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Expert Corporate Governance Service (ECGS)
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Hargreaves Lansdown - AGM 10 October 2019

Hargreaves Lansdown (HL) plc offers a direct to investor investment service.

One of the company’s Wealth 50 recommended funds – LF Woodford Equity Income was suspended in June 2019 after becoming overwhelmed by customer withdrawals. This has left £1.6bn of HL’ client investments trapped until at least December (1.7% of Hargreaves Lansdown’s total Assets Under Administration). Around one out of four HL’ customers is affected.

The company waived fees for nearly 300,000 customers locked into Woodford’s suspended fund which will cost more than £2m in revenues. The Executives decided to give up their annual bonuses in response.

HL has been criticized for promoting Woodford’s Equity Income fund despite its prolonged underperformance and growing concerns over its liquidity profile since at least 2018. According to the FT, some point to Hargreaves’ decision to keep the Fund on its Wealth 50 list when it was reviewed on January 2019, at the same time as it wrestled a further discount of 10 basis points from the manager.

This case raises many questions about potential conflicts of interest in relationships between brokers and fund managers. HL does not receive any payment from funds for inclusion in its best-buy list. However, several commercial factors have the potential to influence these decisions, especially negotiated fee discounts.

We consider that the Company and notably its Investment Committee lack prudence and diligence in assessing the risks of this Fund. We understand the decision of Jayne Styles, the Chair of the Investment Committee, who does not stand for re-election. We consider the Investment Committee accountable for damages caused. We consider the Investment Committee accountable for damages caused.

 

Underlying
Hargreaves Lansdown

Hargreaves Lansdown is a direct to investor investment service administering investments for clients. Co. provides a platform through which clients can buy, hold and sell their investments within tax efficient wrappers such as individual savings accounts and self-invested personal pensions, or fund and share accounts. Co. acts as an intermediary between its clients and the fund managers or registrars of investments and can also provide advice.

Provider
Proxinvest
Proxinvest

Founded in 1995, Proxinvest is an independent proxy firm supporting the engagement and proxy analysis processes of investors. Proxinvest mission is to analyse corporate governance practices and resolutions proposed at general meetings of listed firms.

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Proxinvest has been a pioneer and champion of good corporate governance and has grown into a recognised expert in the field.

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As Managing Partner of Expert Corprate Governance Service Ltd (ECGS), Proxinvest has built a large network of corporate governance experts to support clients in corporate governance analysis worldwide. 

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Expert Corporate Governance Service (ECGS)

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