements Other information
116
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
DIRECTORS’ REPORT
CONTINUED
Financial instruments and financial risk management
Details of the Group’s financial risk management policies and
objectives in relation to the use of financial instruments, and its
exposure to market, liquidity and credit risk, can be found in note
5.7 to the consolidated financial statements on pages 152 to 158.
Change of control
There are no significant agreements to which any member of the
Group is a party that take effect, alter or terminate upon a change
of control of the Company following a takeover bid.
Employee engagement and involvement
The Group is committed to engaging and communicating with
colleagues to ensure they understand the Group’s purpose, vision
and priorities and how they each play their part in the development
of its business. Information on action taken to ensure colleagues
are provided with information on matters that concern them
and to promote awareness of the factors affecting the Group’s
performance can be found on page 30 of the Strategic Report.
Details of how the Group engages with colleagues and how their
interests are considered in decision making can be found on pages
25 and 30 of the Strategic Report and in the Group’s Section 172
Statement on pages 118 to 121.
Further details of how we encourage colleague involvement
in the Group’s performance, including by way of participation in
share schemes, can be found on page 29 of the Strategic Report.
Details of the Group’s policies for the recruitment, continuing
employment and career development of disabled persons can
be found on pages 29 of the Strategic Report.
Post-balance sheet events
Details of important events affecting the Group that have
occurred since the end of the period under review can be found
in note 5.5 to the consolidated financial statements on page 151.
Political donations
The Group did not make any political donations or contributions
or incur any political expenditure during the period under review.
Annual General Meeting
The Board looks forward to welcoming shareholders to the
Company’s AGM in October 2022. Further information, along
with details of all resolutions to be proposed to the Company’s
shareholders and how to vote, will be set out in the Notice of
AGM that will be circulated ahead of the meeting.
Electronic communications and dividend payments
Shareholder communications are only sent in paper format
to shareholders who have elected to receive documents in this
way. This approach enables the Company to reduce printing
and distribution costs and the impact of the documents on the
environment. Shareholders who wish to receive email notification
instead of paper copies can register online at www.shareview.co.uk.
Shareholders can also request that dividends are paid directly into
their bank or building society account via Shareview. This saves
time and is more secure than receiving dividends by cheque,
which could arrive late or be lost in the post.
Going concern
In adopting the going concern basis for preparing the financial
statements, the Directors have considered the Group’s business
activities, together with the factors likely to affect its future
development, performance and position, including the Russian
invasion of Ukraine, the increase in inflation and the associated
cost-of-living crisis. This includes the Group’s principal risks
and uncertainties, details of which can be found in the Strategic
Report. The Operating and Financial Review on pages 45 to 50 of
the Strategic Report describes the Group’s robust balance sheet,
managed to internal risk appetite and regulatory capital limits,
and a business with a high conversion of operating profit to cash
and a strong net cash position.
Having regard to the Company and Group’s financial, liquidity
and capital position, the Board has concluded that it remains
appropriate to adopt the going concern basis of accounting
in preparing the Company and Group’s financial statements.
Long-term viability
In accordance with Provision 31 of the Code, the Directors have
assessed the prospects of the Group over a longer period than
the 12 months required by the going concern provision. Details of
this assessment can be found on page 54 of the Strategic Report.
Disclosure of information to external auditor
Each of the persons who are Directors at the time when this report
is approved confirms that:
• So far as they are aware, there is no relevant audit information
of which the Company’s external auditor is unaware; and
• They have taken all the steps that they ought to have taken
as a Director to make themselves aware of any relevant audit
information and to establish that the Company’s external auditor
is aware of that information.
This confirmation is given and should be interpreted in accordance
with Section 418 of the Companies Act 2006.
Approved by and signed by order of the Board.
Claire Chapman
Group Company Secretary
4 August 2022
Strategic report Financial statements Other information
117
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
SECTION 172 STATEMENT
Understanding the views and interests of our stakeholders helps
the Group to make better decisions with the aim of generating
long-term value for the Company’s shareholders whilst contributing
to wider society by building strong and lasting relationships with
our other key stakeholders.
Section 172 of the Companies Act 2006 requires the Directors
to act in a way they consider will promote the success of the
Company for the benefit of its shareholders as a whole. In doing
so, the Directors must have regard (amongst other matters) to:
• The likely consequences of any decision in the long term;
• The interests of the Group’s employees;
• The need to foster business relationships with the Group’s
suppliers, clients and others;
• The impact of the Group’s operations on the community
and the environment;
• The desirability of the Group maintaining a reputation
for high standards of business conduct; and
• The need to act fairly as between the Company’s shareholders.
You can read more about how we engage with and respond to
the interests and needs of our key stakeholders on pages 24 to 25
of the Strategic Report.
How the Board has discharged its Section 172 duties
The Directors are briefed on their duties as directors as part
of the Group’s induction programme and the Board, as a whole,
periodically receives refresher training. Each Director also has
access to the Group Company Secretary for advice on the
application of those duties.
The Directors’ awareness of their duties to the Company,
combined with the knowledge and insights they obtain on the
views and interests of the Group’s key stakeholders and the impact
of the Group on wider society, enables them to make decisions
that promote long-term sustainable value for the Company’s
shareholders. In practice, the Group operates within a corporate
governance framework whereby responsibility for day-to-day
decision making is appropriately delegated. In considering their
duties under Section 172 when setting the Group’s strategy, values
and framework of policies, the Board aims to ensure that the
consideration of stakeholder interests and the Group’s long-term
success is embedded across its business.
The Board recognises that the impact of each decision made
by it, and elsewhere in the Group’s governance framework, will
be different for each of its key stakeholders and understands
the importance of considering the impact on each of those
stakeholders when making decisions.
The Group’s Board and Committee paper templates encourage
paper authors to consider and highlight the impact on the Group’s
stakeholders of the matters covered. In addition to acting as an
aid to the Board in discharging its duties and facilitating focused
debate, this is intended to provide an additional layer of comfort
that paper authors have properly considered and taken into
account the interests of stakeholders.
Further details of how the Board considers each of the specific
matters set out in Section 172 is set out below, along with some
examples of how those considerations have influenced decisions
taken by the Board and Group more widely.
Considering the long term
The Board sets the strategy, values and culture, and develops and
oversees the Group’s framework of governance, risk management
and internal controls to promote and safeguard the Group’s
long-term success. The strategic goals and objectives it sets are
focused around developing the Group’s proposition and service to
fulfil the long-term needs of its clients. You can read more about
the Group’s strategy on pages 12 to 17 of the Strategic Report.
Details of how stakeholder considerations influenced the Board’s
decision making regarding the strategy can be found in the case
study on page 120.
The Group provides an essential service to its clients in a highly
regulated environment. The identification, management and
mitigation of risks to the Group’s business is key to ensuring the
delivery of its strategy over the longer term, and the consideration
of risk plays an important part in decision making. You can read
more about how the Group evaluates and manages risk along
with a description of the principal and non-financial risks relating
to the Company’s operations on pages 51 to 59 of the
Strategic Report.
Our employees
The Board recognises that understanding the needs of the
Group’s people is essential in developing a workplace and culture
in which they can reach their full potential and, in turn, ensure
the long-term success of the Group.
The Group’s workplace advisory panel, the HL Colleague Forum,
provides a feedback channel directly between colleagues and
the Board on matters of strategic importance. It is chaired by
the Chief People Officer and each meeting is attended by at
least one Non-Executive Director and a broad range of colleagues
from across the Group’s business. In addition to the direct Board
and Group Executive Committee representation on the Forum,
details of the issues raised and outcomes are reported to the
Remuneration Committee, with onward escalation to the Board
where appropriate. You can read more about the Forum on page
30 of the Strategic Report.
The views of colleagues are also obtained via regular colleague
surveys. Detailed results are shared with the Group Executive
Committee, with key themes and issues escalated to the Board
for consideration.
You can read more about how we engage with colleagues and
the actions we have taken as a result of that engagement on
page 25 of the Strategic Report. Details of how engagement with
colleagues has influenced the Board’s decision making can be
found in the case studies on pages 120 and 121.
Strategic report Financial statements Other information
118
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
SECTION 172 STATEMENT
CONTINUED
Our clients
The Group’s clients are at the heart of its strategy and their
interests are a key consideration in everything that the
Group does.
Both the Group Executive Committee and the Board regularly
receive updates on client proposition and service metrics.
The consideration and determination of current and future
needs of clients drives the Group’s innovation and the
prioritisation of activities within the Group’s annual operating
plan and long-term strategy.
You can read more about how we engage with our clients and
the actions we have taken as a result on page 24 of the Strategic
Report. You can read more about how consideration of our clients’
interests have shaped some of the Board’s decisions this year
in the case studies on pages 120 and 121.
Our regulator
The FCA regulates the financial products and services provided
by the Group. The Group’s continued compliance with its
regulatory obligations and the interests and views of the FCA
are primary considerations in decision making across the Group.
The Board is regularly briefed on regulatory developments
and expectations, and the Board’s Risk, Audit and Remuneration
Committees receive detailed insights into specific areas such
as the ICAAP/ICARA, CASS and Consumer Duty. The Board also
receives updates in relation to specific matters, such as areas
of interest to the FCA including operational resilience.
The Group maintains regular contact with the FCA to ensure
awareness of its concerns, expectations and agenda, and this
informs the prioritisation of activities within the Group’s annual
operating plan. The Group also engages with the FCA to help
ensure that the position of retail investors in the UK is understood,
including establishing a Savings and Resilience Sounding Board
to explore options for supporting clients with financial resilience,
of which the FCA is a member. Further details can be found
on page 25.
Our suppliers
Fostering good relationships with the Group’s suppliers is an
important factor in ensuring it is able to continue to service its
clients effectively and efficiently over the long term. The Group
continues to develop, enhance and embed a vendor management
framework across the business, in line with business, market and
regulatory expectations. We aim to pay our suppliers promptly and
within 30 days of payment being requested and have maintained
the increased frequency of our payment runs introduced last year
to support suppliers during the COVID-19 pandemic. Our average
payment days during the period under review was approximately
21 days.
Acting fairly between shareholders
Information on how we engage with our shareholders and how
the Board is made aware of shareholder sentiment and interests
can be found on pages 24 to 25 of the Strategic Report and
page 66 of the Corporate Governance Report.
The views and interests of the Company’s shareholders are key
considerations when the Board determines the level of dividend
payments (further details of which can be found on page 50 of
the Strategic Report), and when setting the Group’s strategy
and business priorities.
Impact on the community and the environment
The Board is conscious of the impact of the Group’s operations
on the community and environment, and understands the
importance of being a good corporate citizen.
The Board recognises ESG as an increasingly important
consideration to many of its key stakeholders and ESG matters
have been the subject of a full deep-dive again this year, alongside
the Chief Executive Officer’s regular updates to the Board on the
Group’s approach. You can read more about our ESG practices on
pages 31 to 44 of the Strategic Report and the key considerations
of the Board when reviewing our ESG strategy on page 121.
Details of how consideration of our wider community has shaped
some of our recent initiatives, e.g. our Savings and Resilience
Barometer can be found on page 25 of the Strategic Report.
Maintaining a reputation for high standards
of business conduct
The Board supports the Chief Executive Officer in embedding a
culture that encourages the Group’s colleagues to live our values
and help the Group deliver on its strategic objectives. The Group
encourages colleagues to ‘do the right thing’ to ensure that, as a
business, we act with integrity in all our dealings and decisions
with the aim of being clear, fair and transparent. The HL Way,
launched last year, has been further developed this year to focus
on helping colleagues understand how best to fulfil their personal
responsibilities, making clear what we stand for, the principles
to follow, why it’s important and what’s expected of us. You can
find more information about the HL Way on page 27 of the
Strategic Report.
The Board approves and oversees the Group’s adherence to
policies that promote high standards of conduct and receives
regular updates on the Group’s culture through KPIs that form
part of the Chief Executive Officer’s business performance update.
Key decisions and consideration of stakeholder interests
The table below summarises how the Board and the wider Group
have had regard to the duties under Section 172 when considering
specific matters.
Strategic report Financial statements Other information
119
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
SECTION 172 STATEMENT
CONTINUED
Setting the new strategy
In February 2022, the management team delivered the Capital Markets Day
announcing to key stakeholders the next phase of HL’s strategic development
and digital transformation. The Board were closely involved in defining this
next phase, including approving the strategic investment required to deliver.
In developing the multi-year strategy outlined at the Capital Markets Day,
the Board has paid particular regard to:
• Our clients through the identification of opportunities to further enhance our
client proposition and transform our service to continue to meet their current
and long-term needs and to promote good client outcomes;
• The views and interests of colleagues to ensure they are motivated and
empowered to play their part in the transformation of HL and the successful
delivery of the strategy, including introducing regular CEO updates
on progress;
• Our shareholders and their appetite to invest for the long term to benefit from
the significant opportunities that exist to grow the business, coupled with the
need to fund that investment including by suspending the payment of any
special dividends through FY22 and FY23;
• The requirements of the FCA, our regulator, and the expectations of our
shareholders and clients in relation to our ability to provide effective oversight
of the delivery of the strategy, e.g. through appropriate governance and
reporting structures and risk management and controls; and
• The likely long-term consequences for the Group of the decision to adopt the
new strategy and make the investment needed to deliver when compared
with alternative options.
Return to the office
As COVID-19 pandemic restrictions eased, the Board oversaw a ‘test and learn’
approach to the Group’s return to the office and adoption of hybrid working
arrangements. In deciding this approach the Board paid particular regard to:
• The variety of views expressed by colleagues. A colleague-led ‘test and learn’
approach recognises the need to balance safety and continued support for
colleagues, both in the office and working from home, with colleagues’ desire
to increase engagement and collaboration by meeting in person; and
• Our clients, by ensuring any return to office or hybrid working plans minimise
and mitigate disruption to clients.
Strategic report Financial statements Other information
120
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
SECTION 172 STATEMENT
CONTINUED
ESG Strategy
The Group has maintained its focus on delivering its ESG strategy this year
and ensuring ESG considerations are embedded in all that we do. The Board
oversaw the introduction of an ESG dashboard of key metrics, developments
in the ownership of the ESG strategy to help drive results across the business;
and proposals to expand the client proposition to enable clients to make
investment decisions aligned to their ESG preferences. In these matters,
the Board has paid particular regard to:
• Understanding the Group’s impact on the environment and the steps needed
to meet its commitment to achieving net zero by at least 2050;
• The importance of ESG to our colleagues and potential benefits in terms
of improving colleague retention and recruitment;
• The views of our major shareholders and other key stakeholders who
continue to highlight the importance of clear communication on ESG matters,
resulting in the Company publishing its first SASB disclosure in June 2022;
and
• The growing importance of ESG factors to our clients and the wider
community and the need to maintain a reputation for high standards of
business conduct in this area, to be a responsible business and to seek
to embed climate considerations into our investment management and
stewardship activities.
Strategic report Financial statements Other information
121
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS
The directors are responsible for preparing the Report
and Financial Statements 2022 and the financial statements
in accordance with applicable law and regulation.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have prepared the group and the parent company financial
statements in accordance with UK-adopted international
accounting standards.
Under company law, directors must not approve the financial
statements unless they are satisfied that they give a true and
fair view of the state of affairs of the group and parent company
and of the profit or loss of the group for that period. In preparing
the financial statements, the directors are required to:
• select suitable accounting policies and then apply them
consistently;
• state whether applicable UK-adopted international accounting
standards have been followed, subject to any material
departures disclosed and explained in the financial statements;
• make judgements and accounting estimates that are reasonable
and prudent; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and parent
company will continue in business.
The directors are responsible for safeguarding the assets of the
group and parent company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
The directors are also responsible for keeping adequate
accounting records that are sufficient to show and explain the
group’s and parent company’s transactions and disclose with
reasonable accuracy at any time the financial position of the group
and parent company and enable them to ensure that the financial
statements and the Directors’ Remuneration Report comply with
the Companies Act 2006.
The directors are responsible for the maintenance and integrity of
the parent company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Directors’ confirmations
The directors consider that the Report and Financial Statements
2022 and accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the group’s and parent company’s position
and performance, business model and strategy.
Each of the directors, whose names and functions are listed
in the Board of Directors profiles on pages 63 to 65, confirm that,
to the best of their knowledge:
• the group, and parent company financial statements, which have
been prepared in accordance with UK-adopted international
accounting standards, give a true and fair view of the assets,
liabilities and financial position of the group and parent company,
and of the profit of the group; and
• the Strategic Report includes a fair review of the development
and performance of the business and the position of the group
and parent company, together with a description of the principal
risks and uncertainties that it faces.
In the case of each director in office at the date the directors’
report is approved:
• so far as the director is aware, there is no relevant audit
information of which the group’s and parent company’s auditors
are unaware; and
• they have taken all the steps that they ought to have taken
as a director in order to make themselves aware of any relevant
audit information and to establish that the group’s and parent
company’s auditors are aware of that information.
