Hargreaves Lansdown shares pare back losses after tanking over 10 per cent yesterday

Hargreaves Lansdown shares pared back sharp losses in early trading today after tanking over 10 per cent yesterday as investors piled out of shares in the financial services firm after its costs soared due to a sharp rise in retail trading volumes driven by the “meme stocks” trend.

Hargreaves reported a three per cent drop in pre-tax profits to £366m yesterday morning, triggered by swelling costs to cope with a 30 per cent rise in assets under its administration.

As a result, investors sold off holdings in the company, causing its shares to slide 11.34 per cent to close at 1,454p yesterday.

Its shares were up 1.75 per cent to 1,480p this morning.

A trend toward investing in so-called “meme stocks” – shares in ailing companies recommended on message board sites such as Reddit – has triggered a surge in participation from individual investors in global financial markets.

Hargeaves said its median age of clients has fallen to 46 this year, down from 58 in 2007, highlighting that a large proportion of new market participants are from younger age groups.

Restrictions on economic activity to curb the spread of Covid cases has engineered a sharp rise in households savings, with many deploying their newfound capital in stock markets in search of higher returns amid a record low interest rate environment.

Apps such as Hargreaves Lansdown enable consumers to invest in financial markets at a relatively low cost, meaning many have opened fresh accounts. As a result, the cost of overseeing assets under management has swelled at the financial services company.

Analysts at Shore Capital said: “Even as share dealing slows down from the elevated levels seen during lockdowns, we expect a higher normalised base from the army of new investors.”