Hargreaves Lansdown (HL) needs to "grow up" and "be more mature" with processes around compiling its Wealth 50 list of best-buy investments, according to its investor Baillie Gifford's Milena Mileva.
HL has come under fire for its recommendation of Neil Woodford's eponymous equity income fund, which was suspended in June after a liquidity crisis before its administrator said it would now be wound up.
The UK's largest retail investment supermarket was criticised for advertising the fund to its numerous investors, even as its performance worsened, causing the regulatory spotlight - and an uncertain future - to shine on platform best-buy lists.
HL is the largest holding in Mileva's £270m Baillie Gifford UK Growth Trust, at 4.4%, while the trust has 1% in competitor AJ Bell, which runs a favourite funds list.
Mileva said she would not want Hargreaves to stop giving its clients recommendations, but she does "want them to be a lot more mature and careful about how they do it".
"Best-buy lists clearly play a role in a market where there is a lack of affordable advice. It is a question of how they do it in relation to their best-buy lists and their multi-manager funds," Mileva explained.
Mileva added HL needs to understand the potential for conflicts of interest, although she said that, as a fund manager, she had "some sympathy" for what she called "an error in judgement" in their continued backing of Woodford.
"We do not get all our stocks right and they do not get all their funds right," she said.
Clearly, the episode was not the firm's "finest hour", said Mileva. However, the manager does not think it "undermines the case" for continuing to hold the shares. In fact, "the way they responded to the fund's gating was supportive of the case for Hargreaves".
"The case for Hargreaves is that their great strength is the fact they have always been very customer-focused, particularly relative to the competition," explained Mileva.
"The way they handled [the Woodford fallout] was supportive of that thesis; I do not think it was a contradiction.
"Everything from waiving their fees straight away to Chris [Hill, CEO] and Philip [Johnson, CFO] both waiving substantial bonuses, beefing up their customer service without any hesitation to the way they have been very thoughtful about follow-on communications.
"All of those things were good. I think they reacted as best as I personally could have hoped they would react."
Mileva added that the financial performance of the business "has continued to be very strong" even in the aftermath of the Woodford scandal and despite wider market conditions being tricky.
Over time, Hargreaves' ambition to become a wealth management platform and tap into a £2trn market gives them added opportunity, she said.
Since Baillie Gifford took over the running of the trust from Schroders in June 2018, it has lost 3.7% compared to its AIC UK All Companies sector average loss of 2.9%.
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