Woodford Concerns

bowlhead99

ZingPowZing wrote: »

If you are curious, why not contact them and ask, then come back here and tell us whether you were right in how you think their business model works.

I did.
And HL said that HL investors in funds under their aegis incur charges

Investors in funds whether or not the funds are under HL's 'aegis' will incur charges.

I am not sure whether by under their 'aegis' you mean:
- those 13 funds which are managed by HL under the HL brand, or ;
- those c.50 funds that are run by third party managers but more heavily promoted to investors by HL (you have mentioned that you consider Woodford's funds to receive 'protection' by HL), or ;
- just generally mean all the thousands of funds which are made available to customers who use HL's platform to access investments?

Either way, it's clear that investors in funds managed by HL are exposed to management fees and running costs incurred by those funds. And of course, investors in funds not managed by HL are exposed to management fees and running costs incurred by those funds, which occurs whether or not the funds are promoted in a Wealth 50 list.

Whether investors choose to invest in HL managed funds, or third party funds promoted by HL on a marketing list, or third party funds offered by HL but not promoted in their marketing list - the platform fee paid by the investor to HL is the same. For the HL managed fund, HL will also be taking fees directly from the fund for the management work.

, but I don't know in which circumstances these would these are waived, if any; nor if there are incentives for fund managers to load up with HLs favourite investments.
I would imagine they do use that leverage, it helps to make sense of HL's perseverance with Woodford's brand that has impacted 1/4 million of their clients.
It's hard to imagine that they don't.

You imagine that there are incentives for third party fund managers to load up with funds promoted by HL? How would that work? Who would provide the incentive?

If e.g. Jupiter run a fund-of-funds and decide they'd like to invest a few tens or hundreds of millions in Woodford's equity income fund, they will go to Woodford and ask to subscribe to the institutional version of his fund. They won't go to HL with their credit card information and ask HL to get them access to a discounted share class designed for retail customers.

Whether or not WEIF is HL's 'favourite' fund to offer to retail investors, Jupiter (running a multi-manager product which is a rival to HL's own) is not going to rock up at HL's doorstep and say, "we like Woodford and others and so would like to load up with all your favourite investments, can you get us in with a discount please?"

AnotherJoe

ZingPowZing wrote: »

If you are curious, why not contact them and ask, then come back here and tell us whether you were right in how you think their business model works.

I did.
And HL said that HL investors in funds under their aegis incur charges, but I don't know in which circumstances these would these are waived, if any; nor if there are incentives for fund managers to load up with HLs favourite investments. <----what does that mean? Thats a non sequitur.
I would imagine they do use that leverage, it helps to make sense of HL's perseverance with Woodford's brand that has impacted 1/4 million of their clients.
It was a name that was attractive to people. They encouraged that attraction by saying it was good (via the wealth 50) and got people to invest in W with them instead of elsewhere. And probably it encouraged them to get off the fence and put their cash ina fund. Theres no commission on cash.

It's hard to imagine that they don't.

Only to you. You have let your annoyance at HL in one respect (CETV transfers) build up into a general conspiracy theory not only based on no evidence, but indeed when presented with evidence its not correct, you are burrowing into non existent rabbit holes looking for it somewhere.
HL gained through discounts simply by making their platform more attractive to people to hold funds there than with another broker, and thus gained from the total funds under management.
Its as simple as that.

• Fund managers are not paying transaction fees to HL,
• HL dont charge for clients moving from one fund to another,
• Clients dont pay extra hidden fees to a fund that HL receive as a kickback.

OldMusicGuy

AnotherJoe wrote: »

Only to you. You have let your annoyance at HL in one respect (CETV transfers) build up into a general conspiracy theory not only based on no evidence, but indeed when presented with evidence its not correct, you are burrowing into non existent rabbit holes looking for it somewhere.

Well said. ZPZ is completely missing the issue. Like I said in my post, the real issue IMO is HL's remorseless promotion of Woodford's funds through its "research" and marketing. It wasn't getting any form of direct kickback, but as an organisation with significant financial holdings in Woodford funds, it is highly questionable for their research function to maintain a strong positive view of Woodford which would definitely influence investors.

