With a hat-trick of senior figures set to leave Hargreaves Lansdown, one can’t help wondering how the investment company is going to revive its reputation.
Prolific analyst and commentator Laith Khalaf started the trend last week, and yesterday saw the firm’s proposition manager and chair of its investment committee reveal that they were also stepping down.
Whether these departures are in any way related to Hargreaves’ involvement in one of the biggest scandals facing the industry is up for debate, but what’s clear is that even the UK’s most popular investment platform isn’t immune from the old saying that what goes up must come down.
Hargreaves’ share price has felt this pain over recent months, and is still down 21 per cent from its record high in May. While it has cushioned its fall by waiving fees for customers directly invested in Neil Woodford’s still-suspended flagship fund, a lot is hanging in the balance.
For Hargreaves’ customers, August has certainly been a mixed bag.
Earlier this month, it came to light that customers’ “loyalty bonuses” would be taxed as income, after the company lost an appeal against HMRC. Hargreaves may have published a healthy set of results, but it has also come under fire for levying high charges on children’s savings. And while the big bosses finally agreed to forgo their bonuses in a bid to appease angry clients, for some, this announcement was too little too late.
Even though chief executive Chris Hill has apologised for the recent problems around Woodford, he caveated this by saying the “shortcomings of one fund should not detract from the benefits of favourite fund lists like the Wealth 50”.
There is nothing like a dose of denial to make an apology taste bittersweet, because the truth is that the company’s best-buy list needs a shake-up. Rather than treating Woodford like a freak one-off, Hargreaves should see it as a warning sign.
Critics continue to question the methodology behind these lists and the inclusion of fund managers with whom Hargreaves has a cosy relationship.
The company would benefit from clarifying how the lists are compiled and ensuring that the selection process is as independent, objective and transparent as possible, ideally conducted at arm’s length from the rest of the business. It also needs to take ownership of the role it played in recent mistakes, and explain how it will stop them from happening again.
This isn’t just for Hargreaves’ sake either. Trust in the entire investment industry has been severely damaged since the Woodford scandal, and Hargreaves needs to do more to help restore that faith.