Andy, Contracts-for-difference:Hello David. Perhaps we could start by hearing a little of your background. When did you get into the trading world? How long have you been with Hargreaves Lansdown? Tell us a little about yourself.
David, Hargreaves Lansdown:Well, I'm Hargreaves Lansdown man and boy. I started at Hargreaves Lansdown Stockbrokers after leaving education in 1997. I spent a couple of years trading equities in the dealing team and then in late 1999 set up Hargreaves Lansdown's online trading service. I now work across the HL group working on a variety of services from CFDs and stockbroking to Annuities and Life Cover.
Andy, Contracts-for-difference:Could you give us a brief overview of Hargreaves Lansdown ?
David, Hargreaves Lansdown:Hargreaves Lansdown was established in 1981 by Peter Hargreaves and Stephen Lansdown who are still at the helm today. We're now one of the largest investment brokers in the UK providing a whole host of financial, investment and trading services. We've dealt for 750,000 clients and this number grows every day.
Andy, Contracts-for-difference:Could you walk us through Hargreaves Lansdown's products?
David, Hargreaves Lansdown:As we do offer quite a few services it might be easier for me just to list them - then your readers can find more information at our website www.hargreaveslansdown.co.uk. Here it goes...Share Dealing, Forex Trading, ISAs, PEPs, Wrap Account, Investment Club Services, Corporate Dealing, Discount Fund Supermarket, SIPPs, Personal Pensions, Corporate Benefit/Pension Services, Stakeholder Pensions, Annuities, Home Insurance, Life Cover, Fund of Funds, Financial Advice, Portfolio Management, and Venture Capital Trusts (VCTS). Oh.I nearly forgot the one we're here talking about. CFDs!
Andy, Contracts-for-difference:How many employees does your business employ?
David, Hargreaves Lansdown:It's growing all the time so it's hard to keep up. Today, we have around 460 staff based at our head office in Bristol and also have small corporate office in London in the heart of the City.
Andy, Contracts-for-difference:Tell us why you decided to plunge into the contracts for difference business?
David, Hargreaves Lansdown:As you know, we were already had a big stockbroking side to our business and were one of the largest execution only brokers in the UK. We try as much as we can to deliver services clients want. In the case of CFDs client's wanted us to offer the service - so we did. I suppose it was a natural progression. Although obvious now it was quite a big decision for us at the time. Whilst there were many 'new' brands offering the service very few of the UK's top 10 stockbrokers were offering the service.
Once we'd launched the service we realised that there were a lot of experienced investors who wanted to trade CFDs but didn't feel comfortable dealing with some of the existing players in the market and preferred to deal with their main stockbroker.
Andy, Contracts-for-difference:What do you think are the other main advantages of cfd trading besides the most obvious of it being free of stamp duty and the leverage that it allows?
David, Hargreaves Lansdown:CFDs also enable investors to go long or short, giving them the potential to profit in any market condition. There is also a huge range of investment choice with the facility to trade CFDs on shares, indices, sectors, commodities and the Forex market.
Andy, Contracts-for-difference:Can clients trade CFDs online? Is phone dealing available?
David, Hargreaves Lansdown:Our entire business is about providing clients with multi channel access so we do, and always will provide clients with both telephone and internet dealing. That said, around 70% of our CFD business is dealt online.
Andy, Contracts-for-difference:Do you accept international clients?
David, Hargreaves Lansdown:We do but it depends on the country and individual circumstances.
Andy, Contracts-for-difference:Do you accept deposits by BACS? Which other payment methods do you accept? Do clients need to fill up a fax form to request a withdrawal? What are the fees for using the different payment systems?
David, Hargreaves Lansdown:We accept payment by cheque, debit card, credit card, BACS and CHAPS. In most cases we can take a telephone instruction from a client to transfer money back to them. There is a £25 charge for transferring out of the account by CHAPS and a 1.5% administration charge on credit cards.
Andy, Contracts-for-difference:What is the minimum deposit required to open an account? Is there a maximum deposit? How do I get money out?
David, Hargreaves Lansdown:There is no minimum requirement to open an account. However, clients are required to meet the initial margin requirements when placing a trade. Money can be paid back to clients by cheque, by transfer to a card or by bank transfer.
Andy, Contracts-for-difference:Please tell us about your commissions for the different products on offer.
