The Financial Conduct Authority has launched a formal investigation into Bristol-based investment platform Hargreaves Lansdown, examining its fund manager selection processes and fee disclosure practices. The probe centres on whether the firm adequately managed conflicts of interest when promoting certain funds to its vast customer base.
This development comes after years of scrutiny surrounding how investment platforms generate revenue through fund manager relationships. The FCA's investigation specifically focuses on the period between February 2014 and April 2020, a six-year span during which Hargreaves Lansdown's popularity among retail investors grew substantially.
Background and Context
The investigation follows the platform's previous involvement with Neil Woodford's collapsed Equity Income fund, which was prominently featured on Hargreaves Lansdown's recommended list until its suspension in 2019. While the current probe isn't directly linked to the Woodford scandal, it examines similar concerns about how investment platforms select and promote funds.
Key areas under scrutiny include:
- Transparency of fee arrangements with fund managers
- Adequacy of conflict of interest management
- Disclosure practices regarding financial benefits received
- Fairness of fund selection processes
Company Response and Market Impact
Hargreaves Lansdown has stated it will cooperate fully with the investigation while emphasising its commitment to serving clients' best interests. The company noted that it has consistently evolved its disclosure practices and conflict management frameworks over the years in question.
Market analysts suggest that the investigation could lead to broader changes in how investment platforms operate, particularly regarding how they generate revenue from fund managers while maintaining impartial advice to customers.
The outcome of this investigation could have significant implications for the entire wealth management sector, potentially leading to stricter regulations around fee transparency and conflict of interest management across the industry.