By order of the Board
Amy Stirling
Chief Financial Officer
4 August 2022
Strategic report Financial statements Other information
122
Hargreaves Lansdown
Report and Financial Statements 2022
Governance
FINANCIAL
STATEMENTS
Independent auditors’ report 124
Section 1: Results for the year 131
Section 2: Assets and liabilities 139
Section 3: Equity 147
Section 4: Consolidated statement of cash flows 149
Section 5: Other notes 150
Section 6: Company financial statements 159
123
Hargreaves Lansdown
Report and Financial Statements 2022
Strategic report Governance Other informationFinancial statements
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF HARGREAVES LANSDOWN PLC
Report on the audit of the financial statements
Opinion
In our opinion, Hargreaves Lansdown plc’s group financial statements and parent company financial
statements (the “financial statements”):
• give a true and fair view of the state of the group’s and of the parent company’s affairs as at
30 June 2022 and of the group’s profit and the group’s and parent company’s cash flows for the
year then ended;
• have been properly prepared in accordance with UK-adopted international accounting standards;
and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Report and Financial Statements 2022
(the “Annual Report”), which comprise: the consolidated statement of financial position and the parent
company statement of financial position as at 30 June 2022; the consolidated income statement, the
consolidated statement of comprehensive income, the consolidated statement of changes in equity,
the consolidated statement of cash flows, the parent company statement of changes in equity and
the parent company statement of cash flows for the year then ended; and the notes to the financial
statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”)
and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’
responsibilities for the audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard,
as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s
Ethical Standard were not provided.
Other than those disclosed in the Audit Committee report, we have provided no non-audit services
to the parent company or its controlled undertakings in the period under audit.
Our audit approach
Overview
Audit scope
• The financial statements comprise the consolidation of 20 individual components, each of which
represents a legal entity within the group or consolidation adjustments.
• We assessed each component and considered the contribution it made to the group’s performance
in the year, whether it displayed any significant risk characteristics and/or whether it contributed
a significant amount to any individual financial statement line item.
• The above assessment resulted in us identifying two financially significant components that
required audit procedures for the purpose of the audit of the group financial Statements.
• The two financially significant subsidiaries are based in the UK and were audited by the PwC
UK audit team.
• By performing audit procedures on these two components, the consolidation adjustments
and by audit of specific balances in the components with large individual balances, we achieved
coverage greater than 90% of each material financial statement line item within the group’s
financial statements.
• We also performed a full scope audit of all material line items in the parent company’s
financial statements.
• In planning our audit, we considered the extent to which climate change is impacting the group
and how it impacted our risk assessment for the audit of the group’s financial statements.
In making these considerations we:
a) Enquired of management in respect of their own climate change risk assessment, including
associated governance processes and understood how these have been implemented.
b) Obtained the latest Task Force for Climate Related Financial Disclosures (“TCFD”) report for the
group and checked it for consistency with our knowledge of the group based on our audit work.
c) Considered management’s risk assessment and the TCFD report in light of our knowledge of
the wider asset management and wealth management industries.
• Our conclusion was that the impact of climate change does not give rise to a key audit matter for
the group and it did not impact our risk assessment for any material financial statement line item
or disclosure.
Key audit matters
• Revenue recognition (group)
Materiality
• Overall group materiality: £13,400,000 (2021: £18,300,000) based on 5% of consolidated profit
before tax.
• Overall parent company materiality: £12,200,000 (2021: £9,800,000) based on 5% of profit before tax.
• Performance materiality: £10,050,000 (2021: £13,700,000) (group) and £9,150,000 (2021: £7,300,000)
(parent company).
Strategic report Governance Other information
124
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF HARGREAVES LANSDOWN PLC CONTINUED
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most
significance in the audit of the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not due to fraud) identified by the
auditors, including those which had the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon, were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Impact of COVID-19, which was a key audit matter last year, is no longer included because of the
reduced uncertainty of the impact of the COVID-19 pandemic. Otherwise, the key audit matters below
are consistent with last year.
Key audit matter How our audit addressed the key audit matter
Revenue recognition (group)
Revenue is material to the group and is an important determinant of the group’s results. Revenue
may be misstated due to errors in system calculations and/or manual processes, for example, arising
from incorrect securities’ prices or levels of assets held used in such calculations and/or processes.
Further, there are incentive schemes in place for Directors and staff which are in part based on the
group’s revenue performance. Where there are incentives based on financial performance, there is
an inherent risk of fraud in revenue recognition in order to misstate revenue. This may arise through
unauthorised changes to key data inputs or system calculations used in the revenue recording
processes and/or posting journal entries to manipulate revenue. Our assessment in this regard in
respect of each of the group’s revenue streams concluded that relevant areas of risk related to the
three areas described below.
In order to address these areas, including risk of fraud in revenue recognition, we evaluated
the design and implementation of key controls as well as performing the following procedures:
The accuracy of, and potential manipulation of, key data inputs used in the automated calculation
of platform fees (e.g. number of units held) or fees on stockbroking transactions (e.g. fee rates)
in the administration system.
We tested relevant IT controls over the administration system, as well as the systems which capture
and transmit customer transactions to the administration system.
We identified and tested relevant IT dependencies (e.g. the interface between the front end systems
and the administration system) in the revenue reporting process.
In addition to this we tested management’s controls over the relevant data in the administration
system (for example over the recording of customer holdings, and matching of transactions to third
party records). We identified a number of exceptions from our testing of controls and therefore
performed additional work to address these including consideration of mitigating controls, with no
further issues arising. We tested samples of key data inputs held and used in the administration
system to supporting documentation, with no exceptions being noted from this testing.
Strategic report Governance Other information
125
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF HARGREAVES LANSDOWN PLC CONTINUED
Key audit matter How our audit addressed the key audit matter
The potential manipulation of the calculation logic within the administration system to increase
reported revenue from platform fees and stockbroking commission, or the potential manipulation
of key data inputs used or manipulation of the manual spreadsheet calculations of interest on
client money.
We used our data analytics software to reperform the platform fees and fees on stockbroking
transactions calculations, using source data extracted from the administration system.
We independently performed the calculation of interest on client money using source data extracted
from records held by the group. We then compared our independent recalculations to the amounts
reported. With respect to the recalculations, we noted differences which in quantitative terms
were immaterial. We investigated these differences and did not consider them to require further testing.
Posting journals to manipulate reported revenue amounts. We tested a risk-based sample of revenue related journals as part of our overall response to the risk
of management override of controls. No exceptions were noted from this testing.
Given that revenue is material to the group and is an important determinant of the group’s results we
also performed testing to address other aspects of revenue recognition, where we had concluded that
the risk of misstatement was not heightened. These related to other revenue streams such as fund
management fees calculated by the third-party fund administrator, as well as characteristics such as
whether revenues had occurred, been completely recorded, and recorded in the correct period.
We recalculated fund management fees using confirmations of daily net asset values provided by
the third-party fund administrator and published annual management charge rates. We reviewed
the third-party fund administrator’s annual controls report considering key controls over the net
asset values we had used in our testing. We tested whether revenue had been completely recorded
and recorded in the correct period, by selecting a sample of transactions around the period end to
assess whether the effective date was correct within the administration system revenue calculations.
We obtained evidence in respect of the occurrence of revenue recorded by the group from testing
a sample of transactions to corroborating evidence such as client instructions and third party
settlement records, and from our testing of selected bank reconciliations. No exceptions were
noted from this testing.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial statements as a whole, taking into account the structure of the group and
the parent company, the accounting processes and controls, and the industry in which they operate.
The group operates primarily in the UK, and has one Polish based subsidiary. There were 5 key
operating subsidiaries during the year, all of which operate in the UK. We considered two subsidiaries
to be financially significant reporting units, Hargreaves Lansdown Asset Management Limited and
Hargreaves Lansdown Fund Managers Ltd., for which we performed an audit of their complete
financial information. Together these two financially significant reporting units represent 106%
of the group’s consolidated profit before tax (before considering the impact of intercompany
eliminations) and 96% of the group’s consolidated revenue. A reporting unit was considered to be
financially significant if it contributed more than 10% of consolidated profit before tax. Specific audit
procedures were also performed over consolidation adjustments, balances that could be tested
centrally which included intangible assets, staff costs, cash and cash equivalents, term deposits and
material movements through the consolidated statement of changes in equity. All of the group audit
work was performed by the group engagement team in the UK.
Strategic report Governance Other information
126
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF HARGREAVES LANSDOWN PLC CONTINUED
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative
thresholds for materiality. These, together with qualitative considerations, helped us to determine the
scope of our audit and the nature, timing and extent of our audit procedures on the individual financial
statement line items and disclosures and in evaluating the effect of misstatements, both individually
and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements
as a whole as follows:
Financial statements – group Financial statements – parent company
Overall
materiality
£13,400,000 (2021: £18,300,000). £12,200,000 (2021: £9,800,000).
How we
determined it
5% of consolidated profit
before tax
5% of profit before tax
Rationale for
benchmark
applied
Based on the benchmarks used
in the Annual Report, profit before
tax is a key measure used by
the shareholders in assessing
the financial performance of
the group, and is a generally
accepted auditing benchmark.
Our approach is consistent
with that used in the prior year.
Based on the benchmarks used in the
Annual Report, profit before tax is a
key measure used by the shareholders
in assessing the financial performance of the
group, and is a generally accepted auditing
benchmark. We have applied a consistent
approach in calculating the parent company’s
materiality. Our approach is consistent with
that used in the prior year.
For each component in the scope of our group audit, we allocated a materiality that is less than
our overall group materiality. The range of materiality allocated across components was between
£3,600,000 and £12,060,000. Certain components were audited to a local statutory audit materiality
that was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically,
we use performance materiality in determining the scope of our audit and the nature and extent of
our testing of account balances, classes of transactions and disclosures, for example in determining
sample sizes. Our performance materiality was 75% (2021: 75%) of overall materiality, amounting
to £10,050,000 (2021: £13,700,000) for the group financial statements and £9,150,000
(2021: £7,300,000) for the parent company financial statements.
In determining the performance materiality, we considered a number of factors – the history of
misstatements, risk assessment and aggregation risk and the effectiveness of controls – and concluded
that an amount in the middle of our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during
our audit above £670,000 (group audit) (2021: £945,000) and £610,000 (parent company audit)
(2021: £533,000) as well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and the parent company’s ability to continue
to adopt the going concern basis of accounting included:
• Obtaining, evaluating and challenging management’s going concern assessment (specifically
covering operational resilience, current and projected capital and liquidity positions, and the
appropriateness of downside scenarios) using our knowledge of the group’s business performance
and review of regulatory correspondence.
• Agreeing cash flow forecasts to the Board approved operating plan (which is used in management’s
assessment) and performing lookback testing over budgeted versus actual results for the previous
year to assess the historical accuracy of management’s forecasting.
• Considering information obtained during the course of the audit and publicly available market
information to identify any evidence that would contradict management’s assessment of the impact
of COVID-19.
• Enquiring and understanding the actions taken by management to mitigate the impacts of COVID-19,
including review of Risk and Audit Committee meeting minutes.
Based on the work we have performed, we have not identified any material uncertainties relating to
events or conditions that, individually or collectively, may cast significant doubt on the group’s and the
parent company’s ability to continue as a going concern for a period of at least twelve months from
when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern
basis of accounting in the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not
a guarantee as to the group’s and the parent company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code,
we have nothing material to add or draw attention to in relation to the directors’ statement in the
financial statements about whether the directors considered it appropriate to adopt the going
concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern
are described in the relevant sections of this report.
Strategic report Governance Other information
127
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF HARGREAVES LANSDOWN PLC CONTINUED
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial
statements and our auditors’ report thereon. The directors are responsible for the other information,
which includes reporting based on the Task Force on Climate-related Financial Disclosures (TCFD)
recommendations. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated
in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated. If we identify an apparent material inconsistency or material misstatement, we are required
to perform procedures to conclude whether there is a material misstatement of the financial statements
or a material misstatement of the other information. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and Directors’ report, we also considered whether the disclosures
required by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also
to report certain opinions and matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit, the information given in the
Strategic report and Directors’ report for the year ended 30 June 2022 is consistent with the financial
statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and parent company and their environment
obtained in the course of the audit, we did not identify any material misstatements in the Strategic
report and Directors’ report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration report to be audited has been properly
prepared in accordance with the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern,
longer-term viability and that part of the corporate governance statement relating to the parent
company’s compliance with the provisions of the UK Corporate Governance Code specified for our
review. Our additional responsibilities with respect to the corporate governance statement as other
information are described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following
elements of the corporate governance statement, included within the Strategic Report and Directors’
Report is materially consistent with the financial statements and our knowledge obtained during the
audit, and we have nothing material to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a robust assessment of the emerging
and principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are in
place to identify emerging risks and an explanation of how these are being managed or mitigated;
• The directors’ statement in the financial statements about whether they considered it appropriate
to adopt the going concern basis of accounting in preparing them, and their identification of any
material uncertainties to the group’s and parent company’s ability to continue to do so over a period
of at least twelve months from the date of approval of the financial statements;
• The directors’ explanation as to their assessment of the group’s and parent company’s prospects,
the period this assessment covers and why the period is appropriate; and
• The directors’ statement as to whether they have a reasonable expectation that the parent
company will be able to continue in operation and meet its liabilities as they fall due over the period
of its assessment, including any related disclosures drawing attention to any necessary
qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the group was
substantially less in scope than an audit and only consisted of making inquiries and considering the
directors’ process supporting their statement; checking that the statement is in alignment with the
relevant provisions of the UK Corporate Governance Code; and considering whether the statement
is consistent with the financial statements and our knowledge and understanding of the group and
parent company and their environment obtained in the course of the audit.
Strategic report Governance Other information
128
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF HARGREAVES LANSDOWN PLC CONTINUED
In addition, based on the work undertaken as part of our audit, we have concluded that each of the
following elements of the corporate governance statement is materially consistent with the financial
statements and our knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced
and understandable, and provides the information necessary for the members to assess the group’s
and parent company’s position, performance, business model and strategy;
• The section of the Annual Report that describes the review of effectiveness of risk management
and internal control systems; and
• The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement
relating to the parent company’s compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ responsibilities, the directors are responsible for
the preparation of the financial statements in accordance with the applicable framework and for being
satisfied that they give a true and fair view. The directors are also responsible for such internal control
as they determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the
parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the directors either intend to
liquidate the group or the parent company or to cease operations, or have no realistic alternative but
to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in
respect of irregularities, including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of
non-compliance with laws and regulations related to breaches of UK regulatory principles, governed
by the Financial Conduct Authority, and we considered the extent to which non-compliance might
have a material effect on the financial statements. We also considered those laws and regulations that
have a direct impact on the financial statements such as the Companies Act 2006. We evaluated
management’s incentives and opportunities for fraudulent manipulation of the financial statements
(including the risk of override of controls), and determined that the principal risks were related to
posting inappropriate journal entries and the potential manipulation of key data or calculation logic
within the administration system to increase reported revenue for the group. Audit procedures
performed by the engagement team included:
• Discussions with the Risk and Compliance functions, Internal Audit and the company’s legal counsel,
including consideration of known or suspected instances of non-compliance with laws and
regulation and fraud;
• The assessment of the susceptibility of the entity’s financial statements to being materially
misstated, including how fraud might occur;
• Obtaining an understanding of, and assessing management’s controls designed to prevent and
detect irregularities and the policies and procedures on fraud risks;
• Reading the Audit Committee papers in which whistle blowing matters are reported and
consideration of the impact of these matters on the group’s compliance with laws and regulations;
• Reading key correspondence with the Financial Conduct Authority in relation to compliance with
laws and regulations;
• Reviewing relevant meeting minutes including those of the Board, Risk and Audit Committees;
• Reviewing data regarding customer complaints and the company’s register of litigation and claims,
in so far as they related to potential non-compliance with laws and regulations and fraud;
• Identifying and testing journal entries, in particular any journal entries posted with unusual account
combinations increasing reported revenues of the group
• Designing audit procedures to incorporate unpredictability around nature, timing or extent of our
testing; and
• Reviewing the Report and Financial Statements 2022 disclosures and testing to supporting
documentation to assess compliance with applicable laws and regulations;
Strategic report Governance Other information
129
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF HARGREAVES LANSDOWN PLC CONTINUED
There are inherent limitations in the audit procedures described above. We are less likely to become
aware of instances of non-compliance with laws and regulations that are not closely related to
events and transactions reflected in the financial statements. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud
may involve deliberate concealment by, for example, forgery or intentional misrepresentations,
or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances,
possibly using data auditing techniques. However, it typically involves selecting a limited number
of items for testing, rather than testing complete populations. We will often seek to target particular
items for testing based on their size or risk characteristics. In other cases, we will use audit sampling
to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located
on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the parent company’s members
as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other
purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate
for our audit have not been received from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the parent company financial statements and the part of the Directors’ Remuneration report
to be audited are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on
25 October 2013 to audit the financial statements for the year ended 30 June 2014 and subsequent
financial periods. The period of total uninterrupted engagement is 9 years, covering the years ended
30 June 2014 to 30 June 2022.
Other matter
In due course, as required by the Financial Conduct Authority Disclosure Guidance and Transparency
Rule 4.1.14R, these financial statements will form part of the ESEF-prepared annual financial report
filed on the National Storage Mechanism of the Financial Conduct Authority in accordance with the
ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no assurance over
whether the annual financial report will be prepared using the single electronic format specified in the
ESEF RTS.
