Investments 

MPs quiz Hargreaves boss about Woodford fees

MPs quiz Hargreaves boss about Woodford fees

Hargreaves Lansdown chief executive Chris Hill has been questioned by a parliamentary committee on the relationship between his firm and Woodford Investment Management and the role of the firm's buylists.

Neil Woodford’s stricken Equity Income fund remained on Hargreaves Lansdown’s Wealth 50 buylist until the day it suspended dealing, despite three years of underperformance at the end of which Mr Woodford’s fund was the absolute worst performer in the IA UK All Companies sector.

The £3.75bn fund was suspended last Monday (June 3) for a minimum of 28 days as the fund manager is trying to sell stock to raise cash to meet redemptions.

Clients of Hargreaves Lansdown receive a discount on the annual management charge of the Woodford Equity Income fund, as they do for all of the funds on the Wealth 50 list.

But Hargreaves Lansdown insists that funds are chosen for its buylist based on performance, and not on the basis that a fee discount be granted to its clients.

Now the chairwoman of the Treasury select committee, Nicky Morgan, has written to Mr Hill to enquire about the link between Hargreaves and Woodford, and the client fees Hargreaves would have received for the investments.

She wrote: "How much did Hargreaves Lansdown receive in fees for money its customers invested in LF Woodford Equity Income Fund, by year, since 2014 until today?

"Hargreaves Lansdown states on its website that 'It's important to make clear we never take payment or commission for funds to appear on the Wealth 50. We only look at performance potential.'

"However, your dealing charges page notes that 'Hargreaves Lansdown receives commission from some fund groups for arranging and administering your investments'.

"Has Hargreaves Lansdown received any commission (or any other reward) from arranging and administering investments, or for any other activities, related to LF Woodford Equity Income Fund, or funds managed by Woodford Investment Management? If yes, please provide the relevant amount by year."

She also quizzed the chief executive on the selection criteria for funds on the firm's buylist, and asked how many of Hargreaves 1.1 million clients are invested in the fund.

During the period the fund is suspended, Hargreaves indicated it will not charge its clients the usual platform fee of 0.45 per cent, and has urged Woodford Investment Management to do the same.

Ms Morgan has also asked Mr Woodford not to take a fee but the manager refused to budge. 

Meanwhile Mr Woodford has urged advisers to stick with him as he battles to re-open the fund, and said it will look very different to the portfolio that has been suspended, with more large cap liquid stocks and fewer unquoted holdings.

david.thorpe@ft.com