Hargreaves Lansdown PLC (LSE:HL.) shares tumbled over 8% after half-year underlying profits beat forecasts but client retention rates fell and client platform cash balances were lower.
The investment platform group experienced a sharp decline in its net new business, however its assets under management increased ahead of inflation year-on-year.
Net new business dropped around 38% to £1 billion, while assets under management grew by 12% to £142 billion.
Customer outflows were highest in "more transient" products, not ISAs and SIPPs, which Hargreaves said was "driven by cash withdrawals to deal with cost-of-living issues and/or to pay down debts", with the period also seeing an increase in transfers to banks and building societies to take advantage of cash ISA products, which led to the launch of its own cash ISA last year and a multi-bank cash ISA last month.
The broker grew revenue 5% to £368.2 million, despite a rise in operating costs.
Hargreaves said it is now expecting underlying costs to come in at at the lower end of its 9-11% guidance range, largely caused by its new view on the FSCS levy which indicates that there will not be the uplift originally anticipated.
Dan Olley, chief executive officer, said: “It is now six months since I took over as CEO and it is clear that the business is built on strong foundations; a proud heritage, with a trusted brand and knowledgeable, client-focused colleagues.
“As the largest wealth platform in the UK, looking ahead, ours is a large and growing market with clear client needs. We have the scale needed to succeed and we have the right strategy and ambition to accelerate our growth.”
Looking forward, the group says it will aim for ordinary dividend growth within line with its guidance, at around 4%.
Analysts at UBS said while results were "modestly ahead of expectations" at PBT level we commentary from the company on cash trends, continued fund flow challenges and a decline in client retention rates will be seen by investors as "disappointing".
"It is clear to us that new CEO Dan Olley is taking control of a transformation plan and so much will depend on the success of this implementation in coming periods."