Hargreaves Lansdown shares dropped more than 7% in mid-morning trading after it warned of an ‘industry-wide slowdown’ in net retail flows.
Amid a wider global equity sell-off which had sent the FTSE 100 down 1.6% in early trading the warning from Hargreaves - which is highly geared to moves in the stock market - appeared to strike a nerve.
In a trading update, the firm warned that an uncertain market environment and weak investor sentiment has caused net retail flows to be hit across the industry during the past three months.
Hargreaves Lansdown reported net new business of £1.3 billion in the third quarter of this year, down 13% on the £1.5 billion it accumulated in the same period a year ago.
But it also reported a 3% rise in assets under administration to £94.1 billion, and net revenue for the period of £120.8 million, up 16% year-on-year.
Hargreaves Lansdown chief executive Chris Hill (pictured) said: ‘I'm pleased to report a solid start to our financial year for growth in clients, net new business and revenue.
‘The past quarter has seen an uncertain market environment and weak investor sentiment resulting in an industry-wide slowdown in net retail flows.
‘Despite this backdrop, we believe the strength of our business model positions us well for when sentiment improves.’
It comes after the firm last month warned that retail investors are feeling more fearful than they have been at any point in the last 23 years, with confidence in UK equity dropping below where it stood in the credit crunch.
Hargreaves Lansdown said its internal index of investor sentiment, which it has compiled monthly since 1995, plummeted four points to a record low of 58 in September, versus a bottom of 61 in late 2008.
In a note on the firm, broker Peel Hunt maintained its ‘hold’ rating but said Hargreaves remains a ‘unique asset’, adding that ‘with a dominant position in the D2C market (38% market share), the ability to deliver inflows regardless of market conditions and the consistent delivery of high returns.’
Company analyst Stuart Duncan said the firm’s Active Savings cash product will be ‘another source of strong growth for HL in the coming years’. It said:
‘Whilst more volatile market conditions are a challenge, the reality is that HL can continue to deliver long-term growth.’