The investment group Hargreaves Lansdown will lose more than £2m in revenues after waiving fees for nearly 300,000 customers locked in Neil Woodford’s suspended flagship fund.
The costs were revealed in Hargreaves’ annual results, which showed that it was giving up about £360,000 of revenue a month by temporarily scrapping fees for clients who had invested through its platform in the Woodford Equity Income Fund.
With Woodford’s fund likely to be gated until at least December, Hargreaves is on track to lose out on £2.1m of client fees over a six-month period.
Hargreaves decided to waive fees for 291,520 of its clients – around one in four of its total customer base – who were affected by his decision to halt withdrawals on 3 June from the £3.7bn fund. Woodford suspended trading in the fund after struggling to fulfil a surge in withdrawal requests sparked by a series of bad market bets.
The gating of the fund has left £1.6bn of Hargreaves’ client investments trapped for months.
Hargreaves has been criticised for promoting Woodford’s flagship fund on its Wealth 50 list of favourite investments, despite concerns about the size of his investments in smaller and unlisted companies, which are harder to sell. Hargreaves said it was also aware of the fund’s underperformance but kept it on the list in the hope it would bounce back.
The chief executive, Chris Hill, said: “I have apologised to all clients who have been impacted by the recent problems around the Woodford Equity Income Fund, because we all share their disappointment and frustration.
“In these difficult times we recognise the financial and personal impact the gating of the fund has had on them. Our priority is to support them, keep them informed and ensure that the fund reopens as soon as is practicable.”
Hill confirmed that he would be giving up his annual bonus over the debacle. He previously said he would not take his payout until the Woodford fund reopened but has now decided to forgo it completely. His bonus last year totalled £1.7m.
Hargreaves’ finance chief, Philip Johnson, whose bonus was £997,000 last year, will also scrap his 2019 bonus. It is understood that Mark Dampier, the research director, and Lee Gardhouse, the chief investment officer, whose pay is not disclosed, will also lose their bonuses.
Hargreaves shares rose 12% to £20.50 on Thursday, making the company the top performer on the FTSE 100. It came as the platform reported a 5% rise in pre-tax profit to £306m for the full year. Revenue jumped 7% to £480m compared with £448m a year earlier.
