‘I wasn’t particularly interested in bookkeeping and mundane accounting, I
wouldn’t have wanted to go through all the rigmarole to become what I wanted to
be, an FD or senior partner of a large firm. I thought I’d be able to do either
job well, probably better than most in the country, but didn’t want the
Tell you how it is northerners might be ten a penny, but few can back such
strident views with an immaculate background, such as floating a billion pound
investment company on the stock exchange.
Peter Hargreaves, co-founder of FTSE 250 Hargreaves Lansdown, can do that.
Lancashire-born Hargreaves qualified as a chartered accountant, spending a
year with Peat Marwick Mitchell, then worked for a client as a group accountant
before moving out.
‘I felt that accountancy gave me the opportunity to see all parts of a
business, no question it does,’ says Hargreaves.
The early 1980s saw the formation of his investment business with Stephen
The business, run from Hargreaves’ house, involved mailing out unit trust
investment plans. Hargreaves Lansdown is expecting £70m profits for the 2008/09
year end on £10bn of assets under management. Hargreaves is ranked 176th in the
Sunday Times Rich List.
The last tumultuous 28 years has led them both through a range of experiences
and situations, so much so that Hargreaves has written a book, In for a Penny,
documenting their travails, and hoping to impart business advice on those
willing to read it.
He says ‘I have no wish to be a management guru’ – but there’s no end of
no-nonsense advice for businesspeople, either in its pages or during discussions
with him. In fairness the book does comprehensively plot the colourful path the
business has taken.
For example, Hargreaves and Lansdown put together their first investment
literature mailout from his back garden while his neighbours watched the royal
wedding of Lady Diana Spencer and Prince Charles.
‘I got on well with my neighbours George and Marcia. She was really into the
royal wedding, something that Stephen and I could have taken or left. Marcia
insisted at every important juncture that we came in to watch the latest wedding
highlights, each visit requiring a fresh glass of champagne. I hope we got all
the right pieces in the right envelopes but I am not so sure.’
But back to the advice, and opinions.
Hargreaves’ main bugbear with the accounting profession is reserved for
smaller local practices. They’re not doing a good enough job for clients, hence
they can’t charge much for the work. A self-defeating spiral, where pressure on
fees is rife from client and competitors.
‘The problem is they can’t command the fees to do the job properly. The
profession has failed singularly to create the right aura for the charging of
fees. They’re different to lawyers, who tend to make good businessmen.’
The problem is the mindset of accountants. They tend to be ‘mean’ with money,
which makes them fear charging. ‘Because there are a few doing it for nearly
nothing, the others feel they have to compete, but they’ll give you a bad
service. A false economy.
Those who want accountants don’t know who’s good, and they try and pay very
Adding value is the key for practices, instead of just preparing accounts
from a ‘bunch of invoices’, because ‘if that’s the service they’re offering they
don’t service much for it – and if that’s what the client wants they don’t
deserve a good accountant’.
‘They should say to clients “we want to be in your offices every three months
finding out what’s going on, where you make money, to help financially plan your
business. If you make a big profit, should you do something before then, perhaps
a marketing promotion and spend it this year while we’re profitable” etc. but of
course lots of business don’t even know if they’ve made a profit until the
accountants produce the accounts,’ says Hargreaves.
‘You probably don’t hear from [your accountant] until after the year end.
That’ s dire. How good has your year been?’
Despite his strong views, Hargreaves takes his time in our interview,
considering his thoughts and is a world away from ranting, despite how he can
come across in print.
Much of his ire seems to stem from how much he actually regards his
‘The basic training is one that should leave someone with a meal ticket for
the rest of their life, but it’s what they do with it.’
‘When someone asks me what I am – it doesn’t say chief exec or MD on my
passport – it says: chartered accountant. That’s what I describe myself as. That
means something to me. You can be an MD or chief exec by spending £100 off the
shelf, but “chartered accountant” says something.’
Times change, and he has seen it all in the past four decades – but the pace
of change accelerates, and Hargreaves is preparing for the next generation to
take on the business.
‘You need a different blend [of people],’ says Hargreaves in what he
colourfully describes as the ‘Star Trek conundrum’.
‘For Star Trek fans, the original team with Spock and Kirk are very different
to Picard and the rest, because things move on. You’d want a different team to
run the business – things have changed so dramatically.’
