Fund giant fined £2m for rip-off fees

Henderson accused of ‘hanging savers out to dry’

A BLUE-CHIP fund manager has been fined £2m and accused of treating thousands of ordinary savers with contempt after overcharging them for almost five years while waiving fees for corporate clients.

In the latest case to shame the investment industry, the Financial Conduct Authority revealed how Henderson raked in £1.8m in excess management charges from two funds while effectively leaving them to run themselves as trackers.

After making a number of fund managers redundant, the London firm decided in November 2011 to reduce active management of its Japan and North American funds.

It immediately informed its institutional investors, such as pension funds and big corporate clients, and waived their fees.

But it kept around 4,700 retail investors in the dark. They continued to be charged an annual fee of between 0.75pc and 1.5pc – several times what they would have been in a tracker fund

The FCA said the two funds at the centre of the scandal had effectively become ‘closet trackers’ – where they blindly mirrored movements in the stock market – while continuing to levy expensive fund management fees.

The watchdog calculated that these investors paid £1.78m more in fees than they would have done if their money had been tied up in a passive tracker fund.

Announcing it had fined Henderson

£1.9m, Mark Steward, executive director of enforcement and market oversight at the FCA, said: ‘The FCA requires firms to treat all its customers fairly, not just some customers. In this case, retail investors paid fees for active investment management they did not receive. The matter is aggravated by the length of time Henderson took to identify the harm being caused to the retail investors and to fix it.’

The alarm was not raised at Henderson until February 2016. An internal report concluded that retail customers should be compensated. They finally received a letter in September 2016 in which Henderson – now called Janus Henderson after a merger – said it should have warned five years earlier of the changes. They were also told they were eligible for a refund of the amount they were overcharged and that fees would be cut.

James Daley, founder of personal finance website Fairer Finance, said: ‘This shows contempt for retail investors. Somebody took the decision very deliberately to hang retail investors out to dry. They knew that they could not get away with it with institutional investors.

‘Fund managers have a duty of care to be up-front and honest. This is another sad news story from a sector which is having all consumer trust drain out of it.’ The scandal emerges after tens of thousands of investors in Neil Woodford’s flagship Equity Income fund were forced to continue to pay fees despite being unable to access their money. The fund, which is being wound up, has generated £8.8m in fees since it was suspended in June.

A spokesman for Janus Henderson said: ‘We accept the FCA’s findings and the financial penalty and have co- operated fully throughout the process.

‘Affected clients had already been separately contacted and fully compensated. Since the incident, the group has improved its systems and controls.’