Woodford > LF Equity Income Fund > Class actions

[Deleted User]

The headline figures in the public domain concerning the numbers affected by Woodford are "over 300,000" in total
https://www.thisismoney.co.uk/money/news/article-7874655/Fresh-blow-Woodford-savers-Payouts-gated-fund-delayed.html
of which "over 290,000" are Hargreaves Lansdown customers
https://financefeeds.com/peter-hargreaves-stands-tall-publicly-attacks-woodford-withdrawal-chaos/
That is a startling correlation. 
If pushing a product beneficial to oneself under the guise of impartial analysis was unlawful, there wouldn't be much left of social media, nor the financial services industry for the matter; so the damage to HL may be just reputational. 

bowlhead99

ZingPowZing said:

That is a startling correlation. 

To add some colour, HL's letter to the Treasury select committee said that about a quarter of their clients (by quantity, not by value) had some exposure to Woodford when it got suspended - either directly invested in the fund or indirectly through their multimanager portfolio products. Fewer than half of those had gone along with the 'Wealth 50' marketing list and decided to hold it direct - about 158k clients instead had it as part of the managed portfolio products where HL decide what to allocate to whom as part of the portfolio plan.

On average, the people who followed the hype train and 'Wealth 150 list' to directly hold the fund on HL's platform had about £8k invested, with half of them having under £4k and a fifth having under £1k, so some will have had quite a bit more.  The average exposure of the clients who held via HL's multimanager funds was lower (about £3k each).

Overall HL client exposure was about £1.6bn, less than a couple of percent of its client assets, and this compared to the over £3bn of total Woodford Equity Income investors. Clearly there were plenty of HL customers who didn't buy the hype (over 98% of HL client money wasn't in Woodford) and there were plenty of people who weren't HL customers buying the fund (from the above, £2bn+ of the reported £3.7bn assets at suspension would have been a mix of institutional money and people using fund platforms other than HL).  I think about two thirds (£2.5bn of the total £3.7bn) has been distributed back to investors so far.

ZingPowZing said:

If pushing a product beneficial to oneself under the guise of impartial analysis was unlawful, there wouldn't be much left of social media, nor the financial services industry for the matter; so the damage to HL may be just reputational. 

The damage will probably just be reputational (and has pretty much already been done, as they've already been dragged through the press at whatever opportunity over the last year). They've continued to add customer numbers, as they reported 1.2m clients in their Treasury letter in mid June 2019 and £97.8bn of assets, while the Q3 2020 figures were £106.9bn of assets and 1.4bn active clients.  There will no doubt be some further ongoing reputational damage as law firms taking on these 'class action' type claims will lash out to throw mud at all parties in a hope of seeing what will stick, but the 'market' has already passed judgement on HL's methods and prospects as this isn't new news.

[Deleted User]

Hargreaves Lansdown had a vested interest in any customer buying a Woodford fund rather than selling it, particularly after it started to go wrong, because they had a huge stake in Woodford that would have been increasing as a % even as the stable assets became disposals to meet demand from sellers. A vicious circle damaging to the interest of HL itself. 

“The problem was Hargreaves Lansdown had too much with him” said Mr Hargreaves, referring to Neil Woodford.

“The clients have been stuffed in this horrible Woodford fund. I’ve drawn this big dividend. Nothing to do with me and I’ve been very successful. What do they want me to do? Give the dividend back to the unit holders?” said Mr Hargreaves in defence of the £64 million dividend he received from the company that he is entitled to as he is a 32% shareholder.

Interesting to note from bowlhead's figures that, although many individual Hargreaves Lansdown clients held a relatively modest investment in Woodford, the dividend drawn by Mr Hargreaves was equivalent to £200 from each of them.

Moe_The_Bartender

What does any of this have to do with Peter Hargreaves? WEI had only been running for a year when he stepped down as a director of HL.

Sailtheworld

Acacia seemed to have done OK out of the Woodford fire sale. They paid $282m for a load of Woodford biotech stocks in June (Woodford fund fell 20% when it happened). They're up $152m in five months.

Woodford investors shot themselves in the foot multiple times. Not least they turned themselves into forced sellers.

bowlhead99

ZingPowZing said:

What do they want me to do? Give the dividend back to the unit holders?” said Mr Hargreaves in defence of the £64 million dividend he received from the company that he is entitled to as he is a 32% shareholder.

Interesting to note from bowlhead's figures that, although many individual Hargreaves Lansdown clients held a relatively modest investment in Woodford, the dividend drawn by Mr Hargreaves was equivalent to £200 from each of them.