Darren Meek (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
4 August 2022
Strategic report Governance Other information
130
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 1: RESULTS FOR THE YEAR
CONSOLIDATED INCOME STATEMENT
For the year ended 30 June 2022
Note
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Revenue 1.1 583. 0 631 .0
Fair value gains on derivatives – 0.6
Operating costs
1.3 (313. 0) (266. 0)
Operating profit 27 0.0 365. 6
Finance income
1.6 – 1. 4
Finance costs
1.7 (0. 8) (1. 0)
Profit before tax 269.2 366.0
Tax
1.8 (53.4) (69.7)
Profit for the financial year 215. 8 296.3
Attributable to:
Owners of the parent 216. 3 296.7
Non-controlling interest (0. 5) (0.4)
215. 8 296.3
Earnings per share
Basic earnings per share (pence)
1.9 4 5.6 62.6
Diluted earnings per share (pence)
1.9 4 5.6 62.5
The results relate entirely to continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2022
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Profit for the financial year 215. 8 296.3
Total comprehensive income for the financial year 215. 8 296.3
Attributable to:
Owners of the parent 216. 3 296.7
Non-controlling interest (0. 5) (0.4)
215. 8 296.3
The results relate entirely to continuing operations.
Strategic report Governance Other information
131
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
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 client money and management fees charged to clients. It relates to services provided in the UK
and is stated net of value added tax.
Revenue is measured at the fair value of the consideration received or receivable, and represents
amounts receivable for services provided in the normal course of business, net of commission
payable, discounts, VAT and other sales related taxes.
Ongoing Revenue
The largest source of revenue for the Group encompasses ongoing revenue, which includes
platform fees, fund management fees, interest on client money and ongoing advisory fees and
renewal commission. This is revenue predominantly earned over time.
Platform fees are received for the provision of custody and administration of products on the
HL platform and are charged monthly in arrears for the service provided in the period, recognised
on an accruals basis as they fall due. The consideration due is based on the value of clients’
underlying assets under administration.
Fund management fees are calculated as a proportion of the net asset value of the funds under
management in each of the HL Multi-Manager and Select funds for the management services
provided by the Group’s fund management subsidiary. They are charged monthly in arrears and
are recognised on an accruals basis in the period during which the service is provided.
Interest earned on client money is the net interest margin earned on money held within Group
products by clients and is recognised over time, based on the client money balances under
administration and by reference to the effective interest rate applicable.
Renewal commission is earned on third-party agreements entered into by clients, as a result of
advice provided to them and is recognised on an accruals basis as it becomes due and payable
to the Group.
Ongoing advice charges are levied monthly in arrears for the period during which the service is
provided and are calculated as a percentage of the assets under management within the Group’s
Portfolio Management Service.
The Portfolio Management Service is provided to clients who prefer a managed service.
This service encompasses the HL platform custody and administration, fund management
and 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 described in transactional revenue below. Each stream is separately charged in relation to the
product. Each stream can also be taken by HL clients who do not use the Portfolio Management
Service, either as separate services or in any combination as required.
Although most ongoing revenue is based on the value of underlying benefits, these are not
considered to constitute variable income in which significant judgement or estimation is involved.
The calculations are based on short timelines or point in time calculations that represent the end
of a quantifiable period, in accordance with the contract. These are charged to and paid by the
client on the same value, constituting the transaction price for the specified period. At any time
during the period a client may choose to remove their assets from a service and no further
revenue is received.
All obligations to the customer are satisfied at the end of the period in which the service
is provided for ongoing revenue, with payment being due immediately.
Transactional
The other source is revenue earned on individual transactions and is primarily made up of
stockbroking commission and advisory event driven fees, referred to as initial advice charges
in the table on the next page. The price is determined in relation to the specific transaction type
and are frequently flat fees. There is no variable consideration in relation to transactional revenue.
The Group earns fees on stockbroking transactions entered into on behalf of clients. The fee
earned is recorded in the accounts on the date of the transaction, being the date on which
services are provided to clients and the Group becomes entitled to the income.
Initial advice charges are made to clients for providing advice to clients on specific financial
matters or in relation to amounts deposited into the Portfolio Management Service. This can
take the form of ad hoc advice on a specific pool of assets or initial advice about taking managed
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 advice charges are levied separately.
Strategic report Governance Other information
132
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 1: RESULTS FOR THE YEAR
NOTES TO THE GROUP FINANCIAL STATEMENTS
INCOME STATEMENT CONTINUED
1.1 Revenue continued
Timing and judgements made in relation to revenue
As at year end, the Group has discharged all of its obligations in relation to contracts with
customers, other than in relation to those services that are billed in advance or arrears.
These amounts are not material and where an obligation still exists at year end and the payment
exceeds the services rendered a contract liability is recognised, as deferred income in trade
payables and spread across the period of the transaction evenly. At the end of the period the
longest period of liability in relation to deferred income is three months.
None of the revenue streams contain financing components.
There are no judgements made in relation to the timing or determination of transaction price
of any revenue streams.
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Ongoing revenue
Platform fees 289.1 263.7
Fund management fees 60.3 60.8
Ongoing advice charges 8.3 9.0
Interest earned on client money 51.8 51.9
Renewal commission 4.6 5.1
Transactional revenue
Fees on stockbroking transactions 164.6 231.6
Initial advice charges 4.0 5.1
Other transactional income 0.3 3.8
Total Revenue 583.0 631.0
1.2 Segmental reporting
Under IFRS 8, operating segments are required to be determined based upon the way the Group
generates revenue and incurs expenses and the primary way in which the Chief Operating Decision
Maker (CODM) is provided with financial information. In the case of the Group, the CODM is
considered to be the Executive Committee.
It is the view of the Board and of the Executive Committee that there is only one segment, being the
direct wealth management service administering investments in ISA, SIPP and Fund & Share accounts,
and providing cash management services for individuals and corporates. Given that only one segment
exists, no additional information is presented in relation to it, as it is disclosed throughout these
financial statements.
The Group does not rely on any individual customer and so no additional customer information
is reported.
1.3 Operating costs
Operating costs
Operating costs represent those arising as a result of our operations and include depreciation
and amortisation. All amounts are recognised on an accruals basis.
Leasing
Leases that are considered short-term or low value under IFRS 16 are charged to the Income
Statement on a straight-line basis over the term of the relevant lease. Benefits received and
receivable as an incentive to enter into a lease are also spread on a straight-line basis over
the lease term.
Marketing and distribution costs
Marketing and distribution costs include advertising and marketing costs, as well as the cost
of providing statements and information to clients.
Dealing and financial services costs
Dealing and financial services costs are those costs associated with the cost of doing business
in relation to stockbroking and volume related transactions.
Strategic report Governance Other information
133
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 1: RESULTS FOR THE YEAR
NOTES TO THE GROUP FINANCIAL STATEMENTS
INCOME STATEMENT CONTINUED
1.3 Operating costs continued
Operating profit has been arrived at after charging:
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Depreciation of owned plant and equipment and right-of-use assets
(note 2.3) 8.9 9.0
Amortisation of other intangible assets (note 2.2) 6.2 6.1
Impairment of intangible assets (note 2.2) 1.0 1.1
Marketing costs 25.8 28.3
Operating lease rentals payable – property – 0.1
Office running costs – excluding operating lease rents payable 4.9 4.9
FSCS costs 12.1 13.9
Dealing and financial services costs 24.6 35.6
Data and technology costs 29.7 22.8
Legal and professional costs
2
33.1 16.7
Other operating costs
1
11.2 7.7
Staff (including contractors) costs (note 1.5) 155.5 119.8
Operating costs 313.0 266.0
1 Included in other operating costs are fair value movements on investments as disclosed in note 2.4. Also included are compensation
and compliance costs, other finance costs and insurance costs.
2 Legal and professional fees has been separated from the Other operating costs line in the current year and as a result the comparative
has been moved in the prior year.
1.4 Auditors’ remuneration
The analysis of auditors’ remuneration is as follows:
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Audit fees
Fees payable to the Company’s auditors for the statutory audit
of the Company’s annual financial statements 0.2 0.1
Fees payable to the Company’s auditors and its associates
for the audits of the Company’s subsidiaries 0.4 0.4
Audit related assurance services 0.5 0.4
1.1 0.9
Audit and related services provided by the auditors are discussed further in the Audit Committee
report on page 76.
1.5 Staff costs
Staff costs represent amounts paid to employees, contractors and NEDs in respect of services
provided in the year including wages and salaries, share-based payment expenses, bonuses,
payments to a defined contribution retirement benefit scheme and related social security costs.
Amounts are recognised as the services are provided.
Year ended
30 June 2022
No.
Year ended
30 June 2021
No.
The average monthly number of employees of the Group
(including Executive Directors and contractors) was:
Operating and support functions 1,533 1,360
Administrative functions 576 479
2,109 1,839
Their aggregate remuneration comprised:
£m £m
Wages and salaries 122.2 97.5
Social security costs 14.2 10.8
Share-based payment expenses 8.4 4.5
Other pension costs 13.2 11.6
Total costs paid for staffing 158.0 124.4
Capitalised in the year (2.5) (4.6)
Staff (including contractors) costs 155.5 119.8
The staff (including contractors) costs of £155.5 million (2021: £119.8m) are net of costs capitalised
under intangible assets. In total, £2.0 million of wages and salaries (2021: £3.9m), social security
costs of £0.2 million (2021: £0.4m) and pension costs of £0.3 million; (2021: £0.3m) were capitalised.
See note 2.2 for further detail of the amounts capitalised.
Strategic report Governance Other information
134
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 1: RESULTS FOR THE YEAR
NOTES TO THE GROUP FINANCIAL STATEMENTS
INCOME STATEMENT CONTINUED
1.6 Finance income
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Interest on bank deposits – 1.1
Other finance income – 0.3
– 1.4
1.7 Finance costs
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Commitment fees 0.3 0.3
Interest incurred on lease payables 0.5 0.7
Finance costs 0.8 1.0
The finance costs relate to the commitment fees paid in respect of a revolving credit facility available
to the Group. The facility allows the Group to draw up to £75 million (2021: £75m) and is undrawn
as at 30 June 2022. The facility incurs interest charges, consisting of a margin of 0.85% plus SONIA
per annum when drawn.
Interest incurred on lease payables is in relation to the right-of-use assets arising due to the leases
of the Group accounted for under IFRS 16 and the incremental borrowing rate implied in the lease.
The incremental borrowing rate for each lease is considered based on the relevant terms of the lease
taking into account factors such as length of lease, the location and economic factors impacting the
asset and the credit rating of the Group company entering into the lease. The rates range between
2.5% and 4.4%, with a weighted average incremental borrowing rate of 2.8%.
1.8 Tax
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax. The tax
currently payable is based on taxable profit for the year. Taxable profit differs from net profit as
reported in the Income Statement because it excludes items of income or expense that are taxable
or deductible in other years and it further excludes items that are never taxable or deductible.
The Group’s liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the end of the reporting period.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial statements and the corresponding tax bases used
in the computation of taxable profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred
tax assets are recognised to the extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised. Such assets and liabilities are
not recognised if the temporary difference arises from the initial recognition of goodwill or from
the initial recognition (other than in a business combination) of other assets and liabilities in a
transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments
in subsidiaries and associates, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability
is settled or the asset is realised. Deferred tax is charged or credited in the Income Statement,
except when it relates to items charged or credited directly to equity, in which case the deferred
tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax liabilities and when they relate
to income taxes levied by the same taxation authority and the Group intends to settle its current
tax assets and liabilities on a net basis.
Strategic report Governance Other information
135
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 1: RESULTS FOR THE YEAR
NOTES TO THE GROUP FINANCIAL STATEMENTS
INCOME STATEMENT CONTINUED
1.8 Tax continued
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Current tax: on profits for the year 52.3 70.4
Current tax: adjustments in respect of prior years (0.4) (0.1)
Deferred tax (note 2.7) 1.0 (0.6)
Deferred tax: adjustments in respect of prior years (note 2.7) 0.5 –
53.4 69.7
Corporation tax is calculated at 19% of the estimated assessable profit for the year to 30 June 2022
(2021: 19%).
In addition to the amount charged to the Consolidated Income Statement, certain tax amounts have
been charged or (credited) directly to equity as follows:
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Deferred tax relating to share-based payments (0.6) (0.2)
Current tax relating to share-based payments 0.1 1.1
(0.5) 0.9
Factors affecting tax charge for the year
It is expected that the ongoing effective tax rate will remain at a rate approximating to the standard
UK corporation tax rate in the medium term, except for the impact of deferred tax arising from the
timing of exercising of share options which is not under our control. Following the enactment of
Finance Act 2021 the standard UK corporation tax rate will remain at 19% before increasing to 25%
from 1 April 2023. Accordingly, the Group’s taxable profits for this accounting year are taxed at 19%.
Deferred tax has been recognised at either 19% or 25% depending on the rate expected to be in force
at the time of the reversal of the temporary difference.
The charge for the year can be reconciled to the profit per the Income Statement as follows:
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Profit before tax 269.2 366.0
Tax at the standard UK corporation tax rate of 19.0% (2021: 19.0%) 51.1 69.5
Non-taxable income 0.1 –
Items not allowable for tax 2.3 0.5
Additional deduction for tax purposes (0.2) –
Adjustments in respect of prior years 0.1 (0.1)
Foreign tax suffered 0.1 –
Impact of the change in tax rate (0.1) (0.2)
Tax expense for the year 53.4 69.7
Effective tax rate 19.9% 19.0%
The additional deduction for tax purposes only arises from enhanced capital allowances available
from the super deduction on qualifying plant and machinery purchased within the financial year ended
30 June 2022.
Factors affecting future tax charge
Any increase or decrease to the share price of Hargreaves Lansdown plc will impact the amount
of tax deduction available in future years on the value of shares acquired by staff under share
incentive schemes.
Strategic report Governance Other information
136
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 1: RESULTS FOR THE YEAR
NOTES TO THE GROUP FINANCIAL STATEMENTS
INCOME STATEMENT CONTINUED
1.9 Earnings per share (EPS)
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the
Company by the weighted average number of ordinary shares in free issue during the year, including
ordinary shares held in the Hargreaves Lansdown Employee Benefit Trust (HL EBT) and Hargreaves
Lansdown SIP Trust (SIP) reserve which have vested unconditionally with employees.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares
outstanding to assume conversion of all potentially dilutive ordinary shares.
The weighted average number of anti-dilutive share options and awards excluded from the calculation
of diluted earnings per share was 429,519 at 30 June 2022 (2021: nil).
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Earnings
Earnings for the purposes of basic and diluted EPS – net profit
attributable to equity holders of parent company 216.3 296.7
Number of shares
Weighted average number of ordinary shares 474,318,625 474,318,625
Weighted average number of shares held by HL EBT and SIP (444,685) (532,185)
Weighted average number of shares held by HL EBT and SIP
that have vested unconditionally with employees 74,702 4,335
Weighted average number of ordinary shares for the purposes
of basic EPS 473,948,642 473,790,775
Weighted average number of dilutive share options held by HL EBT
and SIP that have not vested unconditionally with employees 579,869 754,901
Weighted average number of ordinary shares for the purposes
of diluted EPS 474,528,511 474,545,676
Earnings per share
Pence Pence
Basic EPS 45.6 62.6
Diluted EPS 45.6 62.5
Underlying basic EPS* 50.4 62.6
Underlying diluted EPS* 50.4 62.5
* Underlying basic EPS and underlying diluted EPS are calculated after deducting strategic costs as outlined in the Glossary of Alternative
Performance Measures on page 168.
1.10 Share-based payments
The Group issues equity settled share-based payments to certain employees. Equity settled
share-based payments are measured at fair value (excluding the effect of non-market based
vesting conditions) at the date of grant. Share options are expensed on a straight-line basis over
the vesting period, based on management’s best estimate of awards vesting and adjusted for the
impact of non-market-based vesting conditions. Annual revisions are made to the estimate of
awards vesting, based on non-market-based vesting conditions. The impact of the revision is
recognised in the Income Statement such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to reserves.
Fair value is measured by use of the Black-Scholes model. The expected life used in the model
has been adjusted, based on management’s best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
Any gains or losses on the sale of the Company’s own shares held by the EBT are credited
or debited directly to the EBT reserve.
Equity settled share option schemes
The Group seeks to facilitate equity ownership by employees, principally through schemes that
encourage and assist the purchase of the Company’s shares.
The Group operates three share option and share award plans: the Employee Savings Related Share
Option Scheme (SAYE), the Hargreaves Lansdown plc Share Incentive Plan (SIP) and the Hargreaves
Lansdown Company Share Option Scheme (the Executive Option Scheme).
Awards granted under the SAYE scheme vest over three or five years. Awards granted under the
Employee Share Incentive Plan vest over a three-year period. Awards granted under the Executive
Option Scheme range between vesting at grant date and a maximum of 10 years. Options are
exercisable at a price equal to the market value of the Company’s shares on the date of grant.
There are currently no performance conditions attached to any options granted under any of the
schemes, with the exception of the Sustained Performance Plan (SPP) – a part of the Executive
Option Scheme, although options are forfeited (in most circumstances) if the employee leaves the
Group before the options vest.
Strategic report Governance Other information
137
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 1: RESULTS FOR THE YEAR
NOTES TO THE GROUP FINANCIAL STATEMENTS
INCOME STATEMENT CONTINUED
1.10 Share-based payments continued
Details of the share options and share awards outstanding during the year are as follows:
Year ended 30 June 2022 Year ended 30 June 2021
Share options
No.
Weighted average
exercise price
Pence
Share options
No.
