Stephen Lansdown co-founded the financial services firm Hargreaves Lansdown in 1981, with Peter Hargreaves, stepping away from the firm in 2012. Stephen is also the founder of Bristol Sport and majority shareholder of Bristol Rugby, Bristol Flyers, and Bristol City Football Club.
BLM spoke with Stephen about setting up Hargreaves Lansdown, what promotion for Bristol City would do for the football club, his vision for Bristol Sport and his new investment venture with Channel Islands-based Ravenscroft.
Hargreaves Lansdown, was founded in 1981 by yourself and Peter Hargreaves initially trading from a bedroom, what inspired you to go into business in the first place?
Necessity. Peter and I first met in 1979 working for someone else. He came down from Clitheroe where he was working for Whitbread’s, while I was down here in Bristol working in taxation. We both responded to the same advertisement, which didn’t work out for either of us and it then became a case of us both asking ourselves “what do we do next?”. From a personal point of view, I was determined to prove I could provide investment advice and if I didn’t succeed in that I would go back into accounting, which I’m glad didn’t happen. In the end, we decided to join forces and carry on what we were doing with the biggest difference being we were doing it as a team. We started going directly to clients through advertising in the national papers such as the Daily Telegraph and Sunday Times, which was how we built up our database and found clients.
Did you always have an ambition to go into business for yourself and to be an entrepreneur?
I suppose so, yeah. I set myself a target for when I wanted to be working for myself and I don’t remember if I’d met it, but, it all started to happen eventually. I always thought I’d be better working for myself than someone else, and so it transpired.
Since you started in business the landscape has totally changed. Can you talk to us about what starting a business was like back in 1981?
It was difficult as both myself and Peter were unknown in the marketplace. We were starting from scratch, but I guess we both had certain characteristics which blended well together and we forced our way into the marketplace.
Back in 1981, in the financial services marketplace, there was no financial services act. There was no regulation. You could sell second hand cars one day and then investments the next or even the same day. Where Peter and I scored heavily is the fact that we were honest, perhaps naïve in some cases, but we looked at the best investments from a tax and return point of view. We went out and we found good investment managers and we marketed them. We could do it because there wasn’t the regulation, we traded on the back of our qualifications as chartered accountants and I learnt early on that communication is essential, you’ve got to keep communicating, telling your story and selling your ideas to keep that business growing and moving forward.
Could we start the business up today in the same way? No, we couldn’t because we’d have to go through so many hoops with regulators and everything else in order to get there, that there’s so many barriers for entry now.
If you had started the business now, do you think we would we be having the same conversation today?
I don’t think neither Peter or myself would have done it because we would have just got so frustrated with all the regulation that’s in place now. In my opinion, it’s way over the top. Regulation is necessary but it’s like all regulation it goes too far and then has to be pulled back. My pet hate at the moment is that we spend so much time regulating ourselves that we forget what we’re there for, which is to help advise and look after clients’ accounts and investments. It’s trying to keep a balance and I don’t think we would have been able to do that properly if the regulations had been in place when it started.
Less than a decade ago you decided to step down from the company. Talk to me about how big a decision that was for you personally and the business.
It was a big decision because I spent 30-odd years of my life building up Hargreaves Lansdown with Peter and others, so to go and do different things, was difficult, but I’m good at making up my mind and doing things. I’d been planning it for a while. There were three things we decided as a business and that was to make long term decisions for the company, which I still believe is the case with Hargreaves Lansdown and any business you should always make long term decisions, we wanted to take money off the table we’d worked hard to get where we were and we should take some reward out for it; and the name to continue for as long as it could and to continue to be successful. We looked at how we could get to a scenario and we worked out the best way to do that was through an IPO, which we did in 2007. That was the catalyst for me to do something else. It took me probably three years after I stepped down to fully get it out of my system.
You’re still a significant investor in Hargreaves Lansdown, from the outside looking in, how do you believe Hargreaves Lansdown has performed in an increasingly difficult marketplace?
I think it’s done brilliantly to be honest and I can’t claim any credit because I haven’t been there. It’s kept the culture, which is key in any business, there’s a no blame scenario, where if you make a mistake own up to it, put it right. At HL, the mentality is to look after your client first, business second and then yourself as an individual comes third. That culture is still there. It’s getting more difficult though as the company gets bigger and new people come in who haven’t experienced that culture, but it’s a simple business. I tell this to all analysts – as long as HL are taking on new clients, looking after them and those clients are bringing more assets in under administration thus growing assets and revenue streams, then the business will continue to grow. If they start going outside of that and doing other things that’s where the danger signs are. But they haven’t done that. I stood down finally in 2012 and for six years they’ve consistently carried on doing the same thing. To use one of Peter’s sayings – they’ve stuck to their knitting.
The decision to step away from Hargreaves Lansdown has meant more of a focus on Bristol Sport and Bristol City Football Club, in particular, who are currently fighting for promotion. What impact would a promotion to the premier league have on the city as a whole?