Moe_The_Bartender said:

What does any of this have to do with Peter Hargreaves? WEI had only been running for a year when he stepped down as a director of HL.

It is pretty meaningless Moe -  simply the politics of envy.

Hargreaves was a major owner in the business that he founded forty years ago, so takes a slice of its annual profits. Its clients pay money for services - whether the individual customers make money or lose money, the fund manager or stockbroker firm is designed to make money, although one expects that collectively over the years, the customers will make a lot more money than the platform company, and so are willing to pay for its services.

Some of the profits made by HL will be extracted as dividend by its owners, including Peter. Its clients had £1.62bn of exposure to Woodford when HL wrote to the Treasury Select Committee, under 1.7% of total assets under administration.  So largely, HL's profits (and by extension, the dividend paid to Mr Hargreaves as his share of the profits) don't come from Woodford-invested money.  As part of the letter response to the TSC in June 2019, HL confirmed that platform fee income from Woodford Equity income was 1.2% of their revenue for the part year to April 2019 having been 1.6% of their income for the previous calendar year.

We know that of the 130k HL investors who had a direct exposure to the fund in June 2019, a fifth of them had under £1k in it at that time, and the 160k investors using the HL multimanager funds-of-funds had on average even less exposure than the direct investors. So, plenty of people with small amounts.

To say, "the dividend drawn by Mr Hargreaves was equivalent to £200 from each of them" implying that these small ticket customers had somehow each paid over £200 out of their pocket as a profit share to Mr Hargreaves, and presumably even more money to the other HL owners who owned the other two-thirds of HL,  is simply a nonsense. Even if a £1k investor and a £15k investor had contributed £400 of profits between them, it wouldn't be true that 'each of them' have contributed £200, because the fees relate to the amount of assets serviced. And of course to even imply that those two such investors had contributed £400 of profit between them is meaningless, because over 98% of the revenue and profits made by Hargreaves didn't come from Woodford assets, so you can't divide the dividend taken by the amount of money (or number of individual accounts) invested in Woodford and get some sort of sensible figure that means anything. It's an apples to oranges comparison.

The analogy that HL has paid a couple of hundred million of profit while HL customers have invested a couple of billion in Woodford and tlost some percentage of that due to poor investment performance and therefore the profit should be recovered from HL's owners and given to that particular group of HL customers using the reasoning 'because they have paid Peter Hargreaves £200 each and want it back' is fanciful.  It would be like saying that Apple has made $21bn in sales of iPads in 2019 while Apple shareholders took $14bn in dividend, so anyone who bought an iPad has unwittingly paid 2/3rds of the purchase price of their iPad straight into the pocket of the shareholders. The reality is that most of the $14bn dividend was funded from the $240bn of sales that came from other types of Apple goods and services, even if the number that happened to get paid out to the shareholders s the same order of magnitude as the iPad sales.

coyrls

ZingPowZing said:

Hargreaves Lansdown had a vested interest in any customer buying a Woodford fund rather than selling it, particularly after it started to go wrong, because they had a huge stake in Woodford that would have been increasing as a % even as the stable assets became disposals to meet demand from sellers. A vicious circle damaging to the interest of HL itself. 

“The problem was Hargreaves Lansdown had too much with him” said Mr Hargreaves, referring to Neil Woodford.

“The clients have been stuffed in this horrible Woodford fund. I’ve drawn this big dividend. Nothing to do with me and I’ve been very successful. What do they want me to do? Give the dividend back to the unit holders?” said Mr Hargreaves in defence of the £64 million dividend he received from the company that he is entitled to as he is a 32% shareholder.

Interesting to note from bowlhead's figures that, although many individual Hargreaves Lansdown clients held a relatively modest investment in Woodford, the dividend drawn by Mr Hargreaves was equivalent to £200 from each of them.

Are you under the impression that Mr Hargreaves drew his big dividend from Woodford in some way?  He did not, the dividend was from his shares in Hargreaves Lansdown.

[Deleted User]

coyrls said:

ZingPowZing said:

Hargreaves Lansdown had a vested interest in any customer buying a Woodford fund rather than selling it, particularly after it started to go wrong, because they had a huge stake in Woodford that would have been increasing as a % even as the stable assets became disposals to meet demand from sellers. A vicious circle damaging to the interest of HL itself. 

“The problem was Hargreaves Lansdown had too much with him” said Mr Hargreaves, referring to Neil Woodford.

“The clients have been stuffed in this horrible Woodford fund. I’ve drawn this big dividend. Nothing to do with me and I’ve been very successful. What do they want me to do? Give the dividend back to the unit holders?” said Mr Hargreaves in defence of the £64 million dividend he received from the company that he is entitled to as he is a 32% shareholder.