Weighted average
exercise price
Pence
SAYE
Outstanding at beginning of the year 792,726 1,223.9 826,006 1,238.6
Granted during the year 716,660 808.0 217,196 1,232.0
Exercised during the year (18,034) 1,340.5 (133,947) 1,290.9
Lapsed during the year (9,453) 1,262.7 (1,362) 1,057.0
Forfeited during the year (503,576) 1,218.5 (115,167) 1,268.3
Outstanding at the end of the year 978,323 919.5 792,726 1,223.9
Exercisable at the end of the year – – 9,555 1,377.0
Executive Option Scheme
Outstanding at beginning of the year 1,340,013 572.6 1,525,442 674.9
Granted during the year 517,721 – 263,284 –
Exercised during the year (359,939) 653.7 (430,901) 608.4
Lapsed during the year – – – –
Forfeited during the year (13,705) – (17,812) –
Outstanding at the end of the year 1,484,090 358.5 1,340,013 572.6
Exercisable at the end of the year 563,287 944.6 638,671 1,093.6
SIP
Outstanding at beginning of the year 34,885 23.5 34,885 23.5
Exercised during the year (1,410) 23.5 – 23.5
Outstanding at the end of the year 33,475 23.5 34,885 23.5
Exercisable at the end of the year 33,475 23.5 34,885 23.5
The weighted average market share price at the date of exercise for options exercised during the year
was 1,373.5 pence (2021: 1,653.7 pence).
The share options outstanding at the end of each year have exercise prices and expected remaining
lives as follows:
Year ended 30 June 2022 Year ended 30 June 2021
Share options
No.
Weighted
average options
exercise price
Pence
Share options
No.
Weighted
average options
exercise price
Pence
Weighted average expected
remaining life
0-1 years 1,050,667 719.7 989,867 986.2
1-2 years 413,388 240.9 582,258 853.0
2-3 years 857,299 671.7 429,274 616.7
3-4 years 86,784 0.0 79,440 0.0
4-5 years 87,749 0.0 86,784 0.0
2,495,887 573.6 2,167,623 801.6
The fair value at the date of grant of options awarded during the year ended 30 June 2022 and the
year ended 30 June 2021 has been estimated by the Black-Scholes methodology and the principal
assumptions required by the methodology were as follows:
At 30 June 2022 At 30 June 2021
Weighted average share price 1,260.37 1,597.37
Expected dividend yields 2.41% 1.61%
SAYE
Weighted average exercise price 8.08p 1,232p
Expected volatility 41% 39%
Risk free rate 1.58% 0.15%
Expected life 3 years 3 years
Fair value 253.0p 441.0p
Executive scheme
Weighted average exercise price 0.00p 0.00p
Expected volatility 34% 35%
Risk free rate 0.37% (0.09)%
Expected life 2.6 years 4.4 years
Fair value 1,473.1p 1,607.6p
The expected volatility
The expected Hargreaves Lansdown plc share price volatility was determined by calculating
the historical volatility of the Group’s share price since flotation in May 2007. Prior to 15 May 2007,
the Company’s shares were not listed on a stock exchange and therefore no readily available market
price existed for the shares. Since 15 May 2007, a quoted market price has been available for the
Company’s shares.
The Group recognised total expenses related to equity settled share-based payment transactions
as shown in note 1.5.
Strategic report Governance Other information
138
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 2: ASSETS AND LIABILITIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2022
Note
At 30 June 2022
£m
At 30 June 2021
£m
ASSETS
Non-current assets
Goodwill
2.1 1. 3 1.3
Other intangible assets
2.2 3 7. 3 3 3.6
Property, plant and equipment
2.3 22.5 2 8.6
Deferred tax assets
2.7 1. 9 3.7
63.0 67 .2
Current assets
Investments
2.4 0.8 0.9
Trade and other receivables
2.5 523.5 869.2
Cash and cash equivalents
2.6 488. 3 44 5.3
Current tax assets 0.6 1. 5
1 ,013 .2 1, 316.9
Total assets 1,07 6. 2 1, 384. 1
LIABILITIES
Current liabilities
Trade and other payables
2.8 488. 3 7 74 . 0
488. 3 7 74. 0
Net current assets 52 4.9 542.9
Non-current liabilities
Provisions
2.9 2 .6 2.7
Non-current lease liabilities
2.10 11. 8 1 5.0
Total liabilities 502.7 7 9 1. 7
Net assets 573. 5 592.4
EQUITY
Share capital
3.1 1.9 1. 9
Shares held by EBT reserve (3. 6) (4.8)
EBT reserve (2.4) (3. 1)
Retained earnings 579 .2 599. 5
Total equity, attributable to the owners
of the parent 5 7 5 .1 593.5
Non-controlling interest
3.1 (1. 6) (1 . 1)
Total equity 573. 5 592.4
The consolidated financial statements on pages 131 to 158 were approved by the Board and authorised for issue on 4 August 2022 and signed on its behalf by:
Amy Stirling
Chief Financial Officer
Strategic report Governance Other information
139
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 2: ASSETS AND LIABILITIES
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONTINUED
2.1 Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s
interest in the fair value of the identifiable assets and liabilities of a subsidiary at the date of
acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at
cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill
acquired in a business combination is allocated to the cash generating unit expected to benefit
from the synergies of the combination.
Cash generating units to which goodwill has been allocated are reviewed for impairment
at least annually as a matter of course, and whenever an event or change in circumstances
occurs which indicates potential impairment. The carrying value of goodwill is compared to the
recoverable amount, which is the higher of value in use and the fair value less costs of disposal.
Any impairment is recognised immediately in profit or loss and is not subsequently reversed.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination
of the profit or loss on disposal.
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Cost – at beginning and end of year 1.5 1.5
Accumulated impairment losses
At beginning and end of year 0.2 0.2
Carrying amount – at end of year 1.3 1.3
The net carrying value of goodwill relates entirely to the acquisition of Hargreaves Lansdown
Pensions Direct Limited (HLPD) now named Hargreaves Lansdown Advisory Services Limited (HLAS).
The Group has prepared financial forecasts for the business for the period to June 2026 that show
the Group as a whole is expected to remain profitable and cash generative. HLAS made a loss in
the financial year, but has a net asset position as at 30 June 2022 and forecasts to June 2026 show
a return to profitability. As a result there are no significant indicators that goodwill is impaired.
2.2 Other intangible assets
Other intangible assets comprise customer lists, computer software and the Group’s key
operating system, which are stated at cost less amortisation and any recognised impairment loss.
Amortisation is provided, where material, on all intangible assets excluding goodwill at rates
calculated to write off the cost or valuation, less estimated residual value, of each asset evenly
using a straight-line method over its estimated useful life as follows:
Customer list – eight years
The customer list relates to acquired books of business and does not include internally generated
client lists. The carrying value of the assets is reviewed for impairment at least every 12 months, or
when events or changes in circumstances indicate that the carrying value may not be recoverable.
Computer software – over three to eight years
Computer software relates to purchases of licences and software, in line with the requirements
of IAS 38. The carrying values of computer software are reviewed for impairment when events
or changes in circumstances indicate that the carrying value may not be recoverable. The gain
or loss arising on the disposal or retirement of an asset is determined as the difference between
the sales proceeds and the carrying amount of the asset and is recognised in the Consolidated
Income Statement.
Internally developed software – eight years
IT development costs are capitalised only to the extent that they have led to the creation
of enduring assets, which deliver benefits at least as great as the amount capitalised and
in accordance with the recognition criteria of IAS 38 intangible assets.
When assessing projects for capitalisation we apply IAS 38’s recognition and measurement criteria
for internally generated intangible assets to development expenditure that is both propositional
in nature (as opposed to regulatory or administrative), and which is, or is expected to be, material
over the life of the project.
Development work has been undertaken in house by IT staff and management to enhance the
key operating system. The key operating system is fundamental to the operation of the platform,
which holds client assets, enabling revenue to be earned.
In-house development work has also been undertaken in Hargreaves Lansdown Savings Limited
to develop a digital cash savings product. Development commenced in the year to 30 June 2016.
The Group launched the service in December 2019 to a limited number of clients and is committed
to providing the financial resources required to see it through to expected profitability.
Costs relating to an asset that is not yet fully available for use by the business, are classified as
internally developed software and are reviewed for impairment at least annually. No issues have
been noted in the current year with assets in development other than those referred to within this
note. In accordance with the provisions of IAS 38 the costs are capitalised as an intangible asset
and subsequently amortised over the estimated useful life of the systems of eight years, starting
from the date at which the assets are put into use.
Strategic report Governance Other information
140
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 2: ASSETS AND LIABILITIES
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONTINUED
2.2 Other intangible assets continued
Impairment of intangible assets excluding goodwill
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and
intangible assets to determine whether there is any indication that those assets have suffered an
impairment loss. If any indication exists, the recoverable amount of the asset is estimated in order
to determine the extent of the loss. Where the asset does not generate cash flows, independent
from other assets, the Group estimates the recoverable amount of the cash generating unit to
which the asset belongs. Recoverable amount is the higher of fair value, less costs to sell, and
value in use.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying
amount of the asset is reduced to its recoverable amount and an impairment loss is recognised as
an expense immediately.
Customer
list
£m
Computer
software
£m
Internally
developed
software
£m
Total
£m
Cost
At 1 July 2020 4.6 18.1 26.4 49.1
Asset reclassification – (2.8) 2.8 –
Additions – 1.2 11.6 12.8
Disposals – (0.7) (0.4) (1.1)
Impairment – – (1.3) (1.3)
At 30 June 2021 4.6 15.8 39.1 59.5
Asset reclassification – 1.5 (1.5) –
Additions – 1.5 9.4 10.9
Disposals – – – –
Impairment – – (1.0) (1.0)
At 30 June 2022 4.6 18.8 46.0 69.4
Accumulated amortisation
At 1 July 2020 0.8 13.9 6.4 21.1
Charge 0.4 1.6 4.1 6.1
Disposals – (0.7) (0.4) (1.1)
Impairment – – (0.2) (0.2)
At 30 June 2021 1.2 14.8 9.9 25.9
Asset reclassification 1.4 (1.4) –
Charge 0.6 1.1 4.5 6.2
Disposals – – – –
Impairment – – – –
At 30 June 2022 1.8 17.3 13.0 32.1
Carrying amount
At 30 June 2022 2.8 1.5 33.0 3 7.3
At 30 June 2021 3.4 1.0 29.2 33.6
At 30 June 2020 3.8 4.2 20.0 28.0
The amortisation charge above is included in operating costs in the Income Statement.
The impairment incurred in the year relates to the write-off of a portion of internally developed
software, for which there is no longer an intended future use. It has been written off in part and net
book value of £1.0m has been recorded in operating costs in the Income Statement. This impairment
and write-off of a portion of the asset does not impact the remaining element of the asset and
was performed due to a change in development method. The asset was not in use at the time
of impairment.
The customer lists are a separately acquired intangible asset and do not include any internally
generated element. The remaining amortisation period for these assets is six to eight years.
Computer software includes externally acquired licences and internally generated system
improvements. Commitments in respect of intangible assets are shown in note 5.3.
2.3 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any
recognised impairment loss. Cost includes the original purchase price of the asset and the costs
attributable to bringing the asset to working condition for its intended use.
Property, plant and equipment now includes both owned and leased assets. Owned assets
are measured initially at cost and subsequently at cost less accumulated depreciation. Leased,
or right-of-use assets are measured initially at the present value of all future lease payments,
less any prepaid or accrued rent or incentives and any expected dilapidation cost being the
initial value.
Subsequently, leased assets are measured at initial value less accumulated depreciation.
Depreciation is charged based on the estimates of useful economic lives and expected residual
values, which are reviewed annually, for all plant and equipment, except for leased assets which
are depreciated on a straight-line basis over their economic lives. Management determines the
useful lives and residual values for assets when they are acquired, based on experience with
similar assets and taking into account other relevant factors, such as any expected changes in
technology. The charge is calculated to write off the cost or valuation, less estimated residual
value, of each asset evenly using a straight-line method over its estimated useful life as follows:
Computer hardware – over three to ten years.
Office equipment (includes fixtures and leasehold improvements) – over three to ten years.
Right-of-use assets – over the term of the associated lease.
The carrying values of plant and equipment are reviewed for impairment when events or changes
in circumstances indicate that the carrying value may not be recoverable. The gain or loss arising
on the disposal or retirement of an asset is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in the Income Statement.
Strategic report Governance Other information
141
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 2: ASSETS AND LIABILITIES
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONTINUED
2.3 Property, plant and equipment continued
Property, plant and equipment
Right-of-use
assets
£m
Computer
hardware
£m
Office
equipment
£m
Total
£m
Cost
At 1 July 2020 20.2 39.9 11.6 71.7
Additions 1.3 3.6 0.5 5.4
Disposals (1.1) (0.9) – (2.0)
At 30 June 2021 20.4 42.6 12.1 75.1
Additions – 1.9 0.9 2.8
Disposals – (0.6) – (0.6)
At 30 June 2022 20.4 43.9 13.0 7 7.3
Accumulated depreciation
At 1 July 2020 2.9 28.0 7.6 38.5
Charge 3.0 4.7 1.3 9.0
Disposal (0.1) (0.9) – (1.0)
At 30 June 2021 5.8 31.8 8.9 46.5
Charge 3.1 4.8 1.0 8.9
Disposal – (0.6) – (0.6)
At 30 June 2022 8.9 36.0 9.9 54.8
Carrying amount
At 30 June 2022 11.5 7.9 3.1 22.5
At 30 June 2021 14.6 10.8 3.2 28.6
At 30 June 2020 17.3 11.9 4.0 33.2
Leases recognised in property, plant and equipment
At
30 June 2022
£m
At
30 June 2021
£m
Right-of-use assets
Buildings 11.5 14.6
Leases expense recognised in the Consolidated Income Statement
Note
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Depreciation charge on right-of-use assets
Buildings
1.3 3.1 3.0
Lease expense recognised in finance costs
1.7 0.5 0.7
2.4 Investments
Investments are recognised in the Group’s Statement of Financial Position, on trade date, when
the Group becomes party to the contractual provisions of an instrument and are initially measured
at fair value.
Investments by default are designated as being held at fair value through profit or loss and
are subsequently measured at fair value. Fair value being the quoted market price of the listed
investment, with any gain or loss reported within the Income Statement. An investment is
classified in this category if it is held principally for the purpose of selling in the short-term
mandatorily, in accordance with IFRS 9.
The Group derecognises financial assets only when the contractual rights to the cash flows,
or substantially all of the risks and rewards of ownership from the asset are transferred or expire.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying
amount and the sum of the consideration received and receivable is recognised in profit or loss.
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
At beginning of year 0.9 0.6
Purchases 0.7 2.1
Disposals (0.8) (1.8)
At end of year 0.8 0.9
Comprising:
Current asset investment – UK-listed securities valued at quoted market price 0.8 0.9
£0.8 million (2021: £0.9m) of investments are classified as held at fair value through profit and loss,
being deal related short-term investments. Fair value movements on investments are included in other
operating costs, as disclosed in note 1.3.
Investment balances are short-term positions the Group takes as a result of deals placed either
in error or due to having to take positions where clients are no longer able to hold an investment.
The gross gains and losses in relation to fair value include movements where no investment position
is taken and are as shown below:
Fair value movements on investments
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Gross gains 0.4 1.5
Gross losses (1.3) (8.1)
(0.9) (6.6)
Strategic report Governance Other information
142
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 2: ASSETS AND LIABILITIES
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONTINUED
2.5 Trade and other receivables
Financial assets are recognised in the Group’s Statement of Financial Position when the Group
becomes a party to the contractual provisions of the instrument and are initially measured at
fair value.
Trade and other receivables
Trade and other receivables comprise fees due from clients and counterparty positions. They are
subsequently measured at amortised cost using the effective interest method less any expected
credit losses. The financial assets are held in order to collect the contractual cash flows and those
cash flows are payments of interest and principal only. The Group recognises Expected Credit
Losses (ECLs) relating to trade receivables in line with the simplified approach per IFRS 9 and
calculated based on the historic information available from the preceding years alongside factors
impacting the individual debtors, economic conditions and forecast expectations. Impairment
losses are recognised immediately in the Income Statement.
Term deposits
Term deposits comprise cash deposits held by UK licensed banks for a period of greater than
three months, over which there is no recall during the term of the deposit. The amounts are
measured at amortised cost using the effective interest method in line with IFRS 9.
Accrued income
Accrued income relates to amounts earned by the Group, for which the Group has provided
services, but balances are collected in arrears. The amount relates to fund management fees,
interest on deposits and services direct to clients.
At
30 June 2022
£m
At
30 June 2021
£m
Financial assets:
Trade receivables 432.6 744.5
Term deposits 20.0 60.0
Accrued income 49.0 46.7
Other receivables 3.7 4.1
505.3 855.3
Non-financial assets:
Prepayments 18.2 13.9
523.5 869.2
In accordance with market practice and accounting standards on trade date accounting, certain
balances with clients, Stock Exchange member firms and other counterparties totalling £409.5 million
(2021: £704.8m) are included in trade receivables. These balances are presented net where there is
a legal right of offset and the ability and intention to settle net. The gross amount of trade receivables
is £532.6 million (2021: £936.0m) and the gross amount offset in the Statement of Financial Position
with trade payables is £130.1 million (2021: £231.1m). Other than counterparty balances, trade
receivables primarily consist of fees and amounts owed by clients and renewal commission owed by
fund management groups. There are no balances where there is a legal right of offset but not a right
of offset in accordance with accounting standards, and no collateral has been posted for the balances
that have been offset.
Given the short-term nature of the Group’s receivables and the expectation of the Group in relation to
its counterparties, there has been no material expected credit loss recognised in the year – see note
5.7 for further details.
The Group does not have any contract assets in respect of its revenue contracts with customers
(2021: nil).
