Peter Hargreaves: canny pessimist who's made £85m

Peter Hargreaves, 62, is not a complicated man. The baker's son hates meetings, spurns expensive suits and spends his spare time growing vegetables at his house near Bristol. But don't be duped. Beneath the down-to-earth Lancashire exterior is a serious entrepreneur who believes that any business has only one real goal. "And that's profit."

Hargreaves left Lancashire for Bristol in 1979 to work as an accountant. The firm's business model didn't impress him "everything was done to try and make commission, not serve the client". But it was here he spotted an opportunity to advise investors on unit trusts (a type of fund) by post. He would advertise his services in the newspaper, sending advice on funds and application forms to investors who requested them. "Another guy was doing it, but he was probably recommending what would sell, not what would be good for the client in the long term. I thought we could do it better."

With £5,000 in capital and a Datsun 180B, he and fellow accountant Stephen Lansdown set up Hargreaves Lansdown in 1981. Based in the spare room of his 14ft by 50ft mews house in Bristol, they had a borrowed typewriter, one phone line and a wardrobe as a stationery cupboard. They took out a two-column advertisement in The Sunday Telegraph for £200.

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The top half of the advertisement explained that they were giving advice on unit trusts; a slip for names and addresses was at the bottom. "I thought the advertisement was a complete failure, until I walked into the corridor on Thursday morning and saw 160 envelopes on the floor." He sat down in the middle of them. At that point, he says, there was "no doubt in my mind. I knew that I'd be a millionaire." Direct marketing of unit trusts worked.

With 100-150 responses per advertisement, the business doubled in size every three months for two years. The company took 3% commission for its services, and by 1987 the pair were well on the way to their first £1m profit when the stockmarket crashed. "Then all bets were off." Fortunately, they'd been prudent and kept money invested in the firm. "The optimistic fail while the pessimistic prevail. And I have always been very pessimistic."

The group diversified into investment trusts and stockbroking. But "the thing that probably saved us" was personal equity plans (Peps). The tax-free investment accounts the forerunner of individual savings accounts (Isas) were brought in by the Conservative government to encourage people to buy shares. The firm was soon doing £45m a year in Peps, earning £1.35m in commission at 3%.

When discount brokers started cutting rates to 2%, Hargreaves discounted the full 3%, introducing a 0.5% renewal rate instead. Within 18 months, the Peps business grew to £450m. Turnover hit £98m in 2007, and the firm went public, netting Hargreaves £85m. His biggest investment is still the firm, in which he holds more than £300m-worth of shares. Hargreaves, who has just published his autobigraphy In For A Penny says, "I enjoy it more than anything. I like good food and fine wine, holidays and walking around my garden. But my business is everything to me."