Mike Barrett, director at the Lang Cat, said while it was right for veteran fund manager Train to call out the lack of definitive action by the City regulator over the Woodford Investment Management scandal, this was not the reason why the Bristol-headquartered Hargreaves Lansdown has seen its share price drop over recent weeks.
Barrett said that, from the customer's point of view, he was not sure how much of an issue Woodford is anymore.
He commented: “I think it's right to call out the FCA but it has been years since this thing went wrong," he said, adding that there were other things going on which have suppressed Hargreaves' share price, such as the crisis in Ukraine.
Barrett added: “For the majority of Hargreaves’ customers, Woodford [has caused] reputational damage at best, rather than anything direct.”
He was responding to Train’s comments during a seminar last week (May 18), when the co-founder of Lindsell Train said Hargreaves' share price had been impacted by the lack of action by the Financial Conduct Authority over the Woodford scandal.
I think it's right to call out the FCA but it has been years since this thing went wrong.Mike Barrett, Lang CatWhen asked at the Frostrow Capital seminar why Hargreaves' share price was so low, Train said: “Four years since the suspension of the Woodford fund, there still hasn’t been any official report…there needs to be a certainty that people who were participants in that need to be sued or exonerated.”
Train also hit out at Hargreaves Lansdown’s lack of investment in its own platform, staing: “For years we've been badgering Hargreaves to stop paying so much out in special dividends and to invest more in the functionality [of its investment platform]."
Woodford fallout
Hargreaves bore the brunt of the Woodford fallout as it continued to recommend the Woodford Equity Income fund in its best buy list right up to the day of its collapse, despite awareness of the portfolio’s liquidity issues.
The company's shares have fallen 37 per cent since the start of this year.
Earlier this month, the company reported a drop in the number of customers signing up for its services as well as a slump in inflows, which its chief executive blamed on rising inflation and the war in Ukraine.
New customer sign-ups were two-thirds lower in the first four months of this year compared with the same period in 2021, and net inflows fell 46 per cent to £2.5bn.
However, HL is not the only platform to be struggling with its share price. For example, since the start of the year, AJ Bell’s shares are down 31 per cent, Quilter’s share price has fallen 31 per cent, Abrdn has slumped 24 per cent, as at May 20.
Hargreaves Lansdown declined to comment, as has the FCA.
Graph: A number of platforms have seen their share price plummet since the start of the year
Source: FE Fundinfo
It is too early to say whether these company’s shares will continue to plummet, Barrett said, adding: “The biggest driver [for the drops], especially in the direct space, will be the cost of living crisis.
“[It depends on] just how much money people have got to invest and to save, and the most sensible thing to be cutting back on is your £200 a month to Hargreaves.”
Customers are also moving towards passive funds, which, as they are not actively managed, are much cheaper than most of the funds offered on Hargreaves' platform.
Meanwhile, passive fund house Vanguard has seen its UK clients soar 83 per cent in the year since it launched its advice proposition.
During 2021, according to the company, 183,400 people became clients of Vanguard Personal Investor, an increase from the 100,000 seen in the year before.
The company launched its advice service in April 2021 charging an 'all-inclusive' ongoing fee of 0.79 per cent.
Barrett said the full impact of the cost of living crisis on platforms and asset managers is not yet known.
“It is certainly a headwind which [asset managers] need to be aware of.
"Time will tell exactly how long it all goes.”
sally.hickey@ft.com