It influenced me in my decision to invest a significant amount in Woodford Income Focus (it wasn't the only reason). However, I got uncomfortable with its performance and Woodford's strategy so sold up at a small loss. However, HL's research kept saying they felt Woodford was great and I was surprised they remained so positive even when the concerns started to be raised. Then the head of their research function sold a load of his HL shares just weeks before the fund was gated and HL shares tanked as a result.

HL definitely should face some investigation and censure over its behaviour.

[Deleted User]

HL definitely should face some investigation and censure over its behaviour.

There was some interest:
https://citywire.co.uk/investment-trust-insider/news/fca-examines-whether-hargreaves-was-too-slow-to-drop-woodford/a1244166

That was June, when trading in Woodfrord funds was suspended. I'm not sure if that examination is now concluded.

Of the 1/4 million HL customers to be affected, my guess was that most did not consciously choose Woodford, but rather found they were invested in a slice of Woodford buried in the mix of holdings under control of their fund promoted on HL's site (like a sub-prime element). Furthermore, I wondered whether HL adopted the True Potential model of switching funds (inc Woodford's) in and out of their funds according to risk profile - charging transaction fees as they go. If HL have "significant financial holdings" in Woodford funds, it's understandable. Is it definitely the case that this did not happen?

I freely admit that I dislike Hargreaves Lansdown but didn't know that "the head of their research function sold a load of his HL shares just weeks before the fund was gated."

OldMusicGuy

ZingPowZing wrote: »

Of the 1/4 million HL customers to be affected, my guess was that most did not consciously choose Woodford, but rather found they were invested in a slice of Woodford buried in the mix of holdings under control of their fund promoted on HL's site (like a sub-prime element).

Personally I would doubt that but to be fair I don't know. The HL clients that were "unknowingly" invested in Woodford would be those that use the HL MM funds, which are a really, really bad choice because they are so expensive for what they are. Only really uneducated investors would choose those, but we have had people on here that have invested in them.

I suspect most would have picked the individual Woodford funds because they constantly featured in their "Wealth 100" list and also received relentless email campaigns from HL about the funds. For example, it was emails from HL that made me look seriously at the Woodford Income Focus fund at launch when I was looking to add an actively-managed income fund to my portfolio. Mark Dampier was consistently bullish about Woodford right up to the last minute before he cashed in his shares are conveniently retired. Then the brown stuff hit the fan.......

The lady that was featured in the documentary had invested in one of the Woodford funds and said she did "research". As she clearly used HL, I suspect that involved reading some of the advertorial from HL which is not advice but looks pretty much like it to the inexperienced person.

Malthusian

OldMusicGuy wrote: »

Then the head of their research function sold a load of his HL shares just weeks before the fund was gated and HL shares tanked as a result.

The insinuation that there is something dodgy about this relies on the idea that the problems in Woodford's fund and the effect it would have on HL shares if it was suspended weren't public knowledge.

This fails because it was public knowledge. Anyone with shares in HL had the same information that Dampier did. It wasn't a secret that Woodford had problems or that HL had heavily promoted the funds. If HL investors held onto their shares because they thought that Woodford would come good, or were taking a long-term view and expected HL to survive the Woodford scandal, or weren't paying attention, that's not Dampier's problem.

If Woodford had rung Dampier and told him that the fund was going to be suspended next week, that would have made it illegal insider trading (as Dampier would have known 100% that the fund would be gated while the market was pricing in a probability only). But there is no evidence that such a call ever took place. Nor would it have made any sense for Woodford to make such a call.

While HL shares tanked compared to the peak they hit in 2019, they are still at the price they were in early 2018 when everyone still thought Woodford was a genius.

Malthusian

OldMusicGuy wrote: »

Personally I would doubt that but to be fair I don't know. The HL clients that were "unknowingly" invested in Woodford would be those that use the HL MM funds, which are a really, really bad choice because they are so expensive for what they are. Only really uneducated investors would choose those, but we have had people on here that have invested in them.