Strategic report Governance Other information
143
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 2: ASSETS AND LIABILITIES
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONTINUED
2.6 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits that are readily
convertible to a known amount of cash, subject to insignificant changes in value and are
considered to be holdings of less than three months or those over which the Group has an
immediate right of recall. The carrying amount of these assets is approximately equal to their
fair value.
Term deposits held by the Group on unbreakable terms greater than three months are classified
as financial assets and are shown in note 2.5.
At
30 June 2022
£m
At
30 June 2021
£m
Cash and cash equivalents:
Group cash and cash equivalent balances 488.0 443.5
Restricted cash – balances held by HL EBT 0.3 1.8
488.3 445.3
At 30 June 2022, segregated deposit amounts held by the Group on behalf of clients in accordance
with the client money rules of the Financial Conduct Authority amounted to £8,665 million (2021:
£7,243m). In addition, there were pension trust and Active Savings cash accounts held on behalf of
clients not governed by the client money rules of £6,533 million (2021: £5,621m). The client retains
the beneficial interest in both these deposits and cash accounts, and accordingly, they are not
included in the Statement of Financial Position of the Group.
Restricted cash balances relate to the balances held within the HL Employee Benefit Trust. These
are strictly held for the purpose of purchasing shares to satisfy options under the Group’s share
option schemes.
2.7 Deferred tax assets
Deferred tax assets arise because of temporary differences only. The following are the major deferred
tax assets recognised and movements thereon during the current and prior reporting years. Deferred
tax has been recognised at either 19% or 25% depending upon the rate expected to be in force at the
time of the reversal of the temporary difference. A deferred tax asset in respect of future share option
deductions has been recognised based on the Company’s share price as at 30 June 2022.
Fixed asset
tax relief
£m
Share-based
payments
£m
Other deductible
temporary
differences
£m
Total
£m
At 1 July 2020 0.1 2.4 0.6 3.1
Credit to income 0.2 0.3 0.1 0.6
Credit/(charge) to equity – (0.2) 0.2 –
At 30 June 2021 0.3 2.5 0.9 3.7
(Charge)/credit to income (0.8) (0.7) – (1.5)
Credit/(charge) to equity – (0.3) – (0.3)
At 30 June 2022 (0.5) 1.5 0.9 1.9
Deferred tax expected to be recovered
or settled:
Within 1 year after reporting date – 0.4 0.8 1.2
>1 year after reporting date (0.5) 1.1 0.1 0.7
(0.5) 1.5 0.9 1.9
Strategic report Governance Other information
144
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 2: ASSETS AND LIABILITIES
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONTINUED
2.8 Trade and other payables
Financial liabilities are classified according to the substance of the contractual arrangements
entered into.
Trade payables are measured at amortised cost using the effective interest method. In accordance
with market practice, certain balances with clients, Stock Exchange member firms and other
counterparties are included as creditors.
Current elements of lease liabilities are included within other payables, being initially calculated
in line with IFRS 16. On inception a lease liability is measured as the present value of future lease
payments, discounted at the incremental borrowing rate implied within the lease. The future lease
payments of the Group are fixed, except for those that relate to leases in a currency other than
GBP, which may vary due to exchange rate movements.
At
30 June 2022
£m
At
30 June 2021
£m
Financial liabilities
Trade payables 406.7 712.5
Current lease liabilities 4.6 4.8
Other payables 31.0 28.9
442.3 746.2
Non-financial liabilities
Deferred income 0.3 0.4
Accruals 38.5 21.1
Social security and other taxes 7.2 6.3
488.3 774.0
In accordance with market practice, certain balances with clients, Stock Exchange member firms
and other counterparties totalling £404.9 million (2021: £694.6m) are included in trade payables,
similar to the treatment of trade receivables. As stated in note 2.5, where we have a legal right of
offset and the ability and intention to settle net, trade payable balances have been presented net.
Other payables principally comprise amounts owed to staff as a bonus and rebates due to the
regulated funds operated by the Group. Accruals and deferred income principally comprise amounts
outstanding for trade purchases and receipts from clients, where cash is received in advance for
certain services.
All balances classified as Deferred income in the prior year have been recognised in revenue in the
current year.
2.9 Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event,
and it is probable that the Group will be required to settle that obligation. Provisions are measured
at the Directors’ best estimate of the expenditure required to settle the obligation at the end of
the reporting period, and are discounted to present value where the effect is material.
£m
Included within non-current liabilities
At 1 July 2020 0.8
Charged during the year 1.9
At 30 June 2021 2.7
Released in the year (1.7)
Charged during the year 1.6
At 30 June 2022 2.6
The provision brought forward relates to property related costs representing the Group’s future
committed lease payments on non-cancellable leases and other contractual obligations that arise
on the surrendering of leases, in relation to the head office in Bristol. These property provisions are
not expected to be fully utilised until 2026.
Also included in the current year was a provision in relation to historic transactions that was reduced
by £1.7 million upon review of the obligations present.
Provisions recognised in the current year are not expected to be paid within 12 months of the date
of the Statement of Financial Position and are costs in relation to historic transactions that are now
considered more likely than not to be incurred.
Strategic report Governance Other information
145
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 2: ASSETS AND LIABILITIES
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONTINUED
2.10 Long-term liabilities
Lease liabilities are included within current other payables and non-current lease liabilities, being
initially calculated in line with IFRS 16. On inception a lease liability is measured as the present value
of future lease payments, discounted at the incremental borrowing rate implied within the lease.
The future lease payments of the Group are fixed, except for those that relate to leases in a currency
other than GBP, which may vary due to exchange rate movements.
Interest expense is incurred in relation to these leases, based on the incremental borrowing rate
implied in the contracts. This expense is recognised as a finance cost in the period to which payment
relates, see note 1.7 for further details.
At
30 June 2022
£m
At
30 June 2021
£m
Lease liabilities greater than 12 months 11.8 15.0
Finance costs and financing cash flows associated with the lease are reconciled below to show
the movement in the year.
Reconciliation of lease liability changes to cash flows
Note
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Opening balance – including discounted current cash flows 19.8 22.2
New lease in period – 1.3
Cash paid as rent
4 (3.9) (4.0)
Termination of lease – (0.4)
Lease expense recognised in finance costs
1.7 0.5 0.7
Current element of liability
2.8 (4.6) (4.8)
Long-term liability 11.8 15.0
Strategic report Governance Other information
146
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 3: EQUITY
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2022
Attributable to the owners of the Parent
Non-controlling
interest
£m
Total equity
£m
Share capital
£m
Shares held by
EBT reserve
£m
EBT reserve
£m
Retained
earnings
£m
Total
£m
At 1 July 2020 1. 9 (6. 3) (1.9) 564 .6 558.3 (0 .7) 557 . 6
Total comprehensive income
1
– – – 296. 7 296. 7 (0.4) 296.3
Employee Benefit Trust
Shares sold in the year – 9.3 – – 9.3 – 9.3
Shares acquired in the year – (7 .8) – – (7 .8) – (7 .8)
HL EBT share sale – – (4.9) – (4.9) – (4 .9)
Reserve transfer on exercise of share options – – 3.7 (3.7) – – –
Employee share option scheme
Share-based payments expense – – – 4.5 4. 5 – 4.5
Current tax effect of share-based payments (note 1.8) – – – 1 .1 1 .1 – 1.1
Deferred tax effect of share-based payments (note 1.8) – – – (0.2) (0.2) – (0.2)
Dividend paid (note 3.2) – – – (263. 5) (263. 5) – (263.5)
At 30 June 2021 1. 9 (4. 8) (3. 1) 599 .5 593.5 (1 . 1) 592.4
Total comprehensive income
1
– – – 216. 3 216 .3 (0.5) 215. 8
Employee Benefit Trust
Shares sold in the year – 5.4 – – 5. 4 – 5.4
Shares acquired in the year – (4.2) – – (4.2) – (4.2)
HL EBT share sale – – (2.8) – (2.8) – (2.8)
Reserve transfer on exercise of share options – – 3.5 (3. 5) – – –
Employee share option scheme
Share-based payments expense – – – 8.4 8.4 – 8. 4
Current tax effect of share-based payments (note 1.8) – – – 0 .1 0 .1 – 0 .1
Deferred tax effect of share-based payments (note 1.8) – – – (0.6) (0.6) – (0.6)
Dividend paid (note 3.2) – – – (24 1. 0) (241 .0) – (241. 0)
At 30 June 2022 1. 9 (3. 6) (2.4) 579.2 5 7 5 .1 (1. 6) 5 73.5
1 Total comprehensive income includes Profit for the year and the total comprehensive income presented is equal to Profit in both years presented.
Strategic report Governance Other information
147
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 3: EQUITY
NOTES TO THE GROUP FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONTINUED
3.1 Share capital
At
30 June 2022
£m
At
30 June 2021
£m
Authorised: 525,000,000 (2021: 525,000,000) ordinary shares of 0.4p each 2.1 2.1
Issued and fully paid: ordinary shares of 0.4p each 1.9 1.9
Shares Shares
Issued and fully paid: number of ordinary shares of 0.4p each 474,318,625 474,318,625
The Company has one class of ordinary shares which carry no right to fixed income.
The shares held by the EBT reserve represents the cost of shares in Hargreaves Lansdown plc
purchased in the market and held by the Hargreaves Lansdown EBT to satisfy options under the
Group’s share option schemes.
The EBT reserve represents the cumulative gain on disposal of investments held by the HL EBT.
The reserve is not distributable by the Company as the assets and liabilities of the EBT are subject
to management by the Trustees in accordance with the EBT trust deed.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately
from the Group’s equity therein.
Non-controlling interests consist of the minority’s proportion of the net fair value of the assets and
liabilities acquired at the date of the original business combination and the non-controlling interest’s
change in equity since that date. The non-controlling interest represents a 7.5% shareholding in
Hargreaves Lansdown Savings Limited, which is a subsidiary of the Company.
3.2 Dividends
Dividend recognition
Dividend distributions to the Company’s shareholders are recognised in the accounting period
in which the dividends are declared and paid, or, if earlier, in the accounting period when the
dividend is approved by the Company’s shareholders at the Annual General Meeting.
Amounts recognised as distributions to equity holders in the year:
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
2021 final dividend of 26.6p (2020 final dividend: 26.3p) per share 126.0 124.7
2021 special dividend of 12.0p (2020: 17.4p) per share 56.9 82.4
2022 interim dividend of 12.26p (2021: 11.9p) per share 58.1 56.4
Total dividends paid during the year 241.0 263.5
After the end of the reporting period, the Directors declared a final ordinary dividend of 27.44 pence
per share, payable on 24 October 2022 to shareholders on the register on 23 September 2022.
Dividends are required to be recognised in the financial statements when paid, and accordingly the
declared dividend amounts are not recognised in these financial statements, but will be included in
the 2023 financial statements as follows:
£m
2022 final dividend of 27.44p (2021 final dividend: 26.6p) per share 130.0
Total dividends 130.0
Under an arrangement dated 30 June 1997, the Hargreaves Lansdown Employee Benefit Trust,
which held the following number of ordinary shares in Hargreaves Lansdown plc at the date shown,
has agreed to waive all dividends.
At
30 June 2022
No. of shares
At
30 June 2021
No. of shares
Number of shares held by the Hargreaves Lansdown Employee Benefit Trust 424,035 482,008
Representing percentage of called-up share capital 0.09% 0.10%
Strategic report Governance Other information
148
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 4: CONSOLIDATED STATEMENT OF CASH FLOWS
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2022
Note
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Net cash from operating activities
Profit for the year after tax 215. 8 296.3
Adjustments for:
Income tax expense 53.4 6 9.7
Depreciation of plant and equipment 8.9 9.0
Amortisation of intangible assets 6.2 6 .1
Impairment of intangible assets 1.0 1 .1
Share-based payment expense 8.3 4.5
Interest on lease liabilities 0.5 0.7
Gain on termination of lease – (0. 3)
(Decrease)/increase in provisions (0. 1) 2 .0
Operating cash flows before movements in working capital 29 4.0 389. 1
Decrease/(increase) in receivables 305. 8 (66.0)
(Decrease)/increase in payables (285. 7) 75.8
Cash generated from operations 314. 1 398.9
Income tax paid (51 .2) (70. 3)
Net cash generated from operating activities 262.9 328.6
Investing activities
Decrease in term deposits 40.0 170.0
Purchase of property, plant and equipment (2.8) (5.4)
Purchase of intangible assets (10 .9) (12.8)
Proceeds on disposal of subsidiary – 0. 2
Proceeds/(purchase) on disposal of investments 0 .1 (0. 3)
Net cash generated from investing activities 26.4 151. 7
Financing activities
Purchase of own shares in EBT (4.2) (7 .7)
Proceeds on sale of own shares in EBT 2.8 4.3
Payment of principal in relation to lease liabilities
2.10 (3.9) (4.0)
Dividends paid to owners of the parent (241 .0) (263. 5)
Net cash used in financing activities (246 .3) (270.9)
Net increase in cash and cash equivalents 43.0 209.4
Cash and cash equivalents at beginning of year
2.6 44 5.3 235.9
Cash and cash equivalents at end of year
(including restricted cash)
2.6 488. 3 44 5.3
Strategic report Governance Other information
149
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 5: OTHER NOTES
NOTES TO THE GROUP FINANCIAL STATEMENTS
OTHER
5.1 General information
Hargreaves Lansdown plc (the Company and ultimate parent of the Group) is a company
incorporated in England and Wales with company number 02122142 and domiciled in the United
Kingdom under the Companies Act 2006 whose shares are publicly traded on the London Stock
Exchange. The address of the registered office is One College Square South, Anchor Road,
Bristol BS1 5HL, United Kingdom. The nature of the Group’s operations and its principal activities
are set out in the Operating and Financial Review as part of the Strategic Report.
These financial statements are presented in millions of pounds sterling (£m) which is the currency
of the primary economic environment in which the Group operates.
Basis of preparation
These financial statements have been prepared in accordance with UK-adopted international accounting
standards and with the requirements of the Companies Act 2006 as applicable to companies reporting
under those standards. The financial statements are prepared on a going concern basis as discussed
on page 117.
The financial statements are presented to allow users to understand the primary statements and
the related balances that make them up. It is our aim to ensure that the information provided is
pertinent and indicates balances of most importance, whilst ensuring conformity with IFRS. In order
to do this, we have aligned the notes to the financial statements with the relevant primary statements;
where there is an associated accounting policy, it is denoted by a box presented at the beginning
of the note.
The preparation of financial statements in conformity with IFRS requires the use of certain significant
accounting estimates. It also requires management to exercise its judgement in the process of
applying the Company’s accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the financial statements,
if any, are disclosed in note 5.2.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and
subsidiary undertakings controlled by the Group made up to 30 June 2022. The Group controls
a subsidiary when it has power over an investee, is exposed, or has rights, to variable returns from
its involvement with the subsidiary and has the ability to affect those returns through its power over
the investee. The Group reassesses whether it controls a subsidiary when facts and circumstances
indicate that there are changes to one or more elements of control.
The results of subsidiaries acquired or disposed of during the year are included in the Consolidated
Income Statement from the effective date of acquisition or up to the effective date of disposal,
as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries
to bring the accounting policies used into line with those used by the Group. All intra-Group
transactions, balances, income and expenses are eliminated on consolidation.
Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The cost of the
acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given,
liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control
of the acquired entity. The acquired entity’s identifiable assets, liabilities and contingent liabilities
that meet the conditions for recognition under IFRS 3 ‘Business Combinations’ are recognised at
their fair value at the acquisition date.
The Group recognises any non-controlling interest in the acquired entity at the non-controlling
interest’s proportionate share of the recognised amounts of acquired entity’s identifiable net assets.
Application of new standards
The following amended IFRS standards effective for periods beginning 1 January 2022 have
been applied:
• A number of narrow-scope amendments to IFRS 3, IAS 16, IAS 37 and some annual improvements
on IFRS 1, IFRS 9,IAS 41 and IFRS 16
Changes in accounting policy
None of the standards or amendments below had been endorsed by the UK as at 30 June 2022:
• Amendments to IAS 1, Practice Statement 2 and IAS 8;
• Amendments to IAS 1 ‘Presentation of Financial Statements’ – classification of liabilities as current
and non-current; and
• Amendments to IAS 12 ‘Income Taxes’ – deferred tax related to assets and liabilities arising from
a single transaction.
The Group is currently assessing the impact that the above noted standards and amendments will
have on the Group’s results reported in the Financial Statements. The Directors do not expect that
the adoption of the Standards or amendments listed above will have a material impact on the financial
statements of the Group in future periods.
Accounting policies
The financial statements have been prepared on the historical cost basis, except for the revaluation
of financial assets at fair value through profit and loss. The principal accounting policies adopted are
set out at the start of each note to which they relate.
Strategic report Governance Other information
150
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 5: OTHER NOTES
NOTES TO THE GROUP FINANCIAL STATEMENTS
OTHER CONTINUED
5.2 Critical judgements and key sources
of estimation uncertainty
The preparation of the financial statements requires management to make estimates and
assumptions that affect the reported amount of revenues, expenses, assets and liabilities and the
disclosure of contingent liabilities. If, in the future, such estimates and assumptions, which are based
on management’s best judgement at the date of preparation of the financial statements deviate
from actual circumstances, the original estimates and assumptions will be modified as appropriate
in the period in which the circumstances change. There are no assumptions made about the future,
or any other major sources of estimation uncertainty at the end of the reporting period, that have
a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities
within the next financial year. There are no critical judgments regarding the application of accounting
policies or significant estimates in relation to the preparation of these financial statements.
