Eye of the storm: Neil Woodford’s fund lost money for thousands of investors now seeking justice
When victims of financial misconduct are identified, justice is rarely fair – and always comes far too late. You don’t have to scratch your head too hard to remember examples.
Think of Equitable Life, think of Waspi (Women Against Inequality in State Pensions) and of course think of those sub-postmasters and postmistresses who are still waiting for compensation because they have been wrongly accused of financial impropriety by the bullying Post Office.
We should add Woodford to the list too. In recent days, the first reparations have been made to 300,000 investors who lost money following the near collapse of investment fund Woodford Equity Income in 2019 – a £4 billion investment vehicle that was mismanaged following the death of Neil Woodford, once regarded as the Messi of the fund management industry. How the mighty fall.
While this £230 million in compensation – agreed between the city’s regulator and Link Fund Solutions (the fund’s dormant regulator) – is considered inadequate by most recipients (and experts), there’s another terrible twist in the story .
Some investors have now been told that much of this compensation could be eaten up in claims management fees, insurance costs and related taxes. Understandably, they feel quite sore. Justice? Little chance.
Harcus Parker was one of the main claims management companies that encouraged disgruntled Woodford investors to join a class action against Link.
In the aftermath of the collapse of Woodford Equity Income, it argued with great merit that Link had failed in its duty to protect the financial interests of investors. Link, the report said, had allowed Woodford to invest in illiquid assets that were inappropriate for a fund intended to provide income to investors.
Link, it added, also failed to ensure the fund had sufficient liquid assets to meet investor redemption requests. It was a multi-million pound redemption request from an institutional investor that caused the house of cards around Woodford’s head to collapse. Injured investors signed up in the thousands to join the Harcus Parker class action – while other companies launched similar actions.
Yet they were all stopped in February this year when the Supreme Court approved an indemnity plan between the regulator and Link. An arrangement that is binding on all investors and that reflects all the work of the claim companies. Most of this compensation now ends up in the pockets of investors and although the plan was approved by Woodford investors, the consensus view is that it is a ‘cheap settlement’.
But for participants in the Harcus Parker promotion, it’s a cheap arrangement – with a catch. In his recent letter to those who joined the now-defunct class action, Harcus Parker provides detailed examples of how damages will be removed through fees (35 percent), VAT, insurance costs and insurance premium tax (IPT). It doesn’t make for easy reading: An estimated 60 percent of the initial damages paid will have to be returned once Harcus Parker’s invoices hit customers’ email inboxes.
Those who received the mailing are not impressed. “I’m shocked,” said Ian Forbes, a pharmaceutical consultant from just outside London.
“At least Neil Woodford tried to make money for investors in his crooked way, but it failed. Harcus promised us proper compensation but has not delivered and now wants a portion of the compensation that has nothing to do with them.”
Charlie, a teacher, is also unhappy. ‘Harcus Parker? More like Hocus-Pocus,” he says. “They’re not quite the knights in shining armor I thought they were.”
Late last week, Harcus Parker said it was seeking to reduce the overall charge. It also said that as further compensation payments are made, this should increase the rate of return customers receive.
It added that claimants contractually agreed that any damages awarded would be counted as claim proceeds. It also said the recovery scheme was a ‘bad deal’ for Woodford investors and undermined consumer protection by blocking the route to compensation through the Financial Services Compensation Scheme.
If investors had been able to go this route, they would have received up to five times more money, according to Harcus Parker.
Given the scarcity of recovery schemes and the fact that some investors will still exit this messy investment episode with total losses of around 40 percent, there is only one conclusion to be drawn.
Justice is rarely fair.
Andrea’s small but vital Philips Trust victory
While she may not be in the same category as Alan Bates – the sub-postmaster who exposed the Post Office Horizons scandal – the admirable Andrea Hindley isn’t afraid to take on the financial establishment. She has broad shoulders.
Andrea is one of the key figures behind a campaign to achieve financial justice for the 2,300 people who have lost money due to the introduction of unregulated wills and trust fund services by their local building society.
Many of those who took up the offer ended up with their homes and investments in a trust controlled by Philips Trust Corporation, a wrong ‘un (the police are investigating) and which is now in administration.
Although clients have since regained ownership of their homes, their investments are worth a dime, and property manager Kroll is trying to salvage what’s left (at considerable expense). It’s a shame.
Last month, the regulator (the Financial Conduct Authority) dismissed the case. After much delay, she said that she could not hold the building societies responsible for the actions of Philips Trust because it did not exist at the time they recommended that clients use the services of the Will Writing Company and Family Trust Corporation (both part of Estate Plan Group).
Philips Trust only came onto the scene when the Will Writing Company went bankrupt and customers transferred assets from Family to Philips Trust.
Like anyone who has lost a large part of their savings, the FCA’s decision has left Andrea stunned (in her case, it was her parents who were the victims).
Yet she does not give up the fight. A few days ago she got Kroll to force the FCA to change its statement about Philips Trust.
It originally said: ‘Our understanding, supported by the administrators (Kroll), is that it was the actions of Philips Trust, and not the building societies, that caused customers to suffer investment losses.’
It was later said that some building societies had ‘engaged in discussions with administrators’ about ‘some possible support to the affected customer on a voluntary basis’.
Yet Kroll had no contact with the FCA prior to the release of the statement. As a result, Andrea successfully got Kroll to have the FCA remove “supported by the administrators” and “involved with the administrators” from the statement.
A small victory, yes. But Andrea, a retired publican from Devon, is determined not to let the FCA wash its hands of the scandal. She will continue to hold her feet to the fire until the building societies involved in this terrible case are held accountable for their actions.
She’s right to do that. Without the involvement of these associations, for which they received secret commission payments, there would be no Philips Trust scandal.
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