Interesting to note from bowlhead's figures that, although many individual Hargreaves Lansdown clients held a relatively modest investment in Woodford, the dividend drawn by Mr Hargreaves was equivalent to £200 from each of them.

Are you under the impression that Mr Hargreaves drew his big dividend from Woodford in some way?  He did not, the dividend was from his shares in Hargreaves Lansdown.

No, I'm drawing a comparison between Hargreaves Lansdown's dividend to Peter Hargreaves and HL clients' exposure to losses through Woodford funds for which HL were the overwhelmingly dominant broker.

Moe_The_Bartender

ZingPowZing said:

coyrls said:

ZingPowZing said:

Hargreaves Lansdown had a vested interest in any customer buying a Woodford fund rather than selling it, particularly after it started to go wrong, because they had a huge stake in Woodford that would have been increasing as a % even as the stable assets became disposals to meet demand from sellers. A vicious circle damaging to the interest of HL itself. 

“The problem was Hargreaves Lansdown had too much with him” said Mr Hargreaves, referring to Neil Woodford.

“The clients have been stuffed in this horrible Woodford fund. I’ve drawn this big dividend. Nothing to do with me and I’ve been very successful. What do they want me to do? Give the dividend back to the unit holders?” said Mr Hargreaves in defence of the £64 million dividend he received from the company that he is entitled to as he is a 32% shareholder.

Interesting to note from bowlhead's figures that, although many individual Hargreaves Lansdown clients held a relatively modest investment in Woodford, the dividend drawn by Mr Hargreaves was equivalent to £200 from each of them.

Are you under the impression that Mr Hargreaves drew his big dividend from Woodford in some way?  He did not, the dividend was from his shares in Hargreaves Lansdown.

No, I'm drawing a comparison between Hargreaves Lansdown's dividend to Peter Hargreaves and HL clients' exposure to losses through Woodford funds for which HL were the overwhelmingly dominant broker.

There is no comparison to be made. Bowlhead explained why.

[Deleted User]

Moe_The_Bartender said:

ZingPowZing said:

coyrls said:

ZingPowZing said:

Hargreaves Lansdown had a vested interest in any customer buying a Woodford fund rather than selling it, particularly after it started to go wrong, because they had a huge stake in Woodford that would have been increasing as a % even as the stable assets became disposals to meet demand from sellers. A vicious circle damaging to the interest of HL itself. 

“The problem was Hargreaves Lansdown had too much with him” said Mr Hargreaves, referring to Neil Woodford.

“The clients have been stuffed in this horrible Woodford fund. I’ve drawn this big dividend. Nothing to do with me and I’ve been very successful. What do they want me to do? Give the dividend back to the unit holders?” said Mr Hargreaves in defence of the £64 million dividend he received from the company that he is entitled to as he is a 32% shareholder.

Interesting to note from bowlhead's figures that, although many individual Hargreaves Lansdown clients held a relatively modest investment in Woodford, the dividend drawn by Mr Hargreaves was equivalent to £200 from each of them.

Are you under the impression that Mr Hargreaves drew his big dividend from Woodford in some way?  He did not, the dividend was from his shares in Hargreaves Lansdown.

No, I'm drawing a comparison between Hargreaves Lansdown's dividend to Peter Hargreaves and HL clients' exposure to losses through Woodford funds for which HL were the overwhelmingly dominant broker.

There is no comparison to be made. Bowlhead explained why.

Disagree. 
I don't buy the narrative that Hargreaves Lansdown were unaware of Woodford funds spiralling down into trouble and don't believe that HL's 32% owner was ignorant of the situation either.
Plus, it is not altogether for you and Bowlhead to decide whether Hargreaves Lansdown have a case to answer. Their relationship with Woodford funds has been framed this way:

“The scale of Hargreaves Lansdown’s investment in Neil Woodford’s funds is staggering – it has, broadly speaking, been responsible for around one-third of cash inflows.

“Clearly, many brokers will not have the same scale, but where the relationship between broker and fund is so entrenched, and the fund’s performance becomes reliant on the broker’s continued support, it will become increasingly difficult for the broker to meet its obligations to act in its clients’ best interests.

“If a broker could not, if required, safely redeem its clients’ holdings in full, can that obligation really be met?”

 “The concerning levels of unlisted assets within Woodford Equity Income had been apparent for some time and the impact upon liquidity was entirely foreseeable – certain brokers had taken action but Hargreaves Lansdown had not,”