5.3 Contingencies and commitments
Capital commitments
At the end of the reporting period, the Group had capital commitments of £5.0 million (2021: £0.1m)
for software development and IT hardware.
Contingencies
The Group operates in a highly regulated environment and, in the ordinary course of business,
provides information to various regulators and authorities as part of informal and formal requests
and enquiries. In addition the Group receives complaints or claims in relation to its services from
time to time brought by clients, investors or other third parties. These may be notified to the Group
or directly to third parties, such as the Financial Ombudsman Service in the case of client and
investor complaints investigated and not upheld by the Group.
All such matters are periodically reassessed, with the assistance of external professional advisers
where appropriate, to determine the likelihood of the Group incurring a liability. There are inherent
uncertainties in the outcome of such matters and it is not practicable to reliably estimate the financial
impact, if any, on the Group’s results or net assets at the period end.
5.4 Subsidiaries
A list of the investments in subsidiaries included in the consolidated results of Hargreaves Lansdown
plc is shown in note 6.5 to the parent company financial statements. Also included in the Group
Consolidated Financial Statements are ‘The Hargreaves Lansdown Employee Benefit Trust’ and
‘The Hargreaves Lansdown plc SIP Trust’.
5.5 Events after the reporting period
On 4 August 2022 the Directors proposed a final ordinary dividend payment of 27.44 pence
per ordinary share, payable on 24 October 2022 to all shareholders on the register at the close
of business on 23 September 2022 as detailed in note 3.2.
5.6 Related party transactions
The Company has a related party relationship with its subsidiaries, its Directors and members of
the Executive Committee (the ‘key management personnel’). Transactions between the Company
and its key management personnel are disclosed below. Details of transactions between the
Company and other related parties are also disclosed below.
Trading transactions
The Company entered into the following transactions with Directors within the Hargreaves Lansdown
Group and related parties who are not members of the Group:
Throughout the year, the non-controlling interest in HL Savings Limited has been held by Stuart
Louden, an employee of the Group. There has been no change in the holdings of Stuart Louden
in the current year. During the year, an agreement was reached to purchase Stuart Louden’s interest
within the next 12 months.
During the years ended 30 June 2022 and 30 June 2021 the Company has been party to a lease
with P K Hargreaves, a significant shareholder during the year and former Director, for rental of the old
head office premises at Kendal House. A five-year lease was signed in April 2021 for a rental of part of
the building, to be used for disaster recovery purposes at a market rate rent of £0.1 million per annum.
No amount was outstanding at either year end.
During the years ended 30 June 2022 and 30 June 2021, the Group has provided a range of
investment services in the normal course of business to shareholders on normal third-party
business terms.
Directors and staff are eligible for a slight discount on some of the services provided.
Strategic report Governance Other information
151
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 5: OTHER NOTES
NOTES TO THE GROUP FINANCIAL STATEMENTS
OTHER CONTINUED
5.6 Related party transactions continued
Remuneration of key management personnel
The remuneration of the key management personnel of the Group, being those personnel who were
a member of the Executive Committee during the relevant year shown, is set out below in aggregate
for each of the categories specified in IAS 24 Related Party Disclosures.
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Short-term employee benefits 8.6 8.9
Post-employment benefits 0.4 0.3
Other long-term benefits 0.4 –
Termination benefits 0.5 –
Share-based payments 5.2 2.6
15.1 11.8
In addition to the amounts above, eight key management personnel (2021: six) received gains of
£1.6 million (2021: £1.7m) as a result of exercising share options. During the year, awards were made
under executive option schemes for nine key management personnel (2021: six).
Included within the previous table are the following amounts paid to Directors of the Company who
served during the relevant year. Full details of Directors’ remuneration, including numbers of shares
exercised, are shown in the Directors’ remuneration report.
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Short-term employee benefits 2.6 4.4
Post-employment benefits 0.1 –
Other long-term benefits 0.2 –
Share-based payments 1.4 1.5
4.3 5.9
In addition to the amounts above, Directors of the Company received gains of £0.7 million relating
to the exercise of share options (2021: £0.9m).
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Emoluments of the highest paid Director 1.9
1
2.7
1
Number Number
Number of Directors who exercised share options during the year 2 2
Number of Directors who were members of money purchase pension schemes 2 1
1 The highest paid Director was the Chief Executive Officer and full details of his emoluments can be found in the audited ‘Remuneration payable’
table in the Directors’ remuneration report
Any amounts outstanding with related parties are unsecured and will be settled in cash.
No guarantees have been given or received in respect of amounts outstanding. No provisions
have been made for doubtful debts in respect of the amounts owed by the related parties.
5.7 Financial instruments
Financial instruments include both assets and liabilities. Financial assets principally comprise trade
and other receivables, cash and cash equivalents and current asset listed investments. Financial
liabilities comprise trade and other payables.
Categories of financial assets and financial liabilities
The categories and carrying value of the financial assets and financial assets held in the Group’s
Statement of Financial Position are summarised in the table. The impact of climate change does
not have a material impact on the fair values of the assets.
Strategic report Governance Other information
152
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 5: OTHER NOTES
NOTES TO THE GROUP FINANCIAL STATEMENTS
OTHER CONTINUED
5.7 Financial instruments continued
At 30 June
Financial assets and liabilities at fair value
through profit and loss
Financial assets
at amortised cost
Financial liabilities measured
at amortised cost Total
2022
£m
2021
£m
2022
£m
2021
£m
2022
£m
2021
£m
2022
£m
2021
£m
Financial assets
Equity investments 0.8 0.9 – – – – 0.8 0.9
Cash and cash equivalents – – 488.3 445.3 – – 488.3 445.3
Trade and other receivables:
Trade receivables – – 432.6 744.5 – – 432.6 744.5
Other receivables – – 3.7 4.1 – – 3.7 4.1
Accrued income – – 49.0 46.7 – – 49.0 46.7
Term deposits – – 20.0 60.0 – – 20.0 60.0
Total financial assets 0.8 0.9 993.6 1,300.6 – – 994.4 1,301.5
Financial liabilities
Trade payables – – – – 441.4 712.5 441.4 712.5
Other payables and current lease liabilities – – – – 35.6 33.7 35.6 33.7
Lease liabilities – – – – 11.8 15.0 11.8 15.0
Total financial liabilities – – – – 488.8 761.2 488.8 761.2
Strategic report Governance Other information
153
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 5: OTHER NOTES
NOTES TO THE GROUP FINANCIAL STATEMENTS
OTHER CONTINUED
5.7 Financial instruments continued
Fair value hierarchy
The table below sets out the classifications of each class of financial asset and liability and their
fair values.
Level 1
Quoted prices
for similar
instruments
£m
Level 2
Directly
observable market
inputs other than
Level 1 inputs
£m
Level 3
Inputs not based
on observable
market data
£m
Total
£m
At 30 June 2022
Financial assets at fair value through
profit or loss 0.8 – – 0.8
0.8 – – 0.8
At 30 June 2021
Financial assets at fair value through
profit or loss 0.9 – – 0.9
0.9 – – 0.9
There were no transfers between Level 1 and Level 2 assets during the year (2021: £nil). The fair value
of financial instruments traded in active markets is based on quoted market prices at the end of the
reporting period.
Instruments included in Level 1 comprise primarily equity investments and fund units entered into
on a counterparty basis. As such there is no recurring valuation of financial instruments between
reporting periods.
Nature and extent of risks arising from financial instruments
Financial risk management
The main risks arising from financial instruments are market risk (including interest rate risk,
foreign exchange risk and price risk), liquidity risk and credit risk. Each of these risks is discussed
in detail below.
The Group monitors financial risks on a consolidated basis. The Group’s financial risk management
is based upon sound economic objectives and good corporate practice. No hedging transactions
have taken place during the years presented. The Group has designed a framework to manage
the risks of its business and to ensure that the Directors have in place risk management practices
appropriate to a listed company. The management of risk within the Group is governed by the Board.
Market risk
• Interest rate risk
Interest rate risk is the risk that the Group will sustain losses from adverse movements in rates
associated with interest bearing assets and liabilities. There is an exposure to interest rates on
banking deposits held in the ordinary course of business. At 30 June 2022, the value of financial
instruments on the Group Statement of Financial Position exposed to interest rate risk was
£508.3 million (2021: £505.3m) comprising cash, cash equivalents and term deposits.
This exposure is continually monitored to ensure that the Group is maximising its interest earning
potential within accepted liquidity and credit constraints. The Group has no external borrowings
and as such is not exposed to interest rate or refinancing risk on borrowings. Cash at bank, including
restricted cash, earns interest at floating rates based on daily bank deposit rates. Term deposits
are also made for varying periods of between one day and 13 months, depending on the immediate
cash requirements of the Group, and earn interest at the respective fixed term deposit rates.
Given that a source of revenue is based on the value of client cash under administration, the Group
has an indirect exposure to interest rate risk on cash balances held for clients, the balance of which
was £15,045 million at 30 June 2022 (2021: £12,864m). These amounts are not included in the Group
Statement of Financial Position.
Impact of change in interest rates on interest on client money in the Consolidated Income Statement.
2022
£m
Interest on client money +50bps (0.5%) 67.3
Interest on client money -50bps (0.5%) (37.6)
Strategic report Governance Other information
154
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 5: OTHER NOTES
NOTES TO THE GROUP FINANCIAL STATEMENTS
OTHER CONTINUED
5.7 Financial instruments continued
This assumes the interest income has been earned evenly over the period and that rates have
remained constant over the period.
• Foreign exchange translation and transaction risk
Foreign currency risk is the risk that the Group will sustain losses through adverse movements in
currency exchange rates. With substantially all of the Group’s businesses currently operating within
the UK, and therefore with minimal net assets and transactions of the Group denominated in foreign
currencies, the Group is not exposed to significant foreign exchange translation or transaction risk
and as such does not hedge any foreign current assets or liabilities.
• Price risk
Price risk is the risk that a decline in the value of assets adversely impacts on the profitability of
the Group as a result of an asset not meeting its expected value. The Group is exposed to price risk
on investments, in corporate entities, held on the Group Statement of Financial Position. At 30 June
2022, the fair value of investments recognised on the Group Statement of Financial Position was
£0.8 million (2021: £0.9m). A 20% move in equity prices, in isolation, would have an impact of
£0.2 million (2021: £0.1m).
As a main source of revenue is based on the value of client assets under administration, the Group
has an indirect exposure to price risk on investments held on behalf of clients. These assets are
not on the Group Statement of Financial Position. The risk of lower revenues is partially mitigated
by asset class diversification. The Group does not hedge its revenue exposure to movements in the
value of client assets arising from these risks, and so the interests of the Group are aligned to those
of its clients.
In addition, the Group acts as a private client investment manager, unit trust manager and agency
stockbroker on a matched basis so its exposure to market price movements in this capacity is limited
to when there is a trade mismatch or error, or if one matched counterparty fails to fulfil its obligations.
The impact of these risks is minimised by limits and monitoring controls.
Liquidity risk
The Group is exposed to liquidity risk, namely the risk that it may be unable to meet its payment obligations as they fall due. The Group is highly cash generative and holds significant liquid assets.
The Group actively maintains a proportion of cash balances on short-term deposit, as well as ensuring the Group has access to short-term revolving credit facilities, to ensure that the Group has sufficient
available funds for operations.
The table below analyses the maturities of the undiscounted cash flows relating to financial liabilities of the Group based on the remaining period to the contractual maturity date at the end of the
reporting period.
At 30 June 2022 At 30 June 2021
0-3 months
£m
3-12 months
£m
Over 1 year
£m
Total
£m
0-3 months
£m
3-12 months
£m
Over 1 year
£m
Total
£m
Trade and other payables:
Trade payables 406.3 0.4 – 406.7 712.5 – – 712.5
Other payables, including current lease liabilities 35.6 – – 35.6 30.3 3.4 – 33.7
Non-current discounted lease liabilities – – 11.8 11.8 – – 15.0 15.0
441.9 0.4 11.8 454.1 742.8 3.4 15.0 761.2
Balances due within twelve months, in the table above, equal their carrying balances as the impact of discounting is not significant. Included in the trade and other payables and the lease liabilities above are
figures in respect of leases accounted for under IFRS 16. These include discounted cash flows in relation to leases over property as outlined in note 2.10. The undiscounted maturity profiles of these amounts
is shown on the next page.
Strategic report Governance Other information
155
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 5: OTHER NOTES
NOTES TO THE GROUP FINANCIAL STATEMENTS
OTHER CONTINUED
5.7 Financial instruments continued
The undiscounted liability in relation to leases is shown below.
At
30 June 2022
£m
At
30 June 2021
£m
Within one year 4.6 4.8
In the second to fifth years inclusive 12.0 1 7.3
After five years – 0.2
Total minimum lease payments 16.6 22.3
The Group has access to a revolving credit facility, with a UK bank. The facility allows the Group to
draw up to £75 million (2021: £75m) and is undrawn as at 30 June 2022. The facility incurs interest
charges, consisting of a margin of 0.85% plus SONIA per annum when drawn.
Credit risk
The Group’s credit risk is spread over a large number of counterparties and customers.
The Group is exposed to credit risk from counterparties to securities transactions during the period
between the trade date and the ultimate settlement date if the counterparty fails either to deliver
securities or to make payment. Settlement risk is substantially mitigated as a result of the delivery
versus payment mechanism whereby if a counterparty fails to make payment the securities would
not be delivered to the counterparty. Therefore the risk exposure is to an adverse movement
in market prices between the time of trade and settlement, which is generally two to four days.
Conversely, if a counterparty fails to deliver securities, no payment would be made.
The trade receivables presented in the Statement of Financial Position are net of expected
credit losses.
Also included within trade and other receivables in the Statement of Financial Position are term
deposits. These are deposits with UK licensed banks for a period of three months or greater,
where the Group does not have immediate recall on the cash. The maximum amount of time that
these deposits are outstanding at year end is 13 months.
Cash is held with UK licensed banks. The credit risk on liquid funds is minimised by only depositing
with UK regulated banks and the Group takes a conservative approach to treasury management,
carrying out regular reviews of all its banks’ and custodians’ credit ratings.
The following table discloses the Group’s maximum exposure to credit risk on financial assets.
At
30 June 2022
£m
At
30 June 2021
£m
Financial assets at amortised cost
Cash and cash equivalents (including restricted cash) 488.3 445.3
Trade and other receivables 436.3 748.6
Accrued income 49.0 –
Term deposits 20.0 60.0
Financial assets at fair value through profit or loss
Financial investments 0.8 0.9
994.4 1,254.8
The following table contains an analysis of financial assets that are past due at the end of the
reporting period. An asset is past due when the counterparty has failed to make a payment when
contractually due and is considered to be a key indicator of risk.
Strategic report Governance Other information
156
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 5: OTHER NOTES
NOTES TO THE GROUP FINANCIAL STATEMENTS
OTHER CONTINUED
5.7 Financial instruments continued
The Group applies the simplified approach to providing for expected credit losses for receivables,
allowing the use of lifetime expected loss provisions to be made. To determine expected credit losses,
financial assets have been grouped based on shared credit risk characteristics, such as the
counterparty and the number of days past due.
Within terms
£m
0-3 months
past due
£m
3-6 months
past due
£m
6-12 months
past due
£m
Over 12 months
past due
£m
Total
£m
At 30 June 2022
Trade and other receivables:
Trade receivables 423.8 3.5 2.0 1.5 1.8 432.6
Other receivables 3.7 – – – – 3.7
Accrued income 49.0 – – – – 49.0
Term deposits 20.0 – – – – 20.0
496.5 3.5 2.0 1.5 1.8 505.3
At 30 June 2021
Trade and other receivables:
Trade receivables 736.5 3.4 1.7 1.5 1.4 744.5
Other receivables 4.1 – – – – 4.1
Accrued income 46.7 – – – – 46.7
Term deposits 60.0 – – – – 60.0
847.3 3.4 1.7 1.5 1.4 855.3
During the year, the Group has not recognised any credit losses (2021: £nil) in respect of receivables
that are not expected to be recovered. At the end of the reporting period, £0.1 million (2021: £0.1m)
of credit losses have previously been recognised in respect of trade receivables. These balances
have been provided for in full against the value of aged receivables and are presented net in the table
above and in the Statement of Financial Position. As a result, the carrying amount of those receivables
is £nil (2021: £nil) at year-end.
The expected credit loss in relation to receivables is considered to be immaterial, due to the
short-term nature of the receivable balance and the small value of assets that are outstanding
for long periods, without any potential recourse allowing the Group to reclaim the balance in full.
The majority of balances are related to underlying investments that the Group can sell to reclaim
losses and therefore, while they are susceptible to macroeconomic factors the potential impact is
immaterial given their short term nature, as market balances are generally settled in two to four days.
The table on the following page shows the credit quality of financial assets that are current
and not outstanding using the following counterparty grading:
• Financial institutions
In respect of trade receivables, £107.4 million (2021: £225.7m) is due from financial institutions
regulated by the FCA in the course of settlement as a result of daily trading and £4.5 million
(2021: £5.4m) relates to revenue items due from financial institutions regulated by the FCA.
• Individuals
In respect of trade receivables, the balance is related to amounts due from individual clients
in the course of settlement as a result of daily trading. Daily trading balances generally settle
in two to four days.
Strategic report Governance Other information
157
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 5: OTHER NOTES
NOTES TO THE GROUP FINANCIAL STATEMENTS
OTHER CONTINUED
5.7 Financial instruments continued
The table below shows the credit category of financial assets that are within terms and considered
the lowest level of risk.
