Vanguard soars ahead of its competitors

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This week saw the launch of yet another DIY platform in the UK market but this one is a game-changer for the D2C platform industry. Vanguard, one of the world’s largest fund groups  known for its low-cost passive funds will be competing head on with established players like Hargreaves Lansdown and Fidelity.  

Investors get access to a range of its own blended, index or active funds. Blended funds (the LifeStrategy range) are competitively priced at 0.22% while the most expensive actively managed funds are 0.6%. Add to this, the very low cost annual admin fee of 0.15% (capped at £375) and the platform starts to look very attractive indeed.

Nuts and bolts

Investors can open an ISA, a JISA and a general investment account. They don’t offer a SIPP, but there’s one in the pipeline for 2018. Only Vanguard funds are available and they include the blended (LifeStrategy and Target Retirement ranges), trackers and ETFs, