The debacle surrounding the suspension of the Woodford Equity Income fund has undermined trust in the financial advice sector, the adviser trade body has warned.
Neil Woodford suspended dealing of his £3.75bn Woodford Equity Income fund on June 3 amid liquidity concerns, after the Kent County Council pension fund informed the manager that it was withdrawing £255m.
Since then Mr Woodford has been working hard to sell shares to find the money for any redemptions for when the fund reopens.
But the Personal Investment Management & Financial Advice Association (Pimfa) stated the debacle had created an "erosion of trust" among savers and investment managers and advisers.
Chief executive of Pimfa, Liz Field, emphasised in a statement today (June 18) that trust was "at the core" of the adviser/personal investor relationship and that advice was essential for individuals to be able to build their own personal finances.
Ms Field said: "Since the decline of defined benefit pensions and the advent of pension freedoms, which enable choice, individuals have needed guidance and advice to help inform that choice.
"In the absence of financial education explaining the myriad of investment vehicles and what they are used for, people rely on advisers and personal investment managers to help them.
"Actions which undermine good practice serve only to tarnish the reputation of the sector and undermine trust.
"This acts as a block to the very investment that is important to individuals and families in providing for their future and underpinning their wellbeing, and to jobs and growth in the economy as a whole."
Ms Field said the solution to rebuild the lost trust did not lie with further regulation, but a better implementation of the existing rules.
She said: "There is an assumption in this that the right governance is in place.
"For the good of investors, after the deluge of rulemaking over the last few years we do not need further regulation, we need effective implementation of the rules we have."
Mr Woodford has since written to advisers with clients invested in the suspended Woodford Equity Income fund, urging them to stick with him when the fund reopens.
In the letter, Mr Woodford apologised for the fund being suspended and acknowledged it had happened because of his investment philosophy.
He said: "It is not a decision that has been taken lightly, and we fully understand the concern and frustration this will have caused within your client base. However, we believe that it is in the best interests of investors in the fund."
He said suspending the fund meant he could obtain better sale prices, as he would not be a forced seller of stock.
Last week (June 11), Hargreaves Lansdown, which waived its platform fee after dropping Woodford from its best buy list, asked Mr Woodford to follow suit while the fund remains suspended.
Responding to the calls to drop fees, Mr Woodford’s representative said: "The company will continue to charge the fee as the fund remains actively managed and we focus on repositioning the portfolio."