Opinion  

Where will Woodford sit in a new cost-cutting world?

John Lappin

There have been a host of Neil Woodford questions asked in recent months: about the succession, about the strategy of his new funds, about the tax implications of investors moving from Invesco Perpetual to the new, possibly eponymous Woodford operation.

These are clearly the vital, pressing questions about the funds, the transition and all it involves that are most important for investment advisers and clients in the here and now.

But there is another set of Woodford questions that will apply in a few months’ time. The structure and context of the market is changing radically. Share classes are clean or at least cleaner. New execution-only services are springing up, if not quite weekly, then at least monthly.

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If feels as if every other article on FTAdviser is discussing the margin squeeze and the stripping out of costs from fund management – the latest notable blast coming from Nucleus boss David Ferguson, who suggested the big cost clear-out was now arriving at retail fund managers’ doors.

In other parts of the market, new portfolio services are being launched – the latest significant move coming from Skandia with the launch of its WealthSelect range. There is, presumably, room for the new Woodford operation in many such services, depending on the margins accruing to the various parties involved or the structure of the relevant “sub-advised retail mandates”.

Among the self-directed giants, where will Woodford’s funds sit within their new top-value propositions?

It is unlikely the new fund group will be embarking on a Poundland pricing strategy and it is surely more likely to be found on the ‘reassuringly expensive’ shelf than anywhere else in the investment shop.

But will one of those players dare to build a marketing campaign around the ‘cheapest way to access Neil Woodford’, provided they have secured the cheapest way of course? What will the army of advice robots (we’ve all been warned about) make of Woodford and his track record? Will their algorithms cope or fail to recognise him?

I’ll stop the conjecturing, because clearly I am getting slightly ahead of future events both known and unknown.

One final question does have relevance for investment advisers in this world of solutions, take-it-or-leave-it restricted panels and thresholds before a fund gets included in portfolio: how easy will it be for you on your own discretion to include Woodford’s fund in your recommendations? That may be a good test of just how much autonomy an adviser has lost.

One final point. It is fair to say that as the star fund manager among the star fund managers, Mr Woodford might even start to look a little old fashioned in this new world of distribution. Yet some may say he has an old-fashioned approach to contrarian investing that hasn’t really done him too much harm.

And as for the way investors – whether advised or not – access his funds, neither he nor his backers are likely to lose too much sleep. No doubt they’ll still get the assets and will be able to charge a reasonable annual management charge for them, too.