Yahoo Finance Hargreaves Lansdown set for further grief over Woodford debacle
The last thing Hargreaves Lansdown needed in the run-up to Thursday’s annual general meeting was a broadside from the company’s founder and biggest shareholder about its handling of the Neil Woodford affair.
Peter Hargreaves, who owns 32% of the business that bears his name, blamed the company’s management for the plight of savers who are now unable to get their money out of Woodford’s funds.
“It’s annoyed the hell out of me that it would appear he [Woodford] has not been truthful with Hargreaves Lansdown. But it’s also annoyed me that they [Hargreaves Lansdown] let it go on so long,” Hargreaves told the Sunday Times.
Hargreaves, most of whose £3bn-plus fortune is tied up in the investment service company, added: “The clients have been stuffed in this horrible Woodford fund.”
Hargreaves Lansdown, a FTSE 100 company, will hold the AGM at its Bristol headquarters on 10 October alongside a trading update for the three months to the end of September.
Woodford’s flagship equity income fund blocked withdrawals in June and is not due to reopen until December, after its plunging value sparked a run of savers trying to get their money back. Almost 300,000 Hargreaves Lansdown customers, about a quarter of the total, have money tied up there. The company had promoted Woodford heavily in its Wealth 50 list of favourite funds, withdrawing the recommendation only when the fund was frozen.
Chris Hill, Hargreaves Lansdown’s chief executive, has tried to atone for his company’s role in the debacle. He offered an apology and he and his top team waived annual bonuses for last year and fees for affected customers.
But that may not be enough for some individual Hargreaves Lansdown shareholders who also have money frozen in Woodford’s fund. The affair exposed the close relationship between Woodford and Hargreaves Lansdown, which made £41m in fees from clients’ investments in the fund before its closure.
I think investors who are quite active will want to rattle the cage and question the directors
Peter Parry, UK Shareholders Association
Peter Parry, policy director at the UK Shareholders’ Association, said: “There may well be a number of people who are invested in both Woodford and Hargreaves Lansdown who are quite surprised to learn how close those links were. I think some investors who are quite active will want to go along, rattle the cage and question the directors pretty closely.”
The company is unlikely to face major rebellions at the AGM. Shareholder advisers are fairly content with its governance, though Pirc and Minerva have questioned executives’ pay levels.
Woodford’s woes have taken their toll on Hargreaves Lansdown’s shares, which hit a record of more than £24 in May before falling by a quarter over the following month. Even after a further fall last week, it has been a phenomenal investment since floating at 160p in 2007.
But some analysts argue the Woodford imbroglio could cause further trouble for a company whose success has been based on its reputation for customer service and investment advice.
Last week Credit Suisse gave Hargreaves Lansdown an “underperform” rating, sending the shares down. “We see continued headwinds from the impact of the gating of the LF Woodford equity income fund,” analyst Haley Tam said, adding that the company’s outsized profit margins could come under pressure.
If Thursday’s trading update on post-Woodford performance shows the sceptics are right, Peter Hargreaves and other shareholders could get angrier.