Things have been tough for the investment firm, which makes his decision to
stick at it to ensure the business is handed over all the more admirable – but
then again it is his (and Lansdown’s) business.
And, as if to illustrate his earlier points about accountancy practices’
failings, he says that his business has been ‘neurotic’ about the security of
its client cash and investments. ‘We felt very strongly that the banking system
was very dangerous, so we became very cautious with all the money we hold.’
With the stock market sitting lower than its 1999 peak of nearly 7,000,
that’s ‘clearly not good for business’.
‘It’s been very difficult for everyone in our industry. So we’ve been
innovative with clients, give better service, be lean and mean ourselves but
offer more and better services to make sure they stayed with us.’
Hargreaves spent the previous weekend doing ‘absolutely nothing’ at home,
enjoying a rare two days in his garden. A pastime he will surely look to do much
more in the future.
But don’t expect him to be quiet on the issues that matter to him, at least
for the next five years.
Hargreaves on . . .
Blair and Brown
‘The last ten years will go down as one of the worst of all time
economically. Blair and Brown between them – to be honest I wouldn’t employ
either one of them as a lollipop lady, it’s insulting to lollipop ladies. Bloody
‘The institute only asks people what they want. I’ve told [chief executive]
Michael Izza you ought to ask: “what do you not want?” They provide lots of
things because a few people ask for something. They produce lots of stuff most
don’t actually want – they should really find out a consensus of things. They
should also work at improving the image of the accountant. That’s what the
institute should do. Accountants are not valued.’
‘I don’t think they should be allowed to become an MP until they’ve proved
themselves in something they’ve done before. The [number of MPs] should be
halved – pay them a decent amount with no expenses. We don’t need 600 to
represent this little country. Most laws are from Brussels anyway. [They should
prove] they’ve been successful elsewhere else, which is how it used to be: they
had private means.
Lansdown’s investment strategy
‘For 18 months we’ve been neurotic about the security of our clients’ cash
and investments, we felt very strongly that the banking system was very
dangerous. We felt that several of the UK banking institutions of one form or
another would go bust. So we became very cautious with all the money we hold. As
it so transpired we didn’t need to be as it would appear Gordon Brown was going
to bail out anything whether he should have or not.’
By the book
A Good Manager
‘Effective management of people is a rare and undervalued skill in industry.
In the whole of Hargreaves Lansdown, there are probably no more than a dozen who
are exceptional in this respect. The key is being able to delegate, to give
someone a job and then to let them get on with it. However delegation itself
needs to be just that and not what I call abdication of responsibility. That
happens when someone gives somebody a job without knowing whether they can do it
or not and simply assumes, without ever checking, that they are doing it. If
after six months they go back and find that the person wasn’t doing the job
properly, it may be because they didn’t have the talent, but most likely it is
because they were never shown properly what to do. The manager then castigates
them for getting it wrong. It is not the employee’s fault, but the manager’s for
not checking regularly that they understood what they were doing and were in
fact doing it. The manager has abdicated rather than delegated.’
Learning the ropes
The characters whom I came across during my time as an articled clerk while
training to become a chartered accountant gave me a wonderful grounding in what
is good and what is bad in business. One of my audit clients was an egg
producer. He would have made money in any industry. If he came into the office
to ask about capital allowances and the tax implications for his business, you
soon found out that he was only coming in to have confirmed what he had already
read and worked out for himself. He didn’t need us to sort out his tax, as he
had it all planned already in his head. Few clients however were quite as savvy.
For example, I found a business which made woodware – step ladders, fencing and
many other items made of wood. It was a fantastic business with a brilliant
factory manager. Unfortunately, the firm had four directors who each took out a
huge salary and contributed absolutely nothing. The business was slowly going
bust, purely because it was being milked of cash by the salaries of these four
incompetents while nothing was being put back into the business. So impressed
was I by the factory manager’s skills that I almost ended up buying the firm. I
raised the finance only to get cold feet at the last moment. I knew that if I
could cut out the four directors’ salaries and plough the money saved back into
the business, it could have been very successful. Having made my decision, I
didn’t waste time on regrets. That has never been my style. I suspect that I
knew one day there would be another venture to take its place.
In For A Penny by Peter Hargreaves is published by Harriman House, priced
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