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Woodford collapse costs Hargreaves Lansdown £2.3m

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·3-min read
Money manager Neil Woodford. Photo: PA
Money manager Neil Woodford. Photo: PA

Hargreaves Lansdown (HL.L) has waived £2.3m worth of fees on Neil Woodford’s investment funds, the investment platform said Friday.

Investment platform Hargreaves Lansdown was one of the biggest supporters of stock picker Woodford, whose investment business collapsed last October following a four month crisis.

Hargreaves last year took the decision to waive platform fees for clients who had invested in Woodford products, after withdrawals from the money manager’s flagship fund were suspended.

The decision has cost Hargreaves Lansdown around £2.3m, the company said in its half year report on Friday. Hargreaves has also set up a dedicated Woodford help desk for clients and been lobbying on their behalf. Chief executive Chris Hill declined to estimate how much the scandal had cost his business, besides the waived fee number.

“Our priority remains our clients,” Hill said Friday. “We share their disappointment and frustration.”

Hargreaves Lansdown has been criticised for boosting Woodford funds even as trouble was brewing.

READ MORE: Hargreaves Lansdown 'learning lessons' from Woodford fiasco

Woodford’s flagship Equity Income Fund was on Hargreaves Lansdown’s ‘Wealth 50’ list until the fund was frozen in June. The ‘Wealth 50’ list advertises Hargreaves’ preferred funds and thousands of Hargreaves customers were left trapped in the Equity Income Fund after withdrawals were suspended.

Hill said Friday that Hargreaves Lansdown was planning to “reform” the ‘Wealth 50’ list to introduce a “greater focus on transparency” and add “new functionality” to help people who want to forge a “more independent path”. He said an announcement would be made in due course.

Administrators for Woodford’s biggest fund, the Equity Income Fund, have been winding it up since October and this week made their first capital distribution to investors. Hill said getting money back to Hargreaves’ clients had been a “significant undertaking” but had “gone smoothly”.

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

The suspension of Woodford funds and the collapse of his business had also contributed to “general unease” in the market, Hill said. The trade war between the US and China, December’s general election, and continued Brexit uncertainty also contributed to a tough market.

“The second half of 2019 was challenging and as we’ve seen in previous unpredictable periods, confidence and retail investment flows were affected across the industry,” Hill said.

Despite this, total assets under management rose 22% to £105.2bn in the six months to 31 December 2019. Revenue rose 9% to £257.9m and pre-tax profit rose 12% to £171.1m.

Hill added that conditions have improved since the turn of the year.

“Since the election, we’ve seen an increase in client activity and a pick up in investor confidence coming through in the first few weeks of the year,” he said.

50,000 net new clients have signed up to Hargreaves Lansdown since Woodford’s fund was suspended last June and Hargreave’s market share has grown to 41.8%. Hill pointed to the numbers as evidence that the Woodford scandal had not left a lasting mark on his business.

“Clients can vote with their feet and join a rival platform,” Hill said. “But the fact that we’ve gained new clients in the last six months and we’ve increased our market share shows that we know that we stand in their corner.”

READ MORE: Woodford investors face £10m bill for closure of fund