Woodford crisis puts fund best buy lists in dock: Watchdog launches probe after Hargreaves Lansdown controversially kept backing troubled fund manager
Hargreaves Lansdown has been ordered to explain why it repeatedly plugged Neil Woodford’s toxic flagship fund.
As City regulators launched a probe into best-buy lists, Hargreaves was sent a string of questions about its practices by MPs on the Treasury select committee.
The fund supermarket has come under heavy pressure over its close links to Woodford, whose Equity Income fund was included on Hargreaves’ prestigious Wealth 50 list of top investments right up until it suspended trading on Monday last week.
Hargreaves Lansdown has come under heavy pressure over its close links to Woodford, whose Equity Income fund was included on Hargreaves’ Wealth 50 list until Monday last week
This table of supposedly star performers is used by thousands of savers as an authoritative guide to where they should put their money.
Hargreaves has long insisted that the Wealth 50 is compiled solely based on analysis of funds’ performance and the value for money which they offer investors in terms of fees.
But Equity Income made the cut despite poor performance over the past three years.
Tory MP Nicky Morgan, chairman of the committee, has written to Hargreaves boss Chris Hill with a list of questions about the Wealth 50 and the firm’s links with Woodford.
Woodford’s misguided support for Stobart pariah
The former boss of Stobart Group has lost his appeal against a judgment which found him guilty of breaching his duties as a director.
Andrew Tinkler initiated a boardroom battle at Southend Airport-owner Stobart last summer – with major shareholder Neil Woodford one of his biggest cheerleaders.
But Tinkler’s coup was unsuccessful, and he was kicked off the board and found to have breached his duties as a director by destabilising the company.
The debacle was a major embarrassment for Woodford.
After Tinkler sent an explosive letter to shareholders and employees urging them to remove the chairman, which eventually got him fired, Woodford sent him a supportive text message saying: ‘It is absolutely excellent.
‘It strikes the right tone and will go down really well with employees and management.
‘We will be with you to a successful end on this, Andrew. You will at times feel very lonely on this journey but rest assured that you are supported by me and a group of talented and honourable people.
‘We will prevail.’
The Court of Appeal yesterday refused to give Tinkler permission to appeal.
Morgan said: ‘We have asked Hargreaves about its links to the Woodford fund, the fund’s inclusion on Hargreaves’ Wealth 50 list and the number of Hargreaves customers exposed to the fund.’
Many firms which make it into the Wealth 50 offer discounts for Hargreaves customers.
These include Woodford, which charges users of the platform 0.5 per cent. This compares with a levy that can reach 0.75 per cent for other savers.
Big-name fund managers have in the past claimed they were left off the Wealth 50 list because they refused to offer a discount.
Stock-picker Terry Smith – who has consistently delivered stellar returns to investors – hit out at Hargreaves in January when he was not included.
He said: ‘Hargreaves Lansdown’s recommended funds continue to be chosen mainly for fund managers’ willingness to comply with a charging structure which enables Hargreaves Lansdown to maximise its own profitability, and not because they perform well for investors.’
The Financial Conduct Authority already requires best-buy lists to be put together based on what is best for investors, rather than commercial incentives for firms.
Andrew Bailey, head of the FCA, told the BBC Radio 4 Today programme: ‘We look at how firms construct these best-buy tables.
The principle is they should be impartial, they should do it fairly, and they should make sure it’s up to date. We will look at this again to ensure Hargreaves and others have abided by those principles.’
Last night Hill said: ‘We have received the letter of the Treasury select committee and will reply in due course.’
- Woodford has offloaded more of his stake in estate agent Countryside as part of a fire sale to raise cash so he can pay back investors who want to pull out of Equity Income. He had held 15 per cent of the stock before the crisis, but has now cut his position to 9.95 per cent.