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Neil Woodford investors hit transfer hurdles


The pains of Woodford go on. More than two years after the suspension of fund manager Neil Woodford’s Equity Income Fund, some retail investors have found that their much-devalued holdings are blocking access to other parts of their portfolios.

It is all in the small print. After the freezing of the Woodford fund in June 2019, some wealth advisory clients wanted to switch investment firms, often in anger at the way the Woodford EIF investments had turned out.

But they soon found it wasn’t that easy. A few firms prevented the sale and transfer of some client portfolios, often worth hundreds of thousands of pounds — if they included as little as a few hundred pounds worth of Woodford stock.

They have done so specifically for investments held in individual savings accounts (Isas), where the contracts are different from those covering other kinds of account. Under these contracts they have been allowed to block the liquidation of a whole portfolio if any part of it is illiquid, as has been the case with the frozen EIF stock.

The investors can instead transfer the portfolio as shares. But this isn’t always convenient: for example, when they want to move holdings to a firm that will receive cash.

Thousands out of the 300,000-plus investors who had money in the frozen fund are potentially affected, though many of these people have not tested their arrangements by trying to switch their portfolios.

Quilter, is one firm with restrictive rules, as one FT reader, semi-retired at the age of 78, found out. He first tried in January last year to transfer the cash value of his and his wife’s stocks and shares Isa portfolios worth £640,000.

Quilter initially refused because their investments included £656 in the Woodford Equity Income Fund — around 0.1 per cent of their portfolios.

They had fallen foul of their contract terms, which state that Old Mutual Wealth, which was taken over by Quilter after they opened their accounts, does not allow “partial transfers” in cash for its Isas.

Quilter would allow the clients to transfer their holdings as shares. But the couple want to transfer their Isas to Netwealth, another wealth manager, which requires cash investments.

Government rules for Isas, the established tax-free accounts, state that money invested during the current tax year must be transferred in full. However, “for money you invested in previous years, you can choose to transfer all or part of your savings”. 

Investors are therefore allowed to make partial transfers. But the regulations do not compel managers and platforms to complete such transfers.

The Quilter couple took their case to the Financial Ombudsman Service (FOS) as recommended by Quilter. They failed. The FOS said: “Our service can’t compel a business to change their commercial practice.” It said only the regulator, the Financial Conduct Authority, could act.

Quilter refused to budge for months but eventually relented. It initially told its clients: “We have no control over a fund manager’s choice to suspend a fund and therefore cannot be held responsible for this preventing you from transferring your accounts.” 

But after FT Money called, the firm said: “While we are not in control of third-party fund suspensions, we apologise to these customers given this process will have been stressful for them. We have offered the customers a goodwill solution that will enable them to complete their transfers and bring this matter to a close.”

A goodwill solution is nice, but not as good as a rule change. A rival wealth manager says the transfer problem is shared by other investors. “The Woodford fund was in most people’s portfolios,” he said. “In theory, if only one penny was left in Woodford, no transfer could take place under the platform rules.”

Fidelity International is another firm which normally bans partial transfers out. But it’s making an exception in the case of the Woodford fund — now often called the LF Equity Income Fund, as it is managed by the Link Group.

Fidelity says: “Our general policy does not enable for partial transfers out, however we have allowances in place for scenarios such as fund suspensions as in the case of LF Equity Income Fund) so we can support affected customers’ best interests.”

The transfer problem is shrinking because the Woodford fund is being liquidated and the stranded investors’ holdings are falling. The final payments should take place next year. But that’s no consolation for the often older investors who want to rearrange their portfolios now. The FCA could perhaps help things along with a warning nudge to the advisers.

Lindsay Cook is co-author of “Money Fight Club: Saving Money One Punch at a Time”, published by Harriman House. If you have a problem for the Money Mentor, email

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