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Why is the Hargreaves Lansdown share price sinking?

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Scene depicting the City of London, home of the FTSE 100
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FTSE 100 shares continue to struggle for grip (broadly speaking) in Thursday business. Concerns over soaring inflation — and consequently what measures central banks might take to curb price rises — has spooked investors of late. But the Hargreaves Lansdown (LSE: HL) share price has really taken a pasting.

As I type the financial services giant is down 5% at £16.80 per share. This makes it the third-worst performing FTSE 100 share today (below Burberry and BT).

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Foggy forecasts

The Hargreaves Lansdown share price has dropped following the release of latest trading numbers. But I will have to dig deep to find the catalyst behind Thursday’s mild sell-off.

Towards the end of the release, the FTSE 100 firm said that it was “difficult to say” what share volumes will look like as Covid-19 lockdowns end and life returns to normal. However, it added that “similar to when previous lockdowns have been lifted, we have begun to see a reduction in share dealing volumes in both UK and overseas trades.”

Signs of falling investor activity take the shine off of what was, largely-speaking, another robust update.

Hargreaves Lansdown enjoys record trading volumes

Hargreaves Lansdown enjoyed net new business of £4.6bn in the four months to April, it said. Meanwhile assets under administration (AUA) ended last month at £132.9m, up from £120.6bn at the beginning of 2021. This is also up significantly from AUA of £104bn recorded at the start of the financial year (in July 2020).

Net new business growth was driven by the usual factors of existing clients using their tax allowances during the ISA season and ongoing wealth consolidation onto our platform from existing clients,” Hargreaves Lansdown said.

Exterior photograph of Hargreaves Lansdown HQ in Bristol

Revenues at the business soared 23% year-on-year between January and April, to £233.2m. And in the fiscal year to date, revenues are up 19% at £523.7m, a result that Hargreaves Lansdown said was driven by “record dealing volumes”. The business helped clients transact 6m deals in the four months to April. This compares with the 4m it recorded in the same 2020 period.

The FTSE 100 firm now has more than 1.62m active clients on its books, with another 126,000 flocking to its services between January and April. It has added a whopping 210,000 new clients since last July too.

What they said

Commenting on the results, Hargreaves Lansdown chief executive Chris Hill commented that “this was a period of very strong growth with record net new business, record ISA subscriptions, record client growth, and record share dealing volumes”. The business saw a 48% increase in new money entering ISA and SIPP accounts between February 12 and April 5. It enjoyed a 54% increase in new ISA and SIPP account openings too.

Hill added that the strong four-month performance reflected “the benefits of the investment we have undertaken in recent years in our digital platform and the diversity and strength of our client proposition.”

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Burberry and Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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