David, Hargreaves Lansdown:The charge for trading CFDs on UK shares is 0.25% subject to a minimum fee of £25. American and European CFDs have a commission rate of 0.35%. The FTSE 100 index CFD has a flat dealing commission of £25 and US index CFDs such as the Dow Jones CFD and S&P500 CFD have a flat charge of $40. A full list of charges and margin rates are included with our brochure.
Andy, Contracts-for-difference:What margin is required for trading contracts for difference at Hargreaves Lansdown ?
David, Hargreaves Lansdown:The margin requirements for CFDs on shares is generally 10%. However, the margin needed for indices, commodities and FX CFDs can be as low as 5%.
Andy, Contracts-for-difference:Do you offer credit facilities? Can accounts be overdrawn?
David, Hargreaves Lansdown:We do not offer a credit facility. Clients accounts are very rarely overdrawn. Investors in CFDs receive margin calls if their position moves against them causing them to have insufficient funds in their account. The margin call reminds them that they need to top up their account and maintain the margin requirement.
Andy, Contracts-for-difference:What instruments are available to trade at Hargreaves Lansdown CFDs?
David, Hargreaves Lansdown:Hargreaves Lansdown CFD clients can trade CFDs on all FTSE 350 shares and a selected range of smaller shares including some AIM shares, CFDs on a vast range of US and European shares and have access to over 10 index CFDs, over 20 UK sector CFDs, Gold & Silver and CFDs on all the major currencies.
Andy, Contracts-for-difference:Is interest paid on the balance of the accounts? If yes, what are the rates?
David, Hargreaves Lansdown:As with the vast majority of CFD brokers interest is not paid on cash balances.
Andy, Contracts-for-difference:How do you hedge your exposure to compensate for clients' positions with regards to cfds?
David, Hargreaves Lansdown:The dealers will hedge clients positions by using the underlying stock or via using derivatives such as Futures.
Andy, Contracts-for-difference:How do you make most of your money?
David, Hargreaves Lansdown:In terms of CFD trading we make our money by charging a commission and being upfront about what it costs.
Andy, Contracts-for-difference:How do you see yourselves conquering the contracts for differences market? What is your edge?
David, Hargreaves Lansdown:In such a crowded marketplace that is a difficult one to answer. I think the key thing with us is the fact we can offer clients a wider breadth of product across share dealing, cfds, sipps, etc. This allows clients to transfer funds between services and fund different forms of dealing. Clients therefore tend to keep more investments with us - and that may include CFDs.
In terms of CFD trading specifically we try to focus on the overall offering which includes everything from the platform to seminars and training courses. Above all we focus on quality of service. You can have all the mod cons and fancy trading systems in the world but if when you call no one answers or the platform is unstable those mod cons aren't worth too much! We try and focus on this basic stuff like platform reliability and answering the phone quickly - with that the rest will follow and we retain clients longer and they feel happier dealing with us.
Andy, Contracts-for-difference:Are there any general safeguards for clients - protected accounts for clients' money or segregated accounts.etc?
David, Hargreaves Lansdown:In the unlikely event that Hargreaves Lansdown CFDs faced liquidation, private customers are covered by the FSA Compensation Scheme to a ceiling of £50,000. Claimants would receive the first £30,000 in full and 90% of the balance to a total of £48,000.
Andy, Contracts-for-difference:How do you classify clients - intermediate or private customers and why? - as we know classifying clients as intermediate indicates a certain degree of knowledge and experience on the clients' part.
David, Hargreaves Lansdown:We classify our clients as Private Customers for the purpose of CFD trading. Each client also receives a free guide to CFDs and run frequent trading seminars around the country.
Andy, Contracts-for-difference:What do you think about education? Do you think people need it to be successful in trading CFDs?
David, Hargreaves Lansdown:One word - Essential. It is absolutely vital that all kinds of investor whether beginners or advanced either seek or are provided with good information and education. Hargreaves Lansdown has built its business on providing information rather than 'selling' products. This education is even more important when you are dealing with more advanced and high risk trading services like CFDs.
Andy, Contracts-for-difference:Do you trade on a personal basis? Have you made any mistakes along the way that you have learned from? If so, would you describe them?
