Panorama 21/10/19

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  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
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    Thrugelmir wrote: »
    What financial incentives were offered, if any?
    I'm sure none will be found.
    Once HL grew in size should it of scrapped it's Wealth List. Focusing instead on regulated specific customer advice.

    Yes and no. Leave advice up to advisors. Platforms should provide account services and not be in the business of "suggesting" what people should buy other than in the broadest asset allocation terms. Putting some funds at the equivalent of eye level in a supermarket might cause people to miss the perfectly good, but less expensive, and maybe more appropriate, product on the bottom shelf.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    bostonerimus wrote: »
    I'm sure none will be found.



    Just had a look. To be included on the published list. Fund managers are required to provide discounted fees on the funds to HL clients. No direct remuneration , but a clear incentive to buy the fund via HL for retail investors. Cosy relationship.
  • itwasntme001
    itwasntme001 Posts: 1,145 Forumite
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    Thrugelmir wrote: »
    Just had a look. To be included on the published list. Fund managers are required to provide discounted fees on the funds to HL clients. No direct remuneration , but a clear incentive to buy the fund via HL for retail investors. Cosy relationship.


    It could still be direct - all depends on the definition. HL are clearly incentivizing retail investors to use their platform and invest in funds like Woodford, like you said. But i am sure HL have got their lawyers to validate the fact that this incentive would not put them in any danger of litigation.
  • bd10
    bd10 Posts: 347 Forumite
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    While the revelations speak for themselves, I feel one thing was really missing: the admission that investors need to do their homework. I got the impression that the individuals portrayed as well as the finance writer for the daily mail claiming he knew the city and how things work (well obviously he doesn't) invested on the back of Woodford's reputation. But if reputation is in the name only it is meaningless. Fund platforms have the key investor documents with one mouse click. No need to hunt the docs down online. All done for us. But we need to read them just like a mortgage offer letter or a credit car agreement. This was just like over 10 years back when Lehman structured products were all the rage. Good returns but who understood what's in it?
    Or the lady who bought the fund for a few grand based on recommendation by a friend. That's just naive with an element of greed. Did she check what the holdings were or what the strategy is? I bet not.
    The question I would have had for the chap from Kent Council: did they ever check the annual investor reports or quizz the fund manager when the fund kept underperforming? Not doing so is careless if not negligent and now to cry foul? Well, if they would have acted earlier the council would not be in such a mess. I manage my own funds which are minuscule compared to council funds but I regularly review all holdings and underperformers get kicked out. Buying and holding and hoping for the best with other peoples' money is just not acceptable.

    Yes, things were going very wrong at Woodford's and now many thousand unable to sell, that's a bad state of affairs and redemption risks I have never seen mentioned on retail platforms.

    A more balanced report would have identified not just the dodgy dealings at Woodford's shop but also emphasised how important it is that savers and investors need to do their homework to make an informed choice. Lacking the latter makes this Panorama episode less helpful to prevent a repeat in the future.
  • [Deleted User]
    [Deleted User] Posts: 0 Newbie
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    But surely the Hargreaves Lansdown proposition is that they do make those checks on behalf of the unsophisticated/uninterested/better things to do investor.
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
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    This is why 90% of the time when people ask for investing advice I say VLSxxx. Most people had no business owning Woodford, and I'd also say that for Fundsmith, LT or anything with EM in the title as well.

    Investing is easy to do right and also easy to do incorrectly, the mistake people make is allowing things to become too complicated by buying lots of stuff they don't understand and usually don't need.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • itwasntme001
    itwasntme001 Posts: 1,145 Forumite
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    bd10 wrote: »
    While the revelations speak for themselves, I feel one thing was really missing: the admission that investors need to do their homework. I got the impression that the individuals portrayed as well as the finance writer for the daily mail claiming he knew the city and how things work (well obviously he doesn't) invested on the back of Woodford's reputation. But if reputation is in the name only it is meaningless. Fund platforms have the key investor documents with one mouse click. No need to hunt the docs down online. All done for us. But we need to read them just like a mortgage offer letter or a credit car agreement. This was just like over 10 years back when Lehman structured products were all the rage. Good returns but who understood what's in it?
    Or the lady who bought the fund for a few grand based on recommendation by a friend. That's just naive with an element of greed. Did she check what the holdings were or what the strategy is? I bet not.
    The question I would have had for the chap from Kent Council: did they ever check the annual investor reports or quizz the fund manager when the fund kept underperforming? Not doing so is careless if not negligent and now to cry foul? Well, if they would have acted earlier the council would not be in such a mess. I manage my own funds which are minuscule compared to council funds but I regularly review all holdings and underperformers get kicked out. Buying and holding and hoping for the best with other peoples' money is just not acceptable.

    Yes, things were going very wrong at Woodford's and now many thousand unable to sell, that's a bad state of affairs and redemption risks I have never seen mentioned on retail platforms.

    A more balanced report would have identified not just the dodgy dealings at Woodford's shop but also emphasised how important it is that savers and investors need to do their homework to make an informed choice. Lacking the latter makes this Panorama episode less helpful to prevent a repeat in the future.


    You assume all those invested in his fund were smart enough to have realised. You are wrong. A lot are not smart enough to put it bluntly. Whilst it is easy to find the companies that woodford invested in, it is not so easy to determine that they were a load of rubbish. The Link reports do not help as well as it just validates the valuations that are clearly too high.


    So probably the best option investors have is to get out when they see some underperformance but most dont think like that, many would prefer to hope for the best rather then lock in a loss. Others may be convinced by their IFAs to hold tight. And the rest would not even monitor that closely.


    What woodford did was not just picking bad stocks. He made a complete U turn in strategy and made highly dangerous bets that went completely against his main objective. Not to mention the fact that Woodford was a bit too cosy with the same companies he invested in as well as the influence he had with valuers. I have seen this in person myself. When someone wants to sell something hard to value, they cosy up with valuers to convince them to value it at a higher price then it is actually worth. It happens a lot in the finance industry (particularly if it is related to real estate). I have seen it so many times that i think genuinely there should be investigations done. Similar to the subprime crisis when rating agencies got it so wrong.


    But regulators are always asleep, not interested or turn a blind eye.
  • itwasntme001
    itwasntme001 Posts: 1,145 Forumite
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    bostonerimus wrote: »
    This is why 90% of the time when people ask for investing advice I say VLSxxx. Most people had no business owning Woodford, and I'd also say that for Fundsmith, LT or anything with EM in the title as well.

    Investing is easy to do right and also easy to do incorrectly, the mistake people make is allowing things to become too complicated by buying lots of stuff they don't understand and usually don't need.


    I mostly agree with you but i do think for EM and small/midcap exposure it makes sense to buy a managed fund. For developed large cap passive is probably better in the long term.


    I certainly think given the Woodford debacle, people should look at all their OEIC investments and look very carefully to see how illiquid the underlying investments are. I would say anything with direct property (not liquid REITs), hy corporate bonds, some small/mid cap funds, some ig bond funds, anything else too exotic, should probably get sold asap.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    bostonerimus wrote: »
    This is why 90% of the time when people ask for investing advice I say VLSxxx.

    Are you qualified to offer advice? ;)
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
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    Thrugelmir wrote: »
    Are you qualified to offer advice? ;)

    Not qualified, but definitely certified or maybe certifiable.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
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