Woodford's £5.9 million fine is a drop in the ocean
- TEBI
- Aug 5
- 5 min read
Updated: 7 days ago
After more than six years of waiting, the Financial Conduct Authority has finally imposed its penalty on Neil Woodford and his investment management company. The headline figures sound substantial: £5.9 million for Woodford personally, £40 million for Woodford Investment Management, and a ban preventing him from holding senior manager roles or managing retail investors' money.
But when measured against the scale of wealth destruction Woodford caused and the fees he extracted along the way, this punishment amounts to little more than a slap on the wrist.
Woodford, the fee extraction machine
The numbers tell a devastating story. By my own estimates, between 2014 and 2021, Woodford Investment Management generated fees of at least £250 million. Even during the fund's suspension, WIM reportedly collected £100,000 in fees every day.
Woodford himself owned 65% of the firm, which made him by far the biggest beneficiary of this fee income. The company paid out substantial dividends during its peak years — £36.5 million in 2017/18 and £13.8 million in 2018/19 — consistent with the enormous fee revenue flowing through the business.
Against this backdrop of personal enrichment, a £5.9 million fine represents less than 2.5% of the estimated fee income from the venture. For someone who accumulated such vast wealth from managing other people's money, this penalty is genuinely a drop in the ocean.
Regulatory condemnation
The FCA has been unequivocal in its criticism. Steve Smart, the regulator's joint executive director of enforcement and market oversight, said: "Being a leader in financial services comes with responsibilities as well as profile. Mr Woodford simply doesn't accept he had any role in managing the liquidity of the fund. The very minimum investors should expect is those managing their money make sensible decisions and take their senior role seriously. Neither Neil Woodford nor Woodford Investment Management did so, putting at risk the money people had entrusted them with."
This damning assessment — particularly Woodford's refusal to accept responsibility for the liquidity crisis that brought down his fund — underscores the inadequacy of the financial penalty. If the breach of trust was this serious, if the failure of duty was this complete, why is the punishment so disproportionately small relative to what he gained?
Six years too late
The timing of this enforcement action is itself scandalous. It has taken more than six years since the Woodford Equity Income Fund's collapse to bring him to book. Many of the investors affected have died in that time, never seeing justice done.
The delay becomes even more troubling when you consider that some of us were warning about the risks from the very beginning. From the day WEIF launched, it was clear this wasn't the one-way bet that many commentators were portraying it as. I made the point many times on this blog. Yet the financial media largely bought into the "star manager" narrative, and commentators like me who questioned this were criticised on social media by Woodford devotees convinced of his exceptional abilities.
Inadequate by historical standards
While the combined £46 million penalty may be one of the largest UK asset management enforcement actions, context matters. The FCA has shown it can extract far more meaningful financial consequences when it chooses to prioritise restitution over fines.
When Aviva Investors was fined £17.6 million in 2015 for conflicts and controls failings, it also paid approximately £132 million in compensation to funds. Link Fund Solutions, the authorised corporate director of Woodford's fund, wasn't fined at all - but only because it agreed to a £230 million redress scheme for investors.
The real financial pain in modern regulatory enforcement comes through compensation payments, not fines. Measured purely on the penalty imposed on the individual responsible, Woodford has escaped remarkably lightly.
The unfinished business
Perhaps most troubling is what this enforcement action doesn't address. There remains no sign of formal FCA action against Hargreaves Lansdown, Woodford's cheerleader-in-chief throughout the fund's existence. HL promoted Woodford aggressively, featured him prominently on their "best buy" lists, and benefited substantially from his funds' popularity.
The platform's role in channeling retail money toward Woodford while the risks were mounting deserves serious regulatory scrutiny. Yet HL continues to operate without sanction, despite being instrumental in the scale of retail participation that made this disaster so damaging.
Investor recovery progress
Yes, investors are recovering more of their money than initially feared. Capital distributions from asset sales have returned approximately £2.5 billion, with the first tranche of the FCA-backed redress scheme adding another £185.7 million in March 2024. If the full redress amount is paid and remaining assets are realized near current valuations, total recovery could approach 80% of the fund's value at suspension.
But this recovery has come despite Woodford's actions, not because of them. The money is being returned through the painstaking work of liquidators and administrators, not through any acceptance of responsibility or voluntary restitution from the man who created the mess.
An unrepentant exit?
While I believe it would be in everyone's interests for Woodford to withdraw gracefully from the financial services scene, his words and actions suggest he has no intention of doing so. His appeal against the FCA's provisional decision notices to the Upper Tribunal indicates a man still unwilling to accept responsibility for his failures.
This unrepentant stance makes the lenient penalty even more problematic. A truly deterrent fine might have encouraged reflection and accountability. Instead, we have a penalty that barely dents his accumulated wealth and a banned individual who shows no signs of accepting the seriousness of his failings.
The bottom line
The Woodford case represents one of the most significant retail investment disasters in recent UK history. Thousands of investors lost substantial sums, many saw their retirement plans destroyed, and some died waiting for justice. The man at the centre of it all extracted more than £160 million in fees and has been fined less than 4% of that amount.
Six years after the fund's collapse, this penalty feels less like justice and more like the regulatory equivalent of filing the paperwork. Woodford's investors deserved better protection when they invested, faster action when things went wrong and more meaningful consequences for those responsible.
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