Really uneducated investors and people who take financial advice from HL and thus haven't made a choice of any kind (other than to go along with the personal recommendation of their HL adviser). HL advisers recommend a ragbag of the HL MM funds for client portfolios.

coyrls

ZingPowZing wrote: »

HL definitely should face some investigation and censure over its behaviour.

There was some interest:
https://citywire.co.uk/investment-trust-insider/news/fca-examines-whether-hargreaves-was-too-slow-to-drop-woodford/a1244166

That was June, when trading in Woodfrord funds was suspended. I'm not sure if that examination is now concluded.

Of the 1/4 million HL customers to be affected, my guess was that most did not consciously choose Woodford, but rather found they were invested in a slice of Woodford buried in the mix of holdings under control of their fund promoted on HL's site (like a sub-prime element). Furthermore, I wondered whether HL adopted the True Potential model of switching funds (inc Woodford's) in and out of their funds according to risk profile - charging transaction fees as they go. If HL have "significant financial holdings" in Woodford funds, it's understandable. Is it definitely the case that this did not happen?

I freely admit that I dislike Hargreaves Lansdown but didn't know that "the head of their research function sold a load of his HL shares just weeks before the fund was gated."

https://en.wikipedia.org/wiki/Category_mistake

a property is ascribed to a thing that could not possibly have that property

bowlhead99

ZingPowZing wrote: »

Of the 1/4 million HL customers to be affected, my guess was that most did not consciously choose Woodford, but rather found they were invested in a slice of Woodford buried in the mix of holdings under control of their fund promoted on HL's site (like a sub-prime element).

Some will have consciously picked Woodford (likely helped towards that decision by positive messaging, but the decision was theirs) and others will have consciously picked an HL- managed multi-manager fund because they did not want to select the asset mix for themselves.

If you pick a multi manager fund you will get exposed to the tastes and preferences of the people doing the investment selection, for better or worse, and you know some of those choices can be poor and investments can go down as well as up etc etc. You can see what they invest in through the 'top 10 holdings' and the annual /semiannual reports showing a fuller list of holdings. HL are not the best multi manager products out there but obviously they will want to promote themselves as being good at it and say that the things in which they invest are good things in which to invest. Their advisors (who are not independent advisors) could only point you to their own products.

I wondered whether HL adopted the True Potential model of switching funds (inc Woodford's) in and out of their funds according to risk profile - charging transaction fees as they go. If HL have "significant financial holdings" in Woodford funds, it's understandable. Is it definitely the case that this did not happen?

. It isn't really understandable that they would keep changing their minds on which of their small number of funds they would like to hold Woodford in and keep passing WEIF from one to the other. It has been in MM Income & Growth for ages, but is not going to suddenly hop out of that one and be picked up by MM Strategic Bond or MM Asia& Emerging Markets.

And the assertion that they would be doing this just so they could keep 'charging transaction fees as they go' seems a little strange. If they decided they would churn their portfolio and transfer it from one of their funds to another, the fact that it's Woodford doesn't really make a difference. If they exited Woodford and bought something else, or exited something else and bought something else, presumably the transaction-based charges imposed by HL (if indeed such charges exist when they reregister a holding), would be the same (and included within the relevant fee disclosure).

OldMusicGuy

Malthusian wrote: »

Really uneducated investors and people who take financial advice from HL and thus haven't made a choice of any kind (other than to go along with the personal recommendation of their HL adviser). HL advisers recommend a ragbag of the HL MM funds for client portfolios.

That would be me then, as I took financial advice from HL :rotfl:. However, as previously discussed, this was about 5/6 years ago and the HL MM funds were not recommended to me by the HL FA. I think this may have changed based on recent posts from some of the IFAs on here, and that the HL MM funds are more frequently recommended by HL FAs.

However, the percentage of HL clients taking financial advice from HL is, I would imagine, pretty low. Where I used to work HL provided our group SIPP and I was the only one of my colleagues that took financial advice from HL. Several said "I just pick a few funds from the Wealth 100 list and then I can't go wrong". That probably sums up the average HL client's investment approach.