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Peter Hargreaves - how he thinks UK should bounce back after Covid-19
DIY investing platform Hargreaves Lansdown's co-founder Peter Hargreaves speaks exclusively to This is Money about his ...
DIY investing platform Hargreaves Lansdown's co-founder Peter Hargreaves speaks exclusively to This is Money about his entrepreneurial journey
The 73-year-old tells us which booming businesses he is currently backing and why he 'invests in the future' with firms such as Powered Now and ITM Power
Believes capitalism is how economies prosper, regulation should be scrapped and Margaret Thatcher was the greatest Prime Minister the UK has ever seen
'Capital like mine should be invested in the future,' says Peter Hargreaves.
From fund management start-up Blue Whale, to Cornwall's Goonhilly satellite station and job management app for tradesmen Powered Now, the co-founder of DIY investing giant Hargreaves Lansdown backs that philosophy with his actions.
And he has plenty of capital to do so.
According to the Sunday Times Rich List 2020, he is worth a staggering £2.4billion and last year Hargreaves made £63million in the firm's dividends alone.
An often outspoken character, he was the top donor to the Brexit campaign, contributing over £3million to Leave.EU, and he believes Margaret Thatcher's Government was the best for British business.
In an interview with This is Money that ranged across a host of topics, this passion for the UK's business world was something the 73-year-old repeatedly came back to - and he said that for any budding entrepreneurs tough times may seem daunting but can often be the best time to start-up.
He beams: 'I love business'.
I love business. I like to think I can see at a glance, how a business can grow and succeed.
'I have always been involved and interested in business, from those I have worked for, those I've created and those I've invested in. I like to think I can see at a glance, how a business can grow and succeed.'
In the 1980s, Hargreaves, along with business partner Stephen Lansdown, created what has become one of the UK's biggest investing firms.
Hargreaves Lansdown, started in a Bristol spare room, is now valued at just under £7billion and is home to £106.9billion of investors' funds.
It revealed last week that lockdown and last year's Neil Woodford scandal hadn't knocked it off course, as it added an extra 31,000 customers over summer.
Hargreaves trained in his twenties as a chartered accountant and then worked as a computer salesman. He always had an interest in investing and eventually moved to Bristol for a job in the field.
He agonised over whether or not to take the job, as it was far from his home in Lancashire. And he says that at the age of 33, he thought he'd be lonely going from somewhere where he knew everybody to a place where he knew nobody.
But when he took the leap, not knowing anyone allowed him to focus on his passion for investing. Hargreaves and a new friend, Stephen Lansdown, started trading in Lansdown's spare bedroom, where they quickly discovered a gap in the market.
Hargreaves says the industry was dominated by salesmen who 'can only make so many calls or so many sales' and that not every client wanted a salesman in their front room.
People wanted information about the products and tax planning matters, which they could trust. In 1981, Hargreaves Lansdown was born.
How Hargreaves Lansdown conquered the market
After they initially started it up, the business grew quickly as more people wanted to know what Hargreaves and Lansdown had to say.
It combined a gift for marketing - combining fund sales information with articles about investing - and the nous to capitalise on the technology that took share trading from phone calls to a broker to doing it yourself on the internet.
'The most important thing a business needs to do is know how to scale,' says Hargreaves. 'Doubling your staff to double your business doesn't work.
'We doubled our business by sending newsletters and building a relationship with our users. There is no difference in cost if your mailing list has 10,000 or 10 million people.
'Our next hurdle was working out how to make money from all past investments and not just new sales. That's when we persuaded the asset managers we used to share their management fees with us, rather than charging the clients more.
I can usually tell which businesses will do best based on the people behind them and three things: honesty, their ability to sell and whether they watch their costs like a hawk
'We were the first real business in that area and so we conquered the market.'
Hargreaves Lansdown has grown over the years to claim its own place in the UK's leading stock market, the FTSE 100, and is known as a profit-making machine.
