Hargreaves Lansdown has dropped its platform fee on Woodford Equity Income and called on the star manager to do the same while the open-ended fund is suspended.
The D2C platform has come under fire for its “wholly inadequate” response to the suspension of the fund, which it has long championed to retail investors, particularly by its influential Wealth 50 list of recommended funds.
In an effort to “support” frustrated fund investors the FTSE 100 firm has dropped its 0.45% platform fee. The Equity Income and Woodford’s other UK equities Oeic, Income Focus, no longer feature on the Wealth 50.
‘This is a frustrating and difficult time for clients’
The decision to waive its fee appears to be a first in the platform industry with no such decisions made during the suspension of property funds in the aftermath of the 2016 Brexit vote.
Head of investment analysis Emma Wall said in a statement: “We have taken the decision to waive the platform fee on the Woodford Equity Income fund while dealing is suspended, effective immediately. We do not think it is fair to charge our clients a fee while they cannot trade in the fund.
“This is a frustrating and difficult time for clients and we are doing what we can to support them. We have been in communication with Woodford Investment Management to explain why we think this is the right thing to do and have put pressure on them to do the same.”
Woodford silent on fees
Woodford Investment Management said it had nothing to add when questioned by Portfolio Adviser on whether it would follow Hargreaves’ request.
AJ Bell head of active portfolios Ryan Hughes said he could see both sides of the argument for whether Woodford should drop his fee.
“The fund manager would argue they are still having to do the same amount of work in terms of buying and selling of the underlying assets, monitoring and company meetings. There’s the practical, ‘Yes that’s true’ and the moral ‘Should you accrue your fee over the same period?’ I can see both sides of that argument; from the fund manager’s perspective and the investors’ perspective.”
Hargreaves fronts up in writing
Hargreaves CIO Lee Gardhouse penned a column on Woodford on Wednesday, which was published on the platform’s website.
While Gardhouse acknowledged the suspension was a “shock” and “unsettling” for Hargreaves Lansdown clients, he reiterated why Equity Income had featured on the Wealth 50 and its predecessor, the Wealth 150, for so long.
He said: “His stock-picking ability, track record, team support, and the fact that he was willing to back his views with conviction meant he earned his place on the list.”
He added that Woodford got his calls right on tech, pharmaceuticals and tobacco in the past. Woodford has been pinning his investment thesis on a turnaround in UK stocks once a resolution to Brexit is reached, although the article from Gardhouse did not mention this.
The platform has published several pieces during the course of the week as Woodford news has unfurled.
In an apparent about-turn on its website, Hargreaves suggested Income Focus investors may want to reconsider the investment, despite it featuring on its Wealth 50 list as recently as Monday.
The article by Mark Dampier said: “We review the funds on the Wealth 50 constantly, and feel that in this case, investors should consider whether the high income paid by Income Focus is their top priority. In our view, investors who don’t need this yield should consider their position.”
