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Hargreaves Lansdown CEO: 'Right thing' for Woodford to axe fees on frozen fund

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
A screengrab taken from a YouTube video issued by Woodford Investment Management of Neil Woodford. Photo: PA/YouTube/Woodford Investment Management

The boss of investment platform Hargreaves Lansdown (HL.L) has urged under-fire stock picker Neil Woodford to stop charging fees to customers stuck in his frozen flagship fund.

Hargreaves CEO Chris Hill said in the company’s annual report on Thursday: “We waived our platform administration fee on direct holdings in this fund and we believe that Woodford Investment Management should suspend collecting its fees whilst their investors cannot access their cash.

“This is the right thing for them to do.”

Hill confirmed that he and chief financial officer Phil Johnson are waiving their annual bonuses this year in the wake of the Woodford scandal.

READ MORE: Short-selling attack costs stricken fund manager Neil Woodford £118m

Fund manager Neil Woodford was forced to suspend his flagship Woodford Equity Income fund at the start of June. Woodford had invested in a high proportion of illiquid investments, such as private company stock, and couldn’t sell them quickly enough to meet investor redemptions. He was forced to stop people withdrawing £3.7bn from the fund while he sold assets to increase liquidity.

The fund is set to stay closed until December but Woodford continues to charge management fees, despite pressure from politicians and the industry to waive the charges on the frozen money.

FTSE 100-listed Hargreaves Lansdown has come under fire for its role in continuing to promote Woodford’s funds even when it had suspicions that trouble could be brewing.

The Equity Income fund was featured on Hargreaves Lansdown’s “Wealth 50” preferred list up until the fund was frozen. More than 290,000 Hargreaves customers are affected by the freeze.

Hill once against apologised to affected customers and said: “We all share their disappointment and frustration.”

“Our priority is always our clients,” he said. “We are working with all relevant stakeholders to put pressure on Link [Asset Services, the fund administrators] and Woodford to ensure the best outcome for all investors.”

READ MORE: Woodford fund freeze 'undermines trust' in whole industry

Hargreaves has already waived its platform fees for clients who directly held the frozen Woodford fund. This move is costing the group £360,000 a month in lost revenue.

“In these difficult times we recognise the financial and personal impact the gating of the fund has had on [customers],” Hill said. “Our priority is to support them, keep them informed and ensure that the fund reopens as soon as is practicable.”

Hill defended the “Wealth 50” list, saying: “The shortcomings of one fund should not detract from the benefits of favourite fund lists like the Wealth 50.

“There will be learnings and improvements we can make from reviewing this event.”

Hill’s call for Woodford to waive his management fees came as Hargreaves Lansdown reported a 7% rise in revenue to £480.5m in the year to June 30 and a 5% rise in pre-tax profit to £305.8m. Net new business fell by 4% to £7.3bn and total assets under administration rose by 8% to £99.3bn.

“We are pleased with the underlying strength and resilience of our business and our increase in market share,” Hill said.

“We recognise that there are industry headwinds, but we continue to execute our strategy and remain on track.”

Hargreaves’ results cover only a few weeks after the gating on the Woodford fund at the start of June. Asked if he had seen an impact in the period since on the business, Hill said: “Woodford’s a very important issue for us but it’s not impacting our ability to run the business day-to-day.”

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Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at@OscarWGrut.

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