This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

Woodford and Hargreaves Lansdown

To follow up on my previous blog post over the collapse of Woodford Investment Management and how to avoid dud managers, the focus has now turned in the national media upon Hargreaves Lansdown (HL.). Investors who have lost a lot of money, and now won’t be able to get their remaining cash out for some time, are looking for who to blame. Neil Woodford is one of course, but what about investment platforms such HL?

The Woodford Equity Income Fund was on the HL “best buy” list for a long time – indeed long after its poor performance was evident. They claimed at a Treasury Committee that Woodford had displayed similar underperformance in the past and had bounced back. But that was when he had a very different investment strategy so far as one can deduce.

The big issue though that the Financial Conduct Authority (FCA) should be looking at is the issue of platforms favouring funds that give financial incentives – in this case via providing a discount to investors and hence possibly generating more revenue when better performing funds such as Fundsmith refused to do so. HL have not recommended Fundsmith in the past, despite it being one of the top performing funds.

It is surely not sensible for fund platforms to be recommending funds unless they have no financial interest in the matter whatsoever. Indeed I would suggest the simple solution is for platforms to be banned from recommending any funds or trusts, thus forcing the investor to both get educated and make up their own minds. Such a rule might spawn a new group of independent retail investor advisors which would be surely to the good.

The author has no position in Hargreaves Lansdown or in the Woodford funds.

Roger Lawson

3 Comments
  1. Jeremy Prescott 19th October 2019 at 3:45 pm

    Hargreaves Lansdown has an awful lot to answer for, which it has signally failed to do to date. In many ways, the reputations of it, Link and the FCA come out of this sorry tale worse than Woodford’s, and as survivors will face criticism and investigation for quite a while. The dividends taken out by the HL and Woodford founders serve to add insult to the injury suffered by the Woodford fund holders.

  2. John Wigglesworth 19th October 2019 at 7:03 pm

    Dated yesterday:
    https://www.fnlondon.com/articles/terry-smith-renews-spat-with-hargreaves-lansdown-20191018
    His reasoning is persuasive and may open the door to legal action.

  3. John Gilbert 19th October 2019 at 8:09 pm

    Platforms are charging extortionate fees for an administrative process and custody. Amazing returns on capital invested. They earn a substantial amount of their profits (or reduced losses) from interest on client’s cash. They are not supposed to offer judgment on investment selection.

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