Financial
institutions
£m
Corporate
clients
£m
Individuals
£m
Total
£m
At 30 June 2022
Trade receivables 119.4 0.2 304.2 423.8
Other receivables 3.7 – – 3.7
Accrued income 26.8 – 22.2 49.0
Term deposits 20.0 – – 20.0
Investments held at fair value through
profit and loss 0.8 – – 0.8
170.7 0.2 326.4 497.3
At 30 June 2021
Trade receivables 181.6 0.1 554.8 736.5
Other receivables 4.1 – – 4.1
Accrued income 27.4 – 19.3 46.7
Term deposits 60.0 – – 60.0
Investments held at fair value through
profit and loss 0.9 – – 0.9
274.0 0.1 574.1 848.2
Capital management
The Group’s objectives when managing capital are: i) to safeguard the Group’s ability to continue
as a going concern so that it can continue to provide returns for shareholders and benefits for other
stakeholders; ii) to maintain a strong capital base and utilise it efficiently to support the development
of its business; and iii) to comply with the regulatory capital requirements set by the FCA. Capital
adequacy and the use of regulatory capital are monitored by the Group’s management and Board.
Capital management – Unaudited
Regulatory capital is determined in accordance with the requirements prescribed in the UK by
the FCA. This is a two-step process requiring an assessment of the minimum capital requirements
followed by an assessment of individual entity and Group risks of harm to ensure that an additional
amount of capital is held above the minimum amount to accommodate the impact of any residual
risk of harm.
Minimum capital requirements are calculated as the higher of certain baseline variables
(depending on the specific requirements for the legal entity in question). In Hargreaves Lansdown
Asset Management Limited (HLAM) this is calculated as the higher of the permanent minimum
capital requirement, fixed overhead requirement and k-factor assessment (capital requirement
based on the activities a firm undertakes), and in Hargreaves Lansdown plc it is the group capital
test which is the book value that the parent company has invested in the underlying entities.
The second step requires investment firms to assess firm-specific and Group risk of harms,
and costs of wind down, ensuring that they hold adequate capital over and above the amount set
by the minimum capital requirements. The Group completes this assessment of regulatory capital
requirements using its Group Internal Capital Adequacy and Risk Assessment process, which is
a continuous and forward-looking exercise that includes stress testing on major risks, such as
a significant market downturn, and identifying mitigating actions.
As required by the FCA, the Group carries out both assessments and maintains a significant
surplus over the higher requirement at all times.
The Group manages its retained earnings and share capital which total £583.4 million (audited)
as at 30 June 2022 (2021: £601.4m – audited). Surplus regulatory capital was maintained through
the year at both a Group level, as well as at an individual regulated entity level. Consistent
with FCA requirements, HLAM specifically is required to disclose regulatory capital information;
this will be available on the Group’s website at www.hl.co.uk/investor-relations.
Strategic report Governance Other information
158
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 6: COMPANY FINANCIAL STATEMENTS
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
As at 30 June 2022
Note
At 30 June 2022
£m
At 30 June 2021
£m
ASSETS
Non-current assets
Investments in subsidiaries
6.5 68.9 54.5
68.9 54.5
Current assets
Trade and other receivables
6.6 132.0 215.6
Cash and cash equivalents
6.7 231.9 155.9
363.9 371.5
Total assets 432.8 426.0
LIABILITIES
Current liabilities
Trade and other payables
6.8 192.0 199.0
192.0 199.0
Net current assets 171.9 172.5
Total liabilities 192.0 199.0
Net assets 240.8 227.0
EQUITY
Share capital
6.10 1.9 1.9
Retained earnings
6.10 238.9 225.1
Total equity 240.8 227.0
The Company recorded a profit for the financial year ended 30 June 2022 of £246.5 million (2021: £197.2m).
The financial statements of Hargreaves Lansdown plc, registered number 02122142, on pages 159 to 164, were approved by the Board and authorised for issue on 4 August 2022.
Amy Stirling
Chief Financial Officer
Strategic report Governance Other information
159
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 6: COMPANY FINANCIAL STATEMENTS
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2022
PARENT COMPANY STATEMENT OF CASH FLOWS
For the year ended 30 June 2022
Share
capital
£m
Retained
earnings
£m
Total
equity
£m
At 1 July 2020 1.9 286.9 288.8
Profit and total comprehensive income – 197.2 197.2
Increase in investment in subsidiaries – 4.5 4.5
Dividend paid – (263.5) (263.5)
At 30 June 2021 1.9 225.1 227.0
Profit and total comprehensive income – 246.5 246.5
Increase in investment in subsidiaries – 8.3 8.3
Dividend paid – (241.0) (241.0)
At 30 June 2022 1.9 238.9 240.8
Details of the Company’s dividends are as set out in note 3.2 to the consolidated financial statements.
Note
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Net cash from operations
Cash generated from operations
6.9 288.0 169.3
Net cash from operating activities 288.0 169.3
Investing activities
Decrease in term deposits 40.0 170.0
Purchase of investment in subsidiary (11.0) (6.0)
Net cash from investing activities 29.0 164.0
Financing activities
Dividends paid to owners of the parent (241.0) (263.5)
Net cash used in financing activities (241.0) (263.5)
Net increase in cash and cash equivalents 76.0 69.8
Cash and cash equivalents at beginning of year
6.7 155.9 86.1
Cash and cash equivalents at end of year
6.7 231.9 155.9
Strategic report Governance Other information
160
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 6: COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS
6.1 General information
Hargreaves Lansdown plc (the Company) is a company incorporated and domiciled in the United
Kingdom under the Companies Act 2006 whose shares are publicly traded on the London Stock
Exchange. The address of the registered office is One College Square South, Anchor Road, Bristol
BS1 5HL, United Kingdom. The Company is the parent company of the Group, and the nature of
the Group’s operations and its principal activities are set out in the Operating and Financial Review.
The Company financial statements are presented in millions of pounds sterling which is the currency
of the primary economic environment in which the Company operates.
Basis of preparation
The separate financial statements of Hargreaves Lansdown plc have been prepared in accordance
with UK-adopted international accounting standards and with the requirements of the Companies Act
2006 as applicable to companies reporting under those standards.
The Company financial statements are prepared on a going concern basis. The Directors believe
that they have a reasonable expectation that the Company has adequate resources to continue
in operational existence for 12 months from the date the financial statements are adopted.
The financial statements have been prepared on the historical cost basis. Accounting policies
have been applied consistently throughout the current and prior financial year.
6.2 Significant accounting policies
The accounting policies of the Company are the same as those of the Group which are set out in
the relevant notes to the consolidated financial statements, except that it has no policy in respect
of consolidation and investments in subsidiaries are carried at historical cost, less any provisions
for impairment.
6.3 Critical judgements and key sources
of estimation uncertainty
As noted in note 5.2 to the Group financial statements the preparation of the financial statements
requires management to make estimates and assumptions that affect the reported amount of
revenues, expenses, assets and liabilities and the disclosure of contingent liabilities. There are
no critical judgements used in the preparation of the Company’s financial statements.
The estimates on the following page are made in respect of the Company financial statements only.
Investments in subsidiaries
The Company is making a significant investment in HL Savings to assist in the development of the
Active Savings proposition. Given the long-term economic benefit that this is expected to bring,
development costs incurred are being capitalised. The parent company has previously held this
investment at cost, in the current year an assessment has been made of the recoverable amount,
which requires estimation of future cash flows and appropriate discount rates for the purpose of its
calculation. A sensitivity analysis of this estimate is presented in note 6.5.
6.4 Profit for the year
As permitted by Section 408 of the Companies Act 2006, no Income Statement or Statement of
Comprehensive Income is presented for the Company. The Company recorded a profit for the
financial year ended 30 June 2022 of £246.5 million (2021: £197.2m).
The Auditors’ remuneration for audit and other services is disclosed in note 1.4 to the consolidated
financial statements.
6.5 Investment in subsidiaries
Investments in subsidiaries are held at cost, being the fair value of consideration paid and capital
contributions made to the subsidiaries.
Impairment assessments are performed at least on an annual basis for all subsidiaries to assess
whether the valuation is still appropriate. A comparison is made between the recoverable amount
and the carrying value. This requires the calculation of either the fair value, less costs to sell of
each subsidiary or the value in use. Value in use is calculated as the present value of discounted
cash flows over an appropriate period at a discount rate appropriate for each subsidiary.
Any losses are recognised immediately in the Income Statement.
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Investments in subsidiaries
At beginning of year 54.5 60.0
Increase in investment in subsidiaries 19.4 10.5
Impairment of subsidiary (5.0) (16.0)
At end of year 68.9 54.5
Comprising:
Non-current investments – investments in subsidiaries valued at cost
less impairment 68.9 54.5
Strategic report Governance Other information
161
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 6: COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
6.5 Investment in subsidiaries continued
In the prior year, the Company impaired its holding in Hargreaves Lansdown Savings Limited
by £16.0m. In the current year, the Company has invested a further £5.0 million in the subsidiary and
immediately impaired this investment, recognising this amount immediately as an expense in the year.
The amount was determined by calculation of the recoverable amount, using future cash flows at a
discount rate of 10.1%. The carrying amount immediately prior to the impairment was £23.8 million
(2021: £34.8m). The instigation for the impairment was increasing investment in Hargreaves Lansdown
Saving Limited, by the Company, that out paced the return on investment in the short term.
Sensitivity analysis
The valuation was performed over a range of discount and growth rates, with value in use
calculations ranging from £13.8m to £26.7m, using discount rates ranging between 9.0% and 11.2%.
A list of the investments in subsidiaries is shown below, along with their country of incorporation and
principal activity. Unless otherwise disclosed below, all subsidiaries have one ordinary class of share
only and all shares are held by Hargreaves Lansdown plc.
During the year, the Company invested £6.0m in Hargreaves Lansdown Advisory Services Limited
to ensure that the subsidiary is able to meet its’ strategic capital commitments.
Subsidiary company name
Country of incorporation
and principal Company purpose/function
Percentage
ownership Voting rights
Hargreaves Lansdown Advisory Services Limited UK
1
Advisory services 100% 100%
Hargreaves Lansdown Asset Management Limited UK
1
Unit trust and equity broking, investment fund management,
life and pensions consultancy
100% 100%
Hargreaves Lansdown Fund Managers Ltd. UK
1
Unit trust management 100% 100%
Hargreaves Lansdown Stockbrokers Ltd UK
1
Trading company* 100% 100%
Hargreaves Lansdown (Nominees) Limited
(100% shares held by Hargreaves Lansdown Asset Management Limited)
UK
1
Nominee services* 100% 100%
Hargreaves Lansdown Insurance Brokers Limited UK
1
Dormant company* 100% 100%
Hargreaves Lansdown Investment Management Limited
(100% shares held by Hargreaves Lansdown Fund Managers Ltd)
UK
1
Dormant company* 100% 100%
Hargreaves Lansdown Savings Limited UK
1
Cash services 92.5% – Ordinary
100% – Class A
92.5%
Hargreaves Lansdown Savings (Nominees) Limited
(100% shares held by Hargreaves Lansdown Savings Limited)
UK
1
Nominee services* 92.5% 100%
Hargreaves Lansdown Pensions Limited
(100% shares held by Hargreaves Lansdown Advisory Services Limited)
Dormant company* 100% 100%
Hargreaves Lansdown Pensions Trustees Limited UK
1
Trustee of the HL SIPP* 100% 100%
Hargreaves Lansdown EBT Trustees Limited UK
1
Trustee of the Employee Benefit Trust
†
100% 100%
Hargreaves Lansdown Trustee Company Limited UK
1
Trustee of the Share Incentive Plan
†
100% 100%
HL Tech Sp. Z O. O
(100% shares held by Hargreaves Lansdown Asset Management Limited)
Poland
2
Service company 100% 100%
* Exempt from the requirements for audit under s394A and s448A of Companies Act 2006
† Exempt from the requirement for audit under s479A of the Companies Act 2006
1 Registered address One College Square South Anchor Road Bristol BS1 5HL
2 Registered address Pl Europejski 1 Warsaw 00-844 Poland
Strategic report Governance Other information
162
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 6: COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
6.6 Trade and other receivables
At
30 June 2022
£m
At
30 June 2021
£m
Financial assets
Amounts receivable from subsidiaries and EBT 111.7 155.2
Term deposits 20.0 60.0
131.7 215.2
Non-financial assets:
Prepayments 0.3 0.4
132.0 215.6
6.7 Cash and cash equivalents
At
30 June 2022
£m
At
30 June 2021
£m
Cash and cash equivalents
Company cash and cash equivalent balances 231.9 155.9
Cash and cash equivalents comprise cash and institutional cash funds with near instant access.
No disclosures for financial instruments have been made in respect of the Company as the only
significant financial instruments held by the Company are cash and term deposit balances as
shown above.
6.8 Trade and other payables
At
30 June 2022
£m
At
30 June 2021
£m
Financial liabilities
Amounts payable to subsidiaries 191.5 198.6
Other payables 0.1 0.4
191.6 199.0
Non-financial liabilities:
Accruals 0.4 –
192.0 199.0
Amounts payable to subsidiaries comprise short-term borrowing from subsidiaries, repayable on
demand. The fair values of amounts owed to subsidiaries are equal to their carrying amounts.
6.9 Notes to the company statement of cash flows
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Profit for the year after tax 246.5 197.2
Adjustments for:
Income tax (credit)/charge (0.1) 0.2
Impairment in investment in subsidiary 5.0 16.0
Operating cash flows before movements in working capital: 251.4 213.4
Decrease in trade and other receivables 43.6 7. 4
Decrease in trade and other payables (7.0) (51.5)
Cash generated from operations 288.0 169.3
6.10 Share capital
Details of the Company’s share capital are as set out in note 3.1 to the consolidated financial statements.
The Company has a share premium account that represents the difference between the issue price
and the nominal value of shares issued and was unchanged at £8,000 throughout the 2021 and 2022
financial years.
The Company has a capital redemption reserve that relates to the repurchase and cancellation of the
Company’s own shares and was unchanged at £12,000 throughout the 2021 and 2022 financial years.
Details of the movements in retained earnings are set out in the Parent Company Statement
of Changes in Equity.
Strategic report Governance Other information
163
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
SECTION 6: COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
6.11 Related party transactions
The key management personnel of the Company are the Directors of Hargreaves Lansdown plc.
The relevant disclosures are given in note 5.6 to the consolidated financial statements. These are the
only staff costs incurred by the Company in the year. The Company has two employees (2021: two),
being the Executive Directors. The cost of providing share scheme benefits to the employees of
the subsidiaries is not charged directly to the subsidiaries. Instead, the Company provides a capital
contribution to its subsidiaries in respect of these schemes.
The Company entered into the following transactions with subsidiaries and the Employee Benefit
Trust, which are related parties.
Year ended
30 June 2022
£m
Year ended
30 June 2021
£m
Dividends received from subsidiaries 254.0 215.0
Capital contribution to subsidiaries 14.4 4.5
Amounts owed by related parties at 30 June 111.7 155.2
Amounts owed to related parties at 30 June 191.5 198.6
Any amounts outstanding with related parties are unsecured and will be settled in cash.
No guarantees have been given or received in respect of amounts outstanding. No provisions
have been made for doubtful debts in respect of the amounts owed by the related parties.
The capital contribution to subsidiaries is shown net of impairment.
6.12 Events after the reporting period
Events after the reporting period are shown in note 5.5 of the consolidated financial statements
on page 151.
6.13 Financial risk management
Note 5.7 to the consolidated financial statements includes the Group’s policy on capital management,
its exposure to financial risks and its policies and processes to manage those risks. There are financial
instruments in the Company made up of amounts receivable from subsidiaries and the Employee
Benefit Trust and amounts payable to subsidiaries. The nature and extent of risks arising from these
financial instruments are as follows:
Liquidity risk
The Company is exposed to liquidity risk, namely the risk that it may be unable to meet its payment
obligations as they fall due.
The payment obligations primarily relate to amounts payable to subsidiaries which are more than
offset by the amounts owed from subsidiaries. In addition, the Company holds significant cash
balances on short-term deposit to ensure that it has sufficient available funds to meet its obligations
and fund its operations.
At the end of the reporting period, none of the liabilities of the Company are past due or represent
a significant long-term liability.
Credit risk
Credit risk is the risk that a counterparty fails to perform its financial obligations, resulting in financial
loss; however, the amounts owed to the Company are primarily from its own subsidiaries. Given the
profitability and net assets of the majority of subsidiaries, credit risk is considered minimal. As per
the wider Group, cash is held with UK licensed banks. The credit risk on liquid funds is minimised
because the counterparties are banks with strong credit ratings assigned by international credit rating
agencies. The Group takes a conservative approach to treasury management and selection of banking
counterparties, and carries out regular reviews of all its banks’ and custodians’ credit ratings.
The Company applies the simplified approach to providing for expected credit losses for receivables,
allowing the use of lifetime expected loss provisions to be made. To determine expected credit
losses, financial assets have been grouped based on shared credit risk characteristics, such as the
counterparty and the number of days past due. The value of expected credit losses on the assets
subject to credit risk is immaterial.
The following table discloses the Company’s maximum exposure to credit risk on financial assets.
