When victims of financial wrongdoing are identified, justice is rarely fair – and invariably far too late in coming. You don’t need to scratch your head too hard to remember examples.
Think Equitable Life, think Waspi (Women against state pension inequality) and of course think those sub-postmasters and postmistresses still waiting to be compensated for being wrongly accused of financial impropriety by the bullying Post Office.
We should also add Woodford to the list. In the past few days, the first redress payments have been made to 300,000 investors who lost money as a result of the near meltdown of investment fund Woodford Equity Income in 2019 – a £4billion investment vehicle badly mismanaged at the death by Neil Woodford, once considered the Messi of the fund management industry. How the mighty fall.
Although this £230 million of redress – agreed between the City regulator and Link Fund Solutions (the fund’s at-sleep overseer) – is viewed by most recipients (and experts) as inadequate, there is a further horrible twist in the tale.
Some investors have now been told a big chunk of this compensation could be swallowed up in claims management fees, insurance costs and related taxes. Understandably, they feel rather sore. Justice? Fat chance.
Harcus Parker was one of the main claims management companies which encouraged disaffected Woodford investors to join a group action against Link.
In the wake of the break-up of Woodford Equity Income, it argued with great merit that Link had failed in its duty to safeguard the financial interests of investors. Link, it said, had allowed Woodford to invest in illiquid assets unbecoming of a fund designed to deliver income for investors.
Link, it added, also failed to ensure that the fund had sufficient liquid assets to meet redemption requests from investors. Indeed, it was a multi-million pound redemption request from an institutional investor that brought the house of cards collapsing around Woodford’s head. Aggrieved investors signed up to Harcus Parker’s group action in their thousands – while other companies launched similar actions.
Yet they were all stopped in their tracks in February this year when the High Court approved a redress scheme thrashed out between the regulator and Link. A scheme binding on all investors – knocking into touch all the work done by the claims companies. The bulk of this redress is now finding itself into the pockets of investors and although the scheme was approved by Woodford investors, the consensus view is that it is ‘settlement on the cheap’.
Yet for participants in the Harcus Parker action, it’s settlement on the cheap – with a sting in the tale. In its recent letter to those who joined its now defunct group action, Harcus Parker gives worked examples of how the redress will be whittled away by fees (35 per cent), VAT, insurance costs and insurance premium tax (IPT). It doesn’t make for easy reading – an estimated 60 per cent of the initial redress paid will have to be handed back once Harcus Parker’s invoices start landing in clients’ email inboxes.
Those who have received the mailing are unimpressed. ‘I am appalled,’ says Ian Forbes, a pharmaceutical consultant from just outside London.
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‘At least, Neil Woodford in his warped way tried to make money for investors and failed. Harcus promised us proper compensation, did not deliver and now wants a slice of a redress payment that had nothing to do with them.’
Charlie, a teacher, is similarly unhappy. ‘Harcus Parker? More like Hocus-Pocus,’ he says. ‘They are not quite the knights in shining armour that I thought they were.’
Late last week, Harcus Parker said it was striving to get the overall charges lowered. It also said that as further compensation payments were made, it should increase the percentage return that clients receive.
It added that claimants contractually agreed to any redress being counted as claim proceeds. It also said the redress scheme was a ‘bad deal’ for Woodford investors and undermined consumer protection by blocking a path to compensation via the Financial Services Compensation Scheme.
If investors had been able to pursue this route, Harcus Parker said they would have received up to five times more money.
Given the paucity of the redress scheme and the fact that some investors will still walk away from this messy investment episode with overall losses in the region of 40 per cent, there is only one conclusion to draw.
Justice is rarely fair.
Andrea’s small but vital Philips Trust victory
Although she might not be in the same league as Alan Bates – the sub-postmaster who brought the Post Office Horizons scandal bubbling to the surface – the admirable Andrea Hindley is not frightened to take on the financial establishment. She has broad shoulders.
Andrea is one of the linchpins behind a campaign to get financial justice for those 2,300 people who have lost money as a result of being introduced to unregulated will writing and trust fund services by their local building society.
Many of those who took up the offer ultimately ended up with their home and investments sitting inside a trust controlled by Philips Trust Corporation, a wrong ‘un (the police are investigating) and now in administration.
While customers have since got back ownership of their homes, their investments are worth peanuts and administrator Kroll is trying to salvage what remains (at some considerable expense). It’s a sorry affair.
Last month, the regulator (the Financial Conduct Authority) washed its hands of the matter. After much procrastination, it said it could not hold the building societies responsible for the actions of Philips Trust because it did not exist at the time they recommended customers to use the services of the Will Writing Company and Family Trust Corporation (both, part of Estate Planning Group).
Philips Trust only came on the scene when the Will Writing Company went bust and customers transferred assets from Family to Philips Trust.
Like all those who have lost a big chunk of their life savings, the FCA’s decision has dismayed Andrea (in her case, it was her parents who were the victims).
Yet she isn’t giving up the fight. A few days ago, she got Kroll to force the FCA to amend its statement on Philips Trust.
Originally, it said: ‘Our understanding, supported by the administrators [Kroll], is that it was the actions of Philips Trust, not the building societies, which caused customers to experience investment losses.’
Later on, it said that some of the building societies were ‘engaged with the administrators’ over ‘some possible support to affected customer on a voluntary basis’.
Yet Kroll had no contact with the FCA ahead of the statement’s publication. As a result, Andrea successfully got Kroll to get the FCA to remove ‘supported by the administrators’ and ‘engaged 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 its feet to the fire until those building societies involved in this dreadful affair are held to account for their actions.
She is right to do so. After all, without the involvement of these societies, for which they received undisclosed commission payments, there would be no Philips Trust scandal.
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