Shares in the company fell to an 18-month low and it was the second-biggest faller on Britain's benchmark FTSE 100 <.FTSE> index at around midday.

The company - through which retail investors can access hundreds of products such as stocks and bonds - attracted just under 1 billion pounds of net new money in the three months to the end of September, compared with almost 1.3 billion pounds in the previous quarter.

"Potential stock market gains are a key incentive for retail investors to act and have not been present this quarter, as markets have reflected uncertainty regarding the Scottish referendum, concern over Middle East and Ukrainian conflicts and unfavourable euro zone economic data," said Chief Executive Ian Gorham.

The firm said total assets under administration increased by 100 million pounds to nearly 47 billion pounds in the period.

And while the number of active clients also rose - by 10,000 to 662,000 - and client retention remained strong at 92.3 percent, revenues lagged the expectations of some analysts, edging up to 70.8 million pounds from 70.1 million a year ago.

Flows and net revenues were a little disappointing versus our forecasts," Barclays analyst Daniel Garrod said in a note to clients. He had expected revenue of 71.7 million pounds.

After doubling in value in 2013, Hargreaves shares have fallen around 35 percent this year on growing investor concern about fee margin pressure and declining returns from its clients' cash pile.

The stock was trading down 2.7 percent at 851 pence a share at 1129 GMT (12.29 p.m. BST) on Tuesday. The drop took Hargreaves to its lowest level since April 2013 in heavy trading volume that was more than its three-month daily average after around two hours of trade.

"The groups' results ... must be considered in light of the prevailing conditions for investment," said Gorham, citing a fall of almost 2 percent in the FTSE All Share index <.FTAS> during the quarter.

CASH PILE PLANS

Hargreaves again painted a poor short-term outlook for returns from investing its clients' cash pile, as a result of regulatory changes to the term over which it can invest, but said it planned to launch new products to improve its returns.

While some had speculated it could apply for a banking licence to give it greater flexibility, it said it had no plans to do so at present, even though it expected the interest rate margin on its cash holdings to fall to between 50 and 60 basis points in full-year 2015.

Hargreaves' clients who invest their pension monies themselves often have some funds in cash as a tactical strategy, or for a short time after they are paid by their employer.

While those funds used to be invested on a 12-month deposit, a rule change by the Financial Conduct Authority meant that the money could only be invested on 30-day deposit, which pays less.

Owen Jones, analyst at BESI, said he would not be surprised if the interest rate margin came in lower than expected, and that the company's plans would not pay out immediately.

"I don't think it will be a short-term fix, and the (earnings) kicker will only come when interest rates normalise."

(Reporting by Simon Jessop; Editing by Nishant Kumar and Pravin Char)

By Simon Jessop