The Woodford saga has called into question best buy investment lists after Hargreaves Lansdown continued to recommend his fund on its highly influential Wealth 50 best funds, despite prolonged poor performance.
Today, Mr Hill defended the Wealth 50, claiming it had outperformed for investors, albeit over a vague and mixed time period when funds were on the list.
He also argued that it saved investors money thanks to Hargreaves negotiating lower fees, something that has proved controversial in itself as the list is largely made up of funds that agreed to cut costs.
He said: ‘Behavioural economics suggest that when people are presented with a wide or unfamiliar choice, for example about financial planning, this can result in them not making any decision at all.
‘One tool that people can use when making investment decisions is ‘best buy’ lists. In their Investment Platforms Market Study, the FCA found that ‘best buy’ lists and/or model portfolios help investors pick independent well-performing funds.
‘We are committed to a favourite funds list as one of many tools which are important for our clients.
‘At Hargreaves Lansdown, we have had a favourite funds list since October 2003. This is now known as the Wealth 50 following its relaunch in January 2019.
‘This was as a result of feedback from 6,500 current and potential investors who told us they wanted a shorter, more focused list with the ability to filter by objective, risk, yield and cost.
‘The process of selecting and reviewing the Wealth 50 constituents is a rigorous one driven by our 14 person investment research team. They devote thousands of working hours every year to conducting quantitative and qualitative analysis of fund managers and the funds.
‘This process helps identify managers who have added value over the long-term through repeatable skill rather than market movements or thematic biases.
‘This research has resulted in the selection of funds which have on average outperformed both their relevant benchmark index and their sector average after charges, by 5.8 per cent and 11.8 per cent respectively over the period they have been on our favourite funds list.
‘It is important to note that Hargreaves Lansdown is paid directly by our clients, not by fund managers. Our fee income is calculated as a percentage of the clients’ assets held on our platform, and we earn the same fee regardless of the funds our clients hold.
‘We use the combined buying power of our 1.2 million clients to get the lowest cost we can for each fund, as a lower price delivers better investment returns. These discounts are passed in full to our clients.
‘In 2018, we saved our clients £61million of fund management costs as a result of the terms we have negotiated on their behalf and the Wealth 50 relaunch has enabled us to deliver a further £7million of discounts to clients.’