At
30 June 2022
£m
At
30 June 2021
£m
Financial assets at amortised cost
Cash and cash equivalents 231.9 155.9
Included within trade and other receivables:
Term deposits 20.0 60.0
Amounts receivable from subsidiaries and EBT 111.7 155.2
363.6 371.1
Strategic report Governance Other information
164
Hargreaves Lansdown
Report and Financial Statements 2022
Financial statements
OTHER
INFORMATION
Directors, company secretary, advisers
and shareholder information 166
Five-year summary 167
Glossary of alternative financial
performance measures 168
Glossary of terms 171
Strategic report Governance Financial statements
Hargreaves Lansdown
Report and Financial Statements 2022
165
Other information
DIRECTORS, COMPANY SECRETARY, ADVISERS AND SHAREHOLDER INFORMATION
Executive Directors
Chris Hill
Amy Stirling
Non-Executive Directors
Deanna Oppenheimer
Andrea Blance
Adrian Collins
Penny James
Moni Mannings
Dan Olley
Roger Perkin
John Troiano
Company Secretary
Claire Chapman
Independent auditors
PricewaterhouseCoopers LLP, London
Solicitors
Freshfields Bruckhaus Deringer, London
Principal bankers
Lloyds Bank Plc, Bristol
Brokers
Barclays
Numis Securities Limited
Registrars
Equiniti Limited
Registered office
One College Square South Anchor Road
Bristol BS1 5HL
Website
www.hl.co.uk
Company number
02122142
Strategic report Governance Financial statements
166
Hargreaves Lansdown
Report and Financial Statements 2022
Other information
FIVE-YEAR SUMMARY
2022
£m
2021
£m
2020
£m
2019
£m
2018
£m
Unaudited Unaudited Unaudited Unaudited Unaudited
Revenue 583.0 631.0 550.9 480.5 447.5
Fair value gains on derivatives – 0.6 1.7 2.2 2.3
Operating costs (313.0) (266.0) (214.9) (179.4) (158.7)
Operating profit 270.0 365.6 337.7 303.3 291.1
Finance income – 1.4 2.8 2.8 1.5
Finance costs (0.8) (1.0) (1.0) (0.3) (0.2)
Other gains
1
– – 38.8 – –
Profit before tax 269.2 366.0 378.3 305.8 292.4
Tax (53.4) (69.7) (65.1) (58.2) (55.7)
Profit after tax 215.8 296.3 313.2 247.6 236.7
Non-controlling interests 0.5 0.4 (0.1) (0.2) (0.4)
Profit for the financial year attributable to owners of the parent company 216.3 296.7 313.1 247.4 236.3
Equity shareholders’ funds 575.1 593.5 558.3 457.6 404.0
Weighted average number of shares for the purposes of diluted EPS (million) 474.5 474.5 475.70 475.76 475.41
Pence Pence Pence Pence Pence
Equity dividends per share paid during year 50.8 55.6 42.9 40.2 30.5
Basic earnings per share 45.6 62.6 66.1 52.1 49.7
Diluted earnings per share 45.6 62.5 65.9 52.0 49.6
Underlying basic earnings per share 50.4 62.6 57.9 52.1 49.7
Underlying diluted earnings per share 50.4 62.5 57.8 52.0 49.6
1 Relates to a one-off gain on the disposal of Funds Library in the year ended 30 June 2020.
Strategic report Governance Financial statements
167
Hargreaves Lansdown
Report and Financial Statements 2022
Other information
GLOSSARY OF ALTERNATIVE FINANCIAL PERFORMANCE MEASURES
Measure Calculation Why we use this measure
Activity costs Total cost related to stockbroking and financial services costs on a
transactional basis related to the volume of activity undertaken by our
clients. This measure is the same as the dealing and financial services
costs within note 1.3.
Provides further detail into the increasing costs that are associated with
increasing client numbers and increasing transactional revenues, to allow
comparison from year to year.
Dividend pay-out ratio (%) The total dividend per share divided by the basic earnings per share (EPS)
for a financial year.
Provides a measure of the level of profits paid out to shareholders and the
level retained in the business.
Dividend per share (pence per share) Total dividend payable relating to a financial year divided by the total
number of shares eligible to receive a dividend. Note ordinary shares held
in the Hargreaves Lansdown Employee Benefit Trust have agreed to waive
all dividends (see note 3.2).
Dividend per share is pertinent information to shareholders and investors
and provides them with the ability to assess the dividend yield of
Hargreaves Lansdown plc shares.
Dual tech running costs Represents the costs incurred for parallel running of new and legacy
technology systems.
During our digital technology strategy we will be using both legacy systems
and new systems in tandem, which will incur increased costs. Once we
complete the move away from the legacy systems, these costs will cease
to be incurred and so this measure reflects the impact on the group during
the strategy.
Ongoing revenue Revenue that is earned depending on the value of assets held on the
platform, including platform fees, management fees and interest earned
on client money and represents revenue earned over a period of time.
We believe ongoing revenue provides greater profit resilience and hence
is of higher quality than transactional revenue.
Percentage of ongoing revenue (%) The total value of renewal commission (after deducting loyalty bonuses),
platform fees, management fees and interest earned on client money
divided by the total revenue.
Provides a measure of the quality of our earnings. We believe ongoing
revenue provides greater profit resilience and hence is of higher quality
than non-ongoing revenue.
Revenue margin (bps) Total revenue divided by the average value of assets under administration
which includes the Portfolio Management Services assets under
management held in funds on which a platform fee is charged.
Provides the most comparable means of tracking, over time, the margin
earned on the assets under administration and is used by management
to assess business performance.
Revenue margin from cash (bps) Revenue from cash (net interest earned on the value of client money held
on the platform divided by the average value of assets under administration
held as client money).
Provides a means of tracking, over time, the margin earned on cash held
by our clients.
Revenue margin from funds (bps) Revenue derived from funds held by clients (platform fees, initial
commission less loyalty bonus) divided by the average value of
assets under administration held as funds, which includes the Portfolio
Management Services assets under management held in funds on
which a platform fee is charged.
Provides the most comparable means of tracking, over time, the margin
earned on funds held by our clients.
Strategic report Governance Financial statements
168
Hargreaves Lansdown
Report and Financial Statements 2022
Other information
GLOSSARY OF ALTERNATIVE FINANCIAL PERFORMANCE MEASURES
CONTINUED
Measure Calculation Why we use this measure
Revenue margin from HL Funds (bps) Management fees derived from HL Funds (but excluding the platform fee)
divided by the average value of assets held in the HL Funds.
Provides a means of tracking, over time, the margin earned on HL Funds.
Revenue margin from shares (bps) Revenue from shares (stockbroking commissions, management fees where
shares are held in a SIPP or ISA, less the cost of dealing errors) divided by
the average value of assets under administration held as shares.
Provides a means of tracking, over time, the margin earned on shares held
by our clients.
Strategic investments costs Costs, including staff and professional fees relating to the planning and
commencement of the digital technology strategy, strategic growth
initiatives and the cost of expanding associated compliance, infrastructure
and support functions.
Costs relating to the planning and commencement of the digital technology
strategy and core growth initiatives, which include staff costs, professional
fees and technology costs, that are considered separately to reflect the
impact on the results of the Group.
Technology costs Costs associated with the use of third-party software and data feeds
used in the performance of daily business. The measure is the same
as technology costs within note 1.3.
Provides a means of understanding the impact that increasing or changing
our proposition has on our costs.
Transactional revenue Revenue that is not non-recurring in nature and dependent on a
client instruction such as a deal to buy or sell shares or take advice.
This represents revenue earned at a point in time.
Such revenue is not as high quality as ongoing revenue but helps to show
the diversification of our revenue streams.
Underlying basic earnings per share Underlying earnings divided by the weighted average number of ordinary
shares for the purposes of basic EPS.
The calculation of basic earnings per share using statutory profit
after tax adjusted for those costs that are related specifically to our
strategic investments.
Underlying costs Operating costs less strategic investment costs and the incremental
cost of running dual technology systems in parallel during our period
of strategic transformation.
Provides relevant information on the year-on-year cost of the underlying
business as we go through a period of significant strategic investment.
Underlying diluted earnings per share Underlying earnings divided by the weighted average number of ordinary
shares for the purposes of diluted EPS.
The calculation of diluted earnings per share using statutory profit
after tax adjusted for those costs that are related specifically to our
strategic investments.
Underlying earnings Profit after tax attributable to equity holders of the parent company
adjusted for the existence other gains outside of the normal course
of business, such as the disposal of subsidiaries. In the current year,
this is the same as profit after tax attributable to the equity holders
of the parent company.
The calculation of earnings per share using unadjusted profit after tax
includes gains from transactions that are not repeated annually or that
may not indicate the true performance of the business.
Strategic report Governance Financial statements
169
Hargreaves Lansdown
Report and Financial Statements 2022
Other information
GLOSSARY OF ALTERNATIVE FINANCIAL PERFORMANCE MEASURES
CONTINUED
Measure Calculation Why we use this measure
Underlying profit after tax Profit after tax attributable to equity holders of the parent company
excluding strategic investment costs and the incremental cost of
running dual technology systems in parallel during our period of
strategic transformation.
Profit after tax includes costs that are part of strategic planning and
development. This measure helps to provide clarity between the profit
of the business from period to period when those costs are not
considered. This is important as we go through a period of significant
strategic investment.
Underlying profit before tax Profit before tax excluding strategic investment costs and the cost
of running dual technology systems in parallel during our period of
strategic transformation.
Provides the best measure for comparison of profit before tax between
financial years.
Strategic report Governance Financial statements
170
Hargreaves Lansdown
Report and Financial Statements 2022
Other information
GLOSSARY OF TERMS
A
AGM Annual General Meeting
AIFMD Alternative Investment Fund
Managers Directive
Asset retention rate Based on the monthly
lost AUA as a percentage of the opening
month’s AUA and averaging for the year
AUA Assets Under Administration. This is the
value of all assets administered or managed by
Hargreaves Lansdown on behalf of its clients
AUM Assets Under Management is the value
of all assets managed by Hargreaves Lansdown
Fund Managers
AWS Amazon Web Services
B
Basic EPS Basic earnings per share
Board The Board of Directors
of Hargreaves Lansdown plc
BRC Plc Board Risk Committee
C
CASS Client Assets Sourcebook
CDP Carbon Disclosure Project
CMD Capital Markets Day
Client retention rate Based on the monthly
lost clients as a percentage of the opening
month’s total clients and averaging for the year.
A lost client is deemed as one who falls below
a holding of £100
CODM Chief Operating Decision Maker
Company Hargreaves Lansdown plc
Corporate Schemes This related to
HL Workplace Solutions which allows employers
to offer the benefits of the Hargreaves Lansdown
Vantage service to employees via the workplace
CSR Corporate Social Responsibility
D
D2C Direct to Consumer
DEFRA Department for Environment
Food & Rural Affairs
Diluted EPS Diluted earnings per share
DR Disaster Recovery
DTR The FCA’s Disclosure Guidance
and Transparency Rules sourcebook
E
EBT Employee Benefit Trust
ERC Executive Risk Committee
ESG Environmental, social and governance
ExCo Executive Committee
F
FATCA Foreign Account Tax Compliance Act
FCA Financial Conduct Authority, regulator
of the UK financial services industry
FRC Financial Reporting Council
FSCS Financial Services Compensation Scheme
FTE Full-time equivalent employees
G
GAAP Generally Accepted Accounting Principles
GAYE Give As You Earn
Group Hargreaves Lansdown plc and its
controlled entities
GCRO The Group Chief Risk Officer
H
HL Hargreaves Lansdown
HMRC Her Majesty’s Revenue and Customs
I
IAS International Accounting Standards
IBS Important Business Services
ICAAP Internal Capital Adequacy
Assessment Process
ICARA Internal Capital Adequacy
and Risk Assessment
IFPR Investment Firm Prudential Regime
IFRS International Financial Reporting Standards
IPO Initial Public Offering
ISA Individual Savings Account
ISSB International Sustainability Standards Board
IT Information Technology
K
KPI Key Performance Indicator
Strategic report Governance Financial statements
171
Hargreaves Lansdown
Report and Financial Statements 2022
Other information
GLOSSARY OF TERMS
CONTINUED
L
LISA Lifetime ISA
Listing Rules Regulations subject to the
oversight of the FCA applicable to companies
listed on a UK stock exchange
Loyalty bonus A reward to customers for
holding certain collective investments within
the Vantage wrapper. This is paid on a regular
basis as a percentage of qualifying assets
LTIP Long-term incentive plan
M
Material Risk Takers Persons identified as
meeting the criteria of ‘material risk takers’ as set
out in the European Banking Authority regulatory
technical standard and consequently subject to
the requirements of the Remuneration Code.
MGC Model Governance Committee
MLRO Money Laundering Reporting Officer
Multi-Manager funds A range of funds offered
by Hargreaves Lansdown which are managed
under the Fund of Funds format
N
Net new business (NNB) Represents
subscriptions, cash receipts, cash and stock
transfers in less cash withdrawals, cash and
stock transfers out
Net new clients Represents the net of new
clients less lost clients in the period
Nominated Director The non-independent,
Non-Executive Director appointed to the Board
by Peter Hargreaves pursuant to his shareholder
agreement with the Company
Number of new clients Unique number of clients
holding at least one account (PMS, ISA, SIPP or
Fund and Share Account) with a value greater
than £100 at the year end
NPS Net Promoter Score
Net revenue Total revenue less commission paid,
which is primarily the loyalty bonus paid to clients
O
ONS Office for National Statistics
Organic growth Growth in assets under
administration can be attributed to two
main causes. The first is growth due to the
appreciation in the value of existing assets
and the second is organic growth through
additional contributions
ORC Operational Risk Committee
P
Pillar 1 and 2 capital requirements The Basel
Committee on Banking Supervision set out
certain capital requirements which must be
met by qualifying financial institutions
Pillar 3 A set of disclosure requirements
which enable the market to assess information
on a firm’s risks, capital and risk management
procedures
Platforum The advisory and research business
specialising in investment platforms which
compiles the Direct Platform Guide
PMS Portfolio Management Service
R
RDR Retail Distribution Review
S
SASB Sustainability Accounting Standards Board
SAYE scheme Save As You Earn scheme
SDR Sustainability Disclosure Requirements
SID Senior Independent Director
SIPP Self-invested Personal Pension
SMCR Senior Managers and Certification Regime
SPP Sustained Performance Plan
SREP The FCA’s supervisory review and
evaluation process
T
TCFD Taskforce for Climate-related
Financial Disclosures
U
UCITS Undertakings for Collective Investment
in Transferable Securities
UNSDG United Nations Sustainable
Development Goals
UK Corporate Governance Code A code
published by the FRC which sets out standards
for best boardroom practice with a focus
on Board leadership and effectiveness,
remuneration, accountability and relations
with shareholders
Y
Year end/financial year Our financial year
starts on 1 July and ends on 30 June
Strategic report Governance Financial statements
172
Hargreaves Lansdown
Report and Financial Statements 2022
Other information
Cautionary statement concerning
forward-looking statements
This document comprises the Report and Financial
Statements for the year ended 30 June 2022 for
Hargreaves Lansdown plc (the ‘Company’) and
its subsidiaries.
It contains certain forward-looking statements with
respect to the financial condition and the results of the
Company, including statements about the Company’s
beliefs and expectations and including, without
limitation, statements containing the words ‘may’, ‘will’,
‘should’, ‘continue’, ‘aims’, ‘estimates’, ‘projects’, ‘believes’,
‘intends’, ‘expects’, ‘plans’, ‘seeks’ and ‘anticipates’,
and words of similar meaning, are forward-looking
statements. These statements are based on plans,
estimates and projections as at the time they are made,
and therefore undue reliance should not be placed on
them. By their nature, all forward-looking statements
involve risk and uncertainty because they relate to
events and depend upon circumstances that may
occur in the future. The forward-looking statements
are based on current assumptions and estimates by the
management of the Company. Past performance cannot
be relied upon as a guide to future performance and
should not be taken as a representation that trends or
activities underlying past performance will continue in
the future. Such statements are subject to numerous
risks and uncertainties that could cause actual results
to differ materially from any expected future results in
forward-looking statements. These risks may include,
for example: changes in the global economic situation;
a lack of alignment between the Company’s
propositions and activities and its strategic objectives;
poor performance of markets adversely affecting
the Company’s revenue and impacting strategic
expectations; a failure to effectively manage
and maintain existing technological architecture,
environment or components that are key to operational
delivery; a failure to design or implement appropriate
policies, processes or technology; a failure to comply
with regulatory and legal standards or expectations;
a failure to design or implement frameworks to counter
financial crime risks; a failure to design or implement
appropriate frameworks to manage data and data
storage risk; a failure of the Company’s culture and
values to support appropriate client-focused conduct
leading to poor client outcomes; a failure to establish
robust operational resilience solutions; and a failure to
attract, retain, develop and motivate people who are
aligned to the Company’s values. Further information
on all these risks is provided on pages 55 to 59 of the
Strategic Report section of this document. The Company
provides no guarantee that future development and
future results actually achieved will correspond to the
forward-looking statements included here and accepts
no liability if they should fail to do so. Neither the
Company nor any member of its group undertakes any
obligation to update these forward-looking statements,
which speak only as at the date of this document and
will not publicly release any revisions that may be made
to these forward-looking statements, which may result
from events or circumstances arising after the date of
this document, except as required under applicable laws
and regulations. Nothing in this document constitutes,
nor should it be construed as, a profit forecast
or estimate.
Hargreaves Lansdown plc
One College Square South
Anchor Road
Bristol BS1 5HL
Tel: 0117 900 9000
Registered number: 02122142
www.hl.co.uk