March saw the launch of a brilliant new book from Owen Walker. He is an award-winning business journalist who writes about European banks for the Financial Times. Previously he was the asset management correspondent there. It was his reporting on Neil Woodford’s downfall that led to the FT winning Business and Finance Team of the Year at the 2019 Society of Editors’ Press Awards. Neil Woodford was a highly respected fund manager for 15 years, but when he went rogue the industry didn’t call him out.
He has now written a fascinating account of those times in his new book, Built on a Lie: The Rise and Fall of Neil Woodford and the Fate of Middle England’s Money. He depicts how an environment of complacency, deceit and incompetence allowed Woodford to squander investors’ money on dubious schemes, covering up the results with a combination of financial jiggery-pokery and blatant lies.
A failed investment empire
It’s reported that Woodford and his business partner took £11.5 million from their failed investment empire, and carried on charging fees, even when the funds had been suspended. Meanwhile, many investors lost life-changing sums of money.
How did he get away with it? How did two of this country’s best-known investment advisers, Hargreaves Lansdown and St James’s Place, become caught up in the debacle?
The area of investments and banking is highly regulated – and with good reason. Unfortunately, Neil Woodford thought the rules didn’t apply to him and bent and broke them as he felt fit. It is a fascinating, if slightly scary read!
How can you ensure your investments are safe?
There are three things we can all learn from the Woodford scandal:
Neil wasn’t honest with his clients about where their money was going. When things started to go wrong, he tried to cover his tracks, making the situation even worse. At Wealth Matters everything we do is open and honest. There are no dodgy deals, just a totally transparent approach and simple, straightforward investment advice that you can trust. Of course, everything we do is regulated by the Financial Conduct Authority.
Conflicts of interest & lack of competence
Mark Dampier, Hargreaves Lansdown’s Research Director was the architect of the fund platform’s buy list. He thought Woodford was brilliant so did a deal with him. However, when performance started to deteriorate, he maintained his funds in the buy list. This move was inappropriate to client risk. Any good IFA would have spotted this years before things started to unwind. One thing we’re really clear about at Wealth Matters is that there should never be a conflict of interest in any of our dealings with other companies.
A robust investment process is crucial
We use a tried and tested method to ensure your money is kept safe with us. It is the Wealth Matters Risk-Assessed Performance System, or WRAPS™, a structured asset allocation model that is tailored to your risk profile. It lets you diversify your investment in different asset classes, in different parts of the world and different sectors, all the time receiving regular reviews and feedback. When it comes to choosing investment partners, we always carry out due diligence to ensure everything is completely watertight.
A fair price for a fair service
Warren Buffett famously said, “Price is what you pay, value is what you get”, and he is absolutely right. However, we do understand that clients want a clear idea of what services they have to pay for – and how much they are likely to cost.
At Wealth Matters, we believe that if you want an excellent service, it won’t be free. It’s not realistic to get state of the art financial advice with cutting edge technology for nothing but equally, you don’t want to be paying over the odds for it.
That’s why from 1 June 2021, we’re introducing our Price Promise. It’s a pledge that wherever we can, we and our key partners will look at reducing fees, while still striving to provide the very best in support.
What does this mean in practice?
A recent survey from The Financial Conduct Authority shows the average IFA charges an initial fee of 2.4% and an ongoing fee of 1.9% per annum. These firms are significantly less qualified than us. We are accredited by the CISI (Chartered Institute of Securities and Investment) and committed to ongoing development.
Our initial fee ranges from 0% to 1% and our ongoing fees from 0.87% to 1.58%. This is significantly less than the fees above. This includes fees to Wealth Matters, the costs for holding your money on the Transact/Nucleus platform and the cost for our funds.
We also promise that wherever we can, we will look to reduce our costs and lower the target where discounts on bands occur. We partner with Transact, Vanguard and Dimensional, as our key fund providers and they too try to reduce costs where possible.
Passing on the saving
Vanguard is a mutual company. Wherever they can, they reduce fees on their funds, which they have done quite a few times. Transact and Dimensional are public limited companies, but they also look to reduce their costs wherever they can. They have actively reduced their costs several times since we have worked with them.
We are starting this Price Promise by reducing the point at which initial fees fall from 1% to 0.50% by reducing the band tier change from £1,000,000 to £800,000 in Funds Under Management (FUM).
Isn’t it nice to get some good news for a change?