Woodford savers blocked from moving away from Hargreaves Lansdown – as they can’t transfer frozen fund
Savers in Neil Woodford’s beleaguered Equity Income fund have been blocked from moving their money away from Hargreaves Lansdown.
Many tried to switch after the fund supermarket was criticised for backing Woodford’s funds right up until he froze withdrawals.
But they have been prevented from doing so, it is claimed, and will now continue to pay fees both to Woodford and Hargreaves.
Frozen: Many savers tried to switch fund supermarkets after Hargreaves was criticised for backing Neil Woodford’s funds right up until he froze withdrawals
Woodford is using the time to rebalance the fund and offload illiquid assets.
He gave himself ‘at least’ 28 days, but it emerged it may take until Christmas to recalibrate the investments.
In the meantime he is continuing to take £100,000 a day in management fees from customers who can’t access their cash.
Richard Wilson, of investment platform Interactive Investor, said that several customers had contacted his firm unable to transfer their account away from Hargreaves.
In a letter to the Treasury Committee, Wilson said: ‘Investors who hold Woodford Equity Income fund have both hands tied behind their back – they can neither exit the fund, nor transfer assets to platforms that might better suit their needs. This is unacceptable.’
Transport firm Eddie Stobart Logistics admits an accounting error will wipe £1.6million off profits, in another blow for Woodford, who has a 23 per cent stake.
Why are customers facing difficulty transferring the Woodford fund?
This is all down to ‘share classes’, which are simply different versions of the same fund, writes This is Money. We explain how they work and how to decode the abbreviations tagged onto fund names here.
Hargreaves customers hold an exclusive ‘Z share class’ version of the Woodford fund, because it negotiated a special cut-rate deal with his fund management firm.
The ‘Z’ version of Woodford’s fund is cheaper than the ‘C share class’ version offered by rival fund brokers. However, because it is exclusive to Hargreaves it cannot be held on those other platforms, and must be converted to ‘C’ when people transfer out.
Carrying out such conversions is normal practice when customers switch in or out of Hargreaves, and would usually pose no problem.
But because Woodford’s fund is currently frozen, the share registrar Link which handles and records such transactions is not allowing conversions between the Z and C share classes.
People who want to transfer a portfolio that includes Woodford’s fund onto the Hargreaves platform can do so – but they must continue holding the C version of it and can’t take advantage of the cheaper fee by converting to the Z version.
But people who want to transfer away from Hargreaves are stymied because the Z share class can’t be held anywhere else, and Link currently won’t convert it to C.
Link Fund Solutions said: ‘Our overwhelming priority is to protect and serve the best interests of investors.
‘Financial Conduct Authority regulations stipulate that no dealing is allowed during the suspension, which places significant obstacles to enabling a customer to move from one investment platform to another where it would mean a change of share class.
‘Link Fund Solutions had already enabled investors to transfer between platforms when no such change in share class is needed.
‘After lengthy discussion with Woodford, transfers between platforms across all share classes, but not share class conversions, will now be allowed with immediate effect (10th July 2019). This supports investors by providing them with the freedom to move their investments between platforms.’ Link has more information for investors here.
Will anything change after the Woodford fiasco?
Neil Woodford, his business, its associates and the entire fund management industry have been thrown under the spotlight, but ultimately, will all this fuss and fiasco make any difference?
On this week’s podcast, Simon Lambert, Georgie Frost and Alex Sebastian look at what next for the investment world, what has changed and whether once the noise dies down it will simply be back to business as usual.