Acres of newsprint have been devoted to reporting the spectacular demise of Neil Woodford’s investment empire. Much of the outraged editorial has centred on questions like: what was blue chip advisory firm Hargreaves Lansdown doing still recommending Woodford funds to its clients when the problems were blatantly obvious? Or, why was Mr Woodford’s organisation allowed to carry on taking fees from a fund that was gated to investors who were prevented from taking out their own money? And where was our ‘champion of the public’ regulator, the FCA, while all this was going on?
All are perfectly fair points to highlight by a sanctimonious media that has done more than its fair share to promote Mr Woodford as some kind of genius. In true ‘hero to zero’ fashion, his pitiless mates in the press have belatedly put him to the sword.
However, the burning question for me is at what point does taking money under false pretences turn from being unsavoury to criminal? Is this not fraud by any other name?
The scale of this episode has been put into perspective by the FT whose analysis estimated that Neil Woodford and his business partner took out £20m by way of dividends over the last financial year as the crisis was unfolding. Prior to that, during the ‘good years’ between 2014 and 2018, they received £98m in dividends. One of the experts quoted by the FT was quoted as saying: “It shouldn’t be possible for directors to profit so lavishly from such disastrous performance”. Quite.
The serious point is that it is one thing taking handsome fees when things are going well, but quite another when poor judgement leads to clients (in this case loyal investors) suffering the misery of losing a large chunk of their money. It is a timely reminder that investing in shares listed on the Stock Exchange is speculative, but that investing shares in unlisted companies is a positive minefield because liquidity can vanish overnight – even if you are a so-called wizard.
But this is not about gloating or cheap schadenfreude. If the FCA really wants to protect private investors from themselves or the siren calls of their advisers, they should be more even-handed in their treatment of purveyors of all investment products and services, including P2P loans.
