The great savings rip-off

THERE is much about the Neil Woodford fiasco which is disturbing, not least the cosy, interconnecting relationships within his empire.

But what this saga illustrates is that firms which claim to have the best interests of ordinary savers at the forefront of all that they do, are out for themselves.

In spite of pressure from the regulator, the Financial Conduct Authority (FCA), Woodford has declined to waive management fees, despite the fact his flagship Equity Income Fund is into its second 28-day period of suspension with no sign of restoration.

The argument made by Woodford is that the costs of running the fund have gone on in spite of the suspension.

Indeed, they may even have increased because of the extra dealing costs as managers seek to liquidate the portfolio.

Reality is that Woodford and his cohorts can afford to take the pain. He and his colleague Craig Newman have extracted just short of £100m from the enterprise over five years. These over-generous payouts are not an accident. They are a result of profit margins which in the past have been close to 50pc.

Of course Woodford is not alone in raking in huge fees from savers. Hargreaves Lansdown (HL), which diverted almost a quarter of its

1.2m clients into Woodford funds, also has fat margins which at 65pc are beyond the dreams of most High Street financial groups. So while HL might provide a convenient service, it is doing savers no favours. Indeed, some might regard the combination of Woodford and Hargreaves fees as a rip-off. They are a good candidate for a Competition and Markets Authority inquiry.

The need for genuine trust in Britain’s savings industry is underlined by a survey from merchant bankers Close Brothers.

One-third of the workforce regards saving for retirement as one of their three biggest money concerns, with the numbers rising to 45pc for the over-55s. Some 74pc of women feel ill-prepared.

With do-it-yourself investment now much more common after the annuity reforms introduced by George Osborne, the Woodford affair strikes at the heart of belief in the savings. Top-to-bottom reforms are necessary if confidence is to be restored.

Audit failures

ANOTHER overpaid profession – which has betrayed the trust placed in it by corporations, shareholders and the public at large – is audit.

Deloitte has joined the list of miscreants for its faulty audit of Serco Geografix in 2011 and 2012. The firm has been fined £4.2m, and the regulator, the Financial Reporting Council (FRC), has severely reprimanded partner Helen George and fined her £97,500.

The fraud that Deloitte failed to spot at Serco is historic. But the list of poor audits by the Big Four is becoming legion, with the Co-op Bank, Carillion and Patisserie Valerie among the most egregious cases.

There has been no shortage of official reports into the profession’s shortcomings, the most searing of which came from Sir John Kingman who condemned the FRC as ‘a ramshackle house’. He called for its abolition and replacement by an Audit, Reporting and Governance Authority. Another report from the CMA recommended among other things for separation of the audit and consulting arms of the Big Four firms. Yet another probe by City grandee Sir Donald Brydon has been asked to review the quality and effectiveness of auditing.

It is admirable that the deep-seated problems and complacency of the industry are being recognised. But as with any such reviews, delays in implementation are an opportunity for lobbying by the big players, with the intention of watering down reforms. The next Tory administration should get its teeth into audit straight away.

It should reach beyond the CMA strictures and demand that the consulting arms of audit firms are not just separated, but floated off as separate entities so there can be no future conflicts of interest.

Greener bosses

SIR Paul Polman’s leadership of Unilever did not end on a high note after investors repulsed the effort to shift the group’s domicile to Rotterdam. He did succeed in making Unilever a much greener, more sustainable company, and that legacy lives on. He now waves a final goodbye, clutching a handsome cheque of £11.7m.

It looks as if it will be put to good use with the creation of a foundation called Imagine which will seek to drive climate goals among the world’s chief executives.

Maybe that is what Polman should have been doing all along.