Promotion would be enormous. A good example is Cheltenham festival recently, look at what that does for the region every year. It brings a vast amount of people and business into the area to boost the local economy. So, to have a Premiership club in the region bringing that sort of boost, week in, week out, will be fantastic. From a Bristol Sport and Bristol City Football Club point of view the turnover goes up by over £100 million the year you get promoted.
What is your long-term ambition for Bristol Sport?
Good question because it’s evolving. There’s a lot of moving parts to it, primarily I think it’s marketing and media related and therefore commercially related. It’s focusing on making sure the clubs that we’re involved with make the best out of what they got. Whether that’s improving the brand, the commercial opportunities or their community infiltration. If I was going to look back at it in five or 10 years’ time I’d like to say that it ensured that more people participated in sport, more people supported in terms of coming to watch or sponsoring and that sport is a major part of the Bristol landscape.
Your recent investment venture Channel Islands-based Ravenscroft looks set to continue growth, please explain about the journey you’ve been on with this company so far.
Why did I get involved with Ravenscroft? First of all, I met Jon [Ravenscroft], he’s infectious, hardworking and a very straight forward guy. He’s been growing his business for over 10 years now and I first got to know it as a client. When I first got to Guernsey I needed someone to look after investments and come up with ideas, which is what they did. Hargreaves Lansdown only operate in the UK so I was looking for something fresh to fill that gap. Ravenscroft remind me very much of where HL were around 10 years into its existence. It’s a very young workforce who are enthusiastic with the same culture as Hargreaves Lansdown of putting the client first. I was naturally drawn into it and the reason I took a significant stake and onto chairman of the board was because circumstances in the company meant there was an opportunity to do that. It’s now purely Channel Islands owned, focusing on developing clients. It differs from Hargreaves Lansdown in the fact that it looks globally as well. It’s a great opportunity, I am a non-executive in the company, but it’s my experience as a client which made me want to get involved with it.
When you are investing in a new venture, what are the main factors that you look for?
There’s two aspects to it for me. One is that some of the businesses that I’ve invested in, once I left Hargreaves Lansdown, has been because I’ve not been involved with them in the past and this has taken me out of my comfort zone into different areas.
Primarily though, when investing, you’re looking at the management. You can look at products, the market place and everything else, but, it’s the people you’re investing into. Look at Bristol Sport, why is that moving forward so well? It’s because of the people that have come up through like Martin Griffiths and so on, they are pushing the business and boundaries forward. I push them, challenge them and pull them back every so often. Empowering people to do jobs and if they’re good, they’ll develop, is something I enjoy.
If you’re going to invest in anything, it’s the people you’re going to invest into more. If the person isn’t key, if they’re not going to work their socks off, sacrifice some of their family time to make it successful, it won’t be.
It’s interesting to note that the personnel behind the business seems key to many investors when looking at businesses for investment.
Yes, and to use a Hargreaves Lansdown reference, people see what we’ve made out of HL now but they don’t realise that for the first 10 years we virtually took nothing out of that business. We took out what we could to live off, but everything else got ploughed back into it. That’s the sort of sacrifice you have to make, we were lucky, we kept growing.
You’ve been quite outspoken about Brexit; how do you feel it’s progressing?
It’s as I expected. The EU is always going to put barriers in the way and say all the negative things they possibly could because they don’t want it to happen. The UK government, while they haven’t done the best of jobs, have handled it quite well. They haven’t been able to show their hand too soon and let the press and everyone know what’s going on. In a negotiation you don’t do that, you keep things close to your chest. We will end up with somewhere in the middle of a hard and no Brexit, middle of the road. But we want to trade with Europe, but we don’t want to be governed by them, there’s an arrangement to be made there and I’m sure that’ll come out at the end of the day. I still believe Britain is better looking after itself than someone else trying to look after it
What do you believe it takes to be a success in business?
Hard work, without a shadow of a doubt. A bit of luck. I think being honest with your customers, clients and yourself. Not being too greedy and I go back to the HL culture and it’s making sure your business is solid and then benefitting from it afterwards. Too many people when they go into business make a bit of money and spend it, not keeping anything back for a rainy day. When I first started, there was a lot of people that would do a bit of business then go and buy the flashiest new car they could, and in a couple of months they were gone. You’ve got to make long-term decisions, nobody is successful in business unless they are really going to work hard at it and have a vision.
What is the biggest hurdle you have faced in business over the years, and how did you overcome it?
I don’t think we’ve had anything which really hit the business. But I do remember in 2008, the Lehman Brothers banking crisis, nobody really knows how close we came to the whole banking system collapsing. We saw evidence of that at HL and it was a big worry at the time because we saw banks as solid. As we thought might be the case at the time, and it was, UK government bailed out the banks. And that’s why as a general note if I ever look at any banks to invest in I look at who’s their prime backer and that’s why with UK banks you can feel fairly confident in. That was probably the most frightening time in business.
What’s your biggest piece of advice to entrepreneurs?
Always do your research and gain advice. My advice is listen to what people tell you but believe in yourself. If you have an idea, the drive to push it forward and you believe in it then stick with it, don’t get side tracked with what others say. There’s a lot of noise out there in marketplaces, but believe in what you’re doing and you’ll have a great chance of being successful.