It is the UK's favourite platform for private investors, where they can buy, sell and manage their funds and shares - and made £378.3million in profit last year on revenue of £550.9million.
However, it has been criticised for charging higher fees than some rivals, had questions asked over incentives and its best buy fund list and came under serious fire for backing fallen star fund manager Neil Woodford right up until his fund was frozen.
Angry Hargreaves Lansdown customers had their money locked into Woodford's failing Equity Income Fund and many felt it should have been removed from the influential best buy list long before it collapsed, when poor performance started to show.
Nonetheless, the company is now valued at £6.96billion, with Hargreaves' remaining stake (he stepped down as chief executive in 2010 but remains a shareholder) worth just under £1.7billion.
But while he has moved away from the company that holds his name, Hargreaves remains just as passionate about business and entrepreneurs now as he was almost 40 years ago in a bedroom in Bristol.
'I have since had the satisfaction of helping many businesses, not necessarily with capital, but with guidance and advice,' he says.
'Then there have been those who have needed the money before they could eventually see their profits grow.
'Of course, I have backed some that have not done so well, but I can usually tell which ones will do best based on the people behind them and three things: honesty, their ability to sell and whether they watch their costs like a hawk.'
Hargreaves adds he particularly likes small businesses because they 'have their priorities right' in that they reward their staff with the things that matter: involvement and a good salary.
All staff should feel rewarded, not with marvellous canteens but a good salary and a bonus
'Expensive staff and flashy offices don't make you money – they are props to make people feel successful, usually the directors,' he says.
'All staff should feel rewarded, not with marvellous canteens but a good salary and a bonus.
'Small businesses do that. So do some great large companies such as Amazon. Rest assured, Jeff Bezos rewards his staff.'
Where Hargreaves is investing now
One of Hargreaves' longest-term investments is ITM Power, a Sheffield-based hydrogen energy company, where he sits as a non-executive director.
He first invested in the firm 18 years ago and over that time has funded it heavily, and even bailed it out of near-closure. Only recently has that investment proven fruitful, and the company's share rose by 333 per cent in the first half of this year.
Hargreaves has kept his faith in ITM Power because of its desire to do good for the environment and the future and because of its potential yet to be released.
invested almost 20 years ago when a couple of scientists told me the future of energy was hydrogen... but it's been a difficult ride
'I invested almost 20 years ago when a couple of scientists told me the future of energy was hydrogen,' he recalls.
'But, until now, it's been a difficult ride because we couldn’t convince any Government that that was the way forward.
'ITM Power now has a market cap of around £1billion.'
Hargreaves says he doesn't see any point in investing in 'smoke stack industries' such as those not involved in technology
He adds: 'I don’t want to invest in things that already exist. I don’t want to prop up businesses in financial difficulty.
'I want to invest in the future. Capital like mine should be going towards improving the future one way or another.'
Another innovative business creating technologies of the future that Hargreaves invests in is the Goonhilly Earth Station in Cornwall, the first private operator in the deep space communications network.
Capital like mine should be going towards improving the future one way or another
'Their satellites and communication systems are only in their infancy, but they will be the future,' he says.
'When it gets going, you'll be able to make a phone call from anywhere. Even the Sahara Desert.
'Everyone's jumping onto this technology, including Jeff Bezos with his latest venture Blue Origin, which hasn't even been priced into Amazon's shares yet.'
'Too much regulation stops people starting up'
Hargreaves says one of the biggest problems businesses face today is unnecessary regulation.
'The Government should abolish some of the regulation that is out there,' he says. 'I'm not sure it does much good.
Is all of this stuff to tackle issues such as money laundering actually stopping money laundering?
'Is all of this stuff to tackle issues such as money laundering actually stopping money laundering?
'No. Regulation hasn’t stopped scandals and fraud. It just makes life harder for everyone else and especially those who want to start a new business.'
