Woodford investors who have ‘had it’ with HL struggle to exit

II and AJ Bell have been unable to accept transfers in the suspended fund

Hargreaves Lansdown clients who hold Woodford Equity Income and have “had it” with the platform are being denied the opportunity to switch to rivals, such as Interactive Investor and AJ Bell.

Interactive Investor has received several requests for transfers from Hargreaves clients trapped in the Wealth 50 constituent, said chief executive Richard Wilson (pictured) in a letter to the Treasury select committee.

But the requests have been denied by Link Fund Services, the authorised corporate director, because Hargreaves clients hold the discounted Z share class while Interactive Investor offers the C share class.

There is “no sound rationale or practical operational basis” for Link’s decision, Wilson said.

He said: “Even where a change in share class is required to effect the transfer, we believe this is a simple record keeping matter.

“It does not require the fund to dispose of any of its underlying portfolio of investments, meaning ‘liquidity’ cannot be the reason for such restriction.”

The restriction is detrimental to choice and competition, particularly given how many consumers hold the fund, he added.

Isa investors can’t do partial transfers

Since the Woodford fund suspension, Interactive Investor has successfully accepted transfers from clients invested in Equity Income via platforms other than Hargreaves, a spokesperson confirmed.

AJ Bell also confirmed it has faced the same problems as Interactive Investors from Hargreaves clients requesting to move.

Outside an Isa wrapper, it is possible that Hargreaves clients can transfer their other holdings now and wait for Woodford Equity Income to reopen before transferring the remainder of their portfolio.

However, Isa contributions from the current tax year must be transferred in full when switching platforms meaning investors would miss out on the remainder of their £20,000 tax allowance if they pushed ahead with a transfer.

HL clients getting out ‘come what may’

Lang Cat director Mike Barrett agreed that a share class conversion should be able to happen while a fund is suspended and said the fact no underlying assets are sold is highlighted by the fact there is no tax liability for consumers transferring under normal circumstances.

Barrett noted the transfer requests were coming despite the fact Hargreaves had waived its platform fee for investors in the suspended fund.

“Over half the clients they’ve got who are invested in Woodford have got less than £4,000,” he said.

“For them, the cheaper option is to stay where they are where there’s no platform fees and actually a fixed fee model like Interactive Investor for smaller amounts is probably more expensive anyway just because of the nature of the charging.

“It’s certainly interesting if there are investors who have essentially had it with Hargreaves and they want to get out come what may. Price is obviously not a huge factor in that decision.”

Hargreaves platform charges start at 0.45% for funds while AJ Bell fees begin at 0.25%. Interactive Investor adopted “Netflix” subscription fees in June.

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