Hargreaves Lansdown is to scrap its controversial Wealth 50 best-buy list after only 16 months following prolonged criticism over how it picked funds and how slow it was to offload them following the Neil Woodford scandal.
It will replace it with a new Wealth Shortlist, chosen by an independent panel, and overhaul the way it promotes funds and investments to its 1.3 million customers.
The new list will also give greater prominence to ethical and passive funds. The Wealth 50 mainly backed traditional actively run portfolios.
Britain’s biggest broker, with more than £100bn of savers’ money, created the buylist in January 2019 as a slimmed down version of its former Wealth 150.
It instantly became embroiled in controversy after including funds that offered Hargreaves customers a discounted price. This was said to be for the benefit of investors, although it raised concerns that the firm was too close to fund groups and that funds could buy their way onto the hugely influential list rather than be selected on merit.
The list has never included Britain’s biggest fund, Fundsmith Equity, which manager Terry Smith said was due to his refusal to offer Hargreaves customers a discount. However, the broker has always denied this.
This came to the fore last year, when Hargreaves continued recommending funds run by former star manager Mr Woodford. This was despite his now-failed Equity Income fund’s poor return record and evident issues with stock selection and how many “unlisted” stocks were included.
The flagship fund was suspended in June, at which time it was taken off the Wealth 50. Investors are still waiting to receive all of their money back.
There was also concern regarding the firm’s popular multi-manager funds, which invested heavily in funds included on the Wealth 50 list. This also created a conflict of interest, as the firm was promoting funds and giving “independent” ratings while also a shareholder.
Since inception, the Wealth 50 has undergone several changes owing to poor performance, manager changes and having to remove two funds managed by Nick Train because he bought more shares in Hargreaves Lansdown.
Telegraph Money understands that under the new set up, the team that selects funds for the best-buy list and those in charge of the multi-manager funds will be separate and both have independent oversight. The fund shop also intends to hire new researchers, as well as two new independent directors.
Best-buy lists are hugely influential and the Woodford fund’s inclusion on Hargreaves’ list was a fundamental reason why hundreds of thousands of investors put billions into the now-defunct portfolio.
The power wielded by such lists has not gone unnoticed by regulators. Earlier this year, the Financial Conduct Authority (FCA, the City watchdog, called for more transparency and accountability from businesses that offer best-buy lists. It declined to comment on Hargreaves’ latest move.
Hargreaves Lansdown declined to comment.