In September 2017, Hargreaves announced a £25million backing for Blue Whale Capital – a new fund management company set up by a former Hargreaves Lansdown employee, Stephen Yiu.
The global fund that it launched has since proved successful, growing to £550million in size and up 75.5 per cent since launch compared to a 26.2 per cent return for the average IA Global sector fund
Regulation hasn’t stopped scandals and fraud. It just makes life harder for everyone else.
But Hargreaves recalls how even as industry insiders the pair found it tough to get going due to regulation making the process extremely difficult.
He says: 'It took 12 months before Stephen could even start working. Who can afford to not have an income for 12 months? And it also cost a huge amount of money to get the darn thing going.'
'The Chancellor needs to know that training people is not the resolution for creating jobs, it's readdressing regulation.
'It would be easier to abolish some of the draconian regulation out there and find people who actually have the skills and want to start their own business but can't stomach the number of hoops they have to jump through.'
Hargreaves says one of the best things Margaret Thatcher, who served as Prime Minister between 1979 and 1990, did was remove a lot of restrictive practises and 'crazy regulations'.
'Thousands of people were then able to start businesses once that happened, myself and Stephen Lansdown being two of them.'
Amazon: an inspiration
Despite being a hugely successful businessman himself, there are other entrepreneurs that Hargreaves admires greatly.
He considers Jim Ratcliffe, chief executive officer of the Ineos chemicals group, to be the most successful businessman in Britain.
'I had a pleasure of sharing a taxi with him about four years ago,' he says.
'I already found him a wonderful businessman, and that trip only cemented that view. And he's done a lot of good with his money.'
Likewise, Hargreaves has donated to a number of charities across the country throughout his career, and most recently set up the Hargreaves Foundation with £100million.
But overall, it is Amazon's Jeff Bezos that Hargreaves admires more than anyone.
'He has produced a fantastically efficient business in Amazon. He is investing in the future like nobody else and if he can't do something just yet, he still takes that space and it becomes profitable in the long-run.
'It's like at Hargreaves Lansdown when we launched our child Isas. We knew they wouldn't be profitable but it means other members of the family might join us and we hope those children will grow up to remain clients.'
Hargreaves currently invests in Amazon through his stake in the Blue Whale Growth fund - although the fund sold down some of its holding over summer after strong price gains.
Amazon has things brewing that aren't even represented in the share price yet
He wouldn't buy more shares directly at the moment, as he believes the 'price is overcooked', but Hargreaves believes taking a long-term view would mean the price would 'come right eventually'.
He adds: 'Amazon has things brewing that aren't even represented in the share price yet like it's space company Blue Origin. It's assets are far greater than it's share price.'
A tool to fix a 'splintered industry'
Hargreaves thinks a mobile app he has backed, Powered Now, will come into its own in the current environment created by the coronavirus pandemic.
It is a field service management solution for UK trade businesses, specialising in providing billing, invoicing and quotation services and he first invested around five years ago.
Peter Hargreaves is one of the biggest backers of mobile app Powered Now.
'Powered Now could be the tool that fixes such a splintered industry that hasn't grasped the importance of technology,' he says.
'With small building firms for example, the boss is usually out on site doing the work and will have tons of paperwork to get through while signing up new clients.
'They need simple methods for managing their work as well as their staff, finances and tax information, not to mention keeping on top of compliance and regulation.
Hargreaves also thinks the app, in which he has so far invested £2.5million, is easy to use which is important in such a hands-on industry largely filled with more vocational people.
He adds: 'I was dubious when I first heard of the app because your average carpenter or plumber doesn't want to get involved in a complicated computer system.
'This is one of the few industries that is least computerised so anyone but PoweredNow have created a simple system for tradesmen and anyone that can do that should be greeted with open arms.
'It’s a big uphill climb to get something like this off the ground but the rewards will be good. The coronavirus has given it a boost as it has made tradesmen realise they need to be able to do these things now more than ever.'