Hargreaves shares fall as profits lag forecast, fund flows slow

* Pretax profit of 101.9 mln pounds below analyst forecast

* Assets under administration rise to 49.1 bln pounds

* Shares (Berlin: DI6.BE - news) fall five percent on valuation fears, margin pressure (Adds details, analyst quotes, share reaction)

By Nishant Kumar

LONDON, Feb 4 (Reuters) - Hargreaves Lansdown (LSE: HL.L - news) reported lower-than-expected profit and slower net fund inflows in the last six months of 2014, sending its shares down by five percent.

The British investment platform administered 49.1 billion pounds ($74.48 billion) in assets at the end of December, up from 43.4 billion pounds from a year ago period and a record.

However, that failed to translate into higher profits as a new fees regime weighed on results.

Profit before tax totalled 101.9 million pounds in the six months to the end of December, down from 104.1 million in the correspoding period a year ago. Analysts had expected the firm to report a pretax profit of 104.5 million pounds.

Operating margin declined by about 2 percentage points to 70.7 percent, reflecting in part the impact of the retail distribution review (RDR) reforms enforced by Britain's Financial Services Authority since January 2013.

The RDR aims to ensure advisers are better trained and that fees for financial advice are more transparent.

VALUATION CONCERNS

The lower profit combined with slower net inflows and fewer new client additions raised questions about the firm's rich valuation of 26.6 times its forward 12-month earnings, significantly above its peers 14.5 times.

Rivals such as Rathbone Brothers (LSE: RAT.L - news) and Brewin Dolphin (LSE: BRW.L - news) Holdings trade at 18.6 times and 14.5 times respectively.

"Hargreaves Lansdown has been a tremendous success story and proven itself to be a formidable asset gatherer," Justin Bates, an analyst at Liberum Capital Ltd wrote.

"However, growth is moderating significantly, partly a function of its size and maturity and also due to the refined revenue model post the introduction of Retail Distribution Review," he added.

At 1136 GMT, Hargreaves shares were trading down 5.1 percent, their biggest one-day decline since September and the top loser in the blue-chip FTSE 100 index.

Heading into the results, four analysts rated the stock as "hold", 5 as "buy" or "strong buy" and six as a "sell" or "strong sell", according to data compiled by Thomson Reuters.

Hargreaves announced a dividend of 7.3 pence per share, up 4 percent from the first half. ($1 = 0.6592 pounds) (Reporting by Nishant Kumar; Editing by Keith Weir)