Customers of Hargreaves Lansdown have heavily criticised the UK’s biggest online funds supermarket after almost 300,000 of them were caught in the collapse of Woodford Investment Management.
Hargreaves had championed funds from Neil Woodford, the UK’s best-known money manager, who on Tuesday announced he was closing his company after being fired from his own flagship fund.
The role of Hargreaves, which promoted Woodford funds on its best buy list and attracted £1.6bn of assets for Mr Woodford, is now being examined by the Financial Conduct Authority.
“They have been influential for thousands and thousands of investors who’ve come a cropper and waiving their fees just isn’t enough,” said Terry Mackie, one customer who pulled money out just before the main Woodford fund was frozen in June after a tide of redemption requests.
The FCA has intensified its discussions with Hargreaves since the summer, according to one person close to the situation, demanding more information from the company on what it knew and when in relation to Mr Woodford.
The case has not escalated into an enforcement case, according to that person. The fund’s administrator, Link Fund Solutions, and Woodford Investment Management are under formal investigation.
Hargreaves said: “As you would expect as a listed FTSE financial services company we are in conversations with our regulator on a wide range of subjects on a regular basis and the detail of those contacts are confidential.”
Neil, a 44-year-old Hargreaves customer from Newcastle, said he invested £23,000 in Woodford funds, a sum now worth about £8,000. He said he felt “strongly let down” as he had “felt reassured by the numerous Hargreaves updates” from figures including Mark Dampier, Hargreaves’ head of research.
Mr Dampier, who had promoted Mr Woodford in company blog posts, was accused on Wednesday of deleting favourable comments about Mr Woodford. David Hearne, a wealth management adviser at Satis Asset Management, pointed to a now-deleted Twitter exchange with Mr Dampier. Mr Dampier did not respond to requests for comment.
Some 291,000 Hargreaves customers were caught when the Woodford Equity Income Fund was frozen in June. About 133,000 had invested directly in the fund and lost access to their money. With this week’s decision to wind up the fund, they must now wait to see what might be recovered from the liquidation. The remainder had invested via Hargreaves own-brand fund and were able to sell.
On Wednesday Hargreaves shares fell 2.1 per cent. They are down 25 per cent since May.
Hargreaves Lansdown earned £41.1m in customer fees on money invested in Woodford Equity Income between 2014 and 2019.
Gina Miller, co-founder of wealth manager SCM Direct and transparency and political campaigner, said Hargreaves appeared to have conducted highly inadequate due diligence on Woodford’s flagship fund and noted it had a high allocation to illiquid securities.
“Given the very small number of funds on the HL Wealth 50 list, how could HL have allowed the Woodford fund on the list over an 18-month period,” she said. “These recommended lists are no more than marketing ploys which the FCA did highlight in their 2017 assessment study but it has failed to take action on.”
Additional reporting by Peter Smith and Archie Hall