Hargreaves Lansdown has been overtaken by Vanguard and AJ Bell in an investment platform customer satisfaction survey in light of the Neil Woodford scandal with respondents expressing a betrayal over its cheerleading of the disgraced manager’s flagship equity income fund.
The FTSE 100 platform group plunged from second to joint sixth place in Which?’s annual survey which polled 1,449 investors, 642 of which were Hargreaves customers.
Which? asked respondents how satisfied they were with their investment platform and how likely they were to recommend it to others.
Hargreaves received a customer satisfaction score of 67%, falling short of rivals Vanguard and AJ Bell Youinvest which were Which?’s ‘Recommended Providers’ for 2020/21 with scores of 88% and 77%.
Customer confidence knocked by Woodford scandal
The shift in customer satisfaction is a departure for the D2C giant which topped Which?’s first survey in 2014 and has continued scoring highly since.
Which? said Hargreaves’ ties with disgraced manager Woodford were to blame for its lower ranking, noting that “many of its customers expressed a sense of betrayal”.
Around 133,000 Hargreaves customers were invested directly in the Woodford Equity Income fund when it was suspended last June, while a further 158,000 held the fund indirectly via Hargreaves’ multi-manager range. Woodford Equity Income remained on Hargreaves’ Wealth 50 buy list until the day of the suspension.
“My confidence in Hargreaves has been knocked by the Woodford scandal’, one investor surveyed by Which? wrote. “Hargreaves seemed to have been too financially involved with the Woodford funds and slow to stop promoting those funds as recommended by Hargreaves.”
Langcat consultant Mike Barrett said Hargreaves “will be very concerned” by Which?‘s findings, “not least since they have long had a reputation for exceptional service”.
“By its nature, service is very personal, and is also inextricably linked to investment returns. To a degree these returns are out of their control, however it is clear some of their customers hold them to blame for the Woodford affair,” Barrett said.
Investors unlikely to leave unless they were badly affected
But Fundscape CEO Bella Caridade‐Ferreira views the customer backlash as more of a temporary blip. She said Fundscape’s own net sales figures showed Hargreaves had “a strong first quarter” despite the Woodford debacle and outbreak of Covid-19.
“There may have been a temporary dip in flows, but investors have short memories and believe that changing platforms is a faff (it isn’t any more) so unless they were badly affected, they won’t switch,” she said.
Hargreaves revealed it took in net new business of £4.0bn during the first four months of the year despite the coronavirus lockdown and the risks of several potential class action suits over its cheerleading of Woodford’s funds. Around 94,000 clients signed up to the D2C platform over the period, taking total active client numbers to 1,368,000.
>See also: Another law firm seeks Woodford investor compensation from Hargreaves Lansdown
Hargreaves charges more double than AJ Bell’s for £1m pots
Which?’s analysis found Hargreaves was among the most expensive platforms for client portfolios with £50,000 in assets. For customer pots averaging £1m Hargreaves annual fees of £3,000 were double AJ Bell Youninvest’s (£1,387) and eight times higher than Vanguard’s (£375).
But the consumer watchdog said Hargreaves received “impressive customer scores for some areas of its service”.
A spokesperson for Hargreaves said the D2C firm had been working hard in the last few months to improve its services. The platform revealed last month it is scrapping its Wealth 50 list in favour of an independently governed list of funds.
“We listen carefully to client feedback and actively use this to make improvements to our service, so we welcome client comments,” the spokepserson said.
“We are pleased that clients recognise the high quality of service they receive and market leading online tools such as Active Savings.”
