AJ Bell’s founder has defended best buy lists as an important tool for non-advised investors as others call for more regulatory scrutiny in light of Hargreaves Lansdown’s cheerleading for Neil Woodford’s now frozen equity income fund.
Speaking to Portfolio Adviser, Andy Bell (pictured) said that for investors with smaller pots who do not have access to financial advice “best buy lists are better than throwing darts at a dartboard, which is the alternative”.
“You’ve got a situation where we’ve got an advice gap that is indisputable so for those people who aren’t being advised, guidance is the big tool available to them.
“The other forks in the road are, one, they do nothing, or two, they just go mad and start pressing buttons and buying anything or going to the Sunday Times and reading the money section and whatever is tipped go and buy that, which we know, is not a great way of putting together an investment portfolio.”
Hargreaves’ call shouldn’t taint the industry
Best buy lists found on platforms and fund supermarkets have come under fire again in recent months as investors question why the biggest D2C provider Hargreaves Lansdown continued to recommend Neil Woodford’s flailing equity income fund to clients despite years of underperformance and concerns over liquidity. Hargreaves clients are said to account for a third of assets trapped in the £3.2bn fund, which suspended dealing on 3 June.
Bell said it was “unfair” to tar all best buy lists with the same brush because of one call made by Hargreaves. “I think one judgement by one provider, albeit a very big provider, shouldn’t taint the whole industry,” he said.
But he said the incident involving Woodford and Hargreaves has prompted introspection on how best buy lists are constructed, including at his own firm. “I think the whole industry, and particularly those parties involved, will have learned some lessons from what happened.
“What firms need to do is make sure they’ve got a robust process behind how they put their best buy list together, and behind how they promote them to their customers to make it clear that they are best buy lists and there are no guarantees in this world,” he added.
Bell said he stands behind AJ Bell’s best buy list, noting that Woodford’s fund was ejected late last year over concerns there was a mismatch between its liquidity profile and what customers were expecting to get from the fund.
‘I hope Neil comes through it’
Bell told Portfolio Adviser he was surprised at the “circumstances” which led to the suspension of Woodford’s equity income fund but said once the national press got hold of the story the fund’s closure was “inevitable”.
Woodford had been one of AJ Bell’s biggest financial backers but sold his entire stake in the platform group to former employer Invesco and AJ Bell’s management team ahead of the firm’s IPO, a move which some said hinted at a liquidity problem.
Bell said he still has the “utmost respect” for the troubled UK equities manager.
“I think people are too quick in our industry to kick people and particularly to kick people when they’re down,” he explained. “Hargreaves is fundamentally a good business and Neil Woodford is fundamentally a good investment manager.”
On whether Woodford would be able to bounce back from the suspension, Bell said, “I hope Neil comes through it”. He said he has “no doubt” Hargreaves would be able to put this issue behind it.