David, Hargreaves Lansdown:Yes, I do trade although don't get as much time as I'd like to do it. I used to trade a lot more than I do now, but Hargreaves Lansdown keeps me too busy these days! I have made plenty of mistakes along the road..all obvious now with hindsight of course. To save me any professional embarrassment I'm keeping them to myself!!!
Andy, Contracts-for-difference:How do people trading these markets trade? Do they jump in and out 50 times a day or do they hold their trades for weeks?
David, Hargreaves Lansdown:Now that's difficult. We have clients who trade in all sorts of ways. The clients who do well tend to adapt their trading methods to the market conditions at the time. We have CFD clients who hold their positions for minutes - others for weeks.
Andy, Contracts-for-difference:Are there traders who make a living through trading at Hargreaves Lansdown? What is the trading style and methods that these traders use for winning consistently?
David, Hargreaves Lansdown:We do have traders who are technically full time but they generally they have other interests too! I know of plenty of professional and full time traders - some of whom trade with us, others who don't. They all have one thing in common - they don't consistently win. At best they'll win more than they lose. I'd like to sit here and say they use some complicated trading method but actually they've got two things in common - they don' trade on their emotions, and the keep their losses tight by closing losing trades quickly and run their profits. Sounds simple doesn't it?!
Andy, Contracts-for-difference:What do you think are the most important characteristics of the professional cfd trader?
David, Hargreaves Lansdown:Lack of emotion - as far as trading is concerned anyway. Emotion leads to panic and poor judgment when trading. You generally find the most effective traders are the ones who make judgments based on the facts and not on their emotions.
Andy, Contracts-for-difference:As of now, what trends do you see in the markets people choose to trade? Are there any sectors, contracts, currencies, indices, particular markets
David, Hargreaves Lansdown:I think we're seeing an increasing amount of interest in currencies which is why we launched our FX Trading Service. More recently we've seen people moving away from indices and into specific stocks, but that will change when the market has some direction again.
Andy, Contracts-for-difference:The last few years has seen an explosion in spread betting and cfds. Do you think it could spell the end of traditional share trading? And is the stock market feeling the pinch?
David, Hargreaves Lansdown:I don't think it's the end of traditional share trading. If it were I suspect the government would start to look at the tax treatment of CFDs and Spread Betting a little more closely. I think CFDs and Spread Betting can offer a useful alternative to certain clients but for others Share Trading works better. It's all about using the right instruments for the right time and market conditions.
Andy, Contracts-for-difference:We've seen more companies move into this market and the structure of products change. What changes do you think there are going to be over the next few years? What challenges do you see ahead?
David, Hargreaves Lansdown:In the active trader market (CFDs, Spread Bets, Forex, etc) I think we'll see consolidation in the industry with providers merging or being taken over. In terms of propositions I think we're doing to see a lot of different financial betting services emerge - not just traditional spread betting. I think the challenge with all these products is to ensure investors and traders understand the products they are trading and the associated risks. It's not in anyone's interest (and certainly not the client's or brokers) for clients to get burned by trading products they don't fully understand. Most of the major trading providers like ourselves do run ongoing education programs and try to ensure their literature is clear. That said, there is still more we can all do and some of the lesser known providers need to concentrate more in this area.
Andy, Contracts-for-difference:There are many sayings in the markets; do you have a favourite one?
David, Hargreaves Lansdown:I'm a bit of a quote fan actually.so have a few favourites.
'Short the industry which the majority of Harvard Business School want to join'
- Marc Favour.
'Every day I get up and look through the Forbes list of the richest people in America. If I'm not in it, I go to work'
- Robert Orben
My favourite favourite is :
'What's the use of happiness? It can't buy you money'
- Henry Youngman
Andy, Contracts-for-difference:Do you operate any other sites besides http://www.hargreaveslansdown.co.uk.
David, Hargreaves Lansdown:www.hargreaveslansdown.co.uk links to all our services. If you're specifically interested in CFDs then www.hlcfds.co.uk will get you straight there. For forex visit www.hlfx.co.uk and for share dealing www.h-l.co.uk. But www.hargreaveslansdown.co.uk gives you everything!
Andy, Contracts-for-difference:Any books and resources you would recommend to fellow traders? Any other comment you want to make?
David, Hargreaves Lansdown:My favourite 'trading book' is a classic but Reminiscences of a Stock Operator remains a great book for traders and non-traders alike. It is the fictionalized biography of Jesse Livermore, one of the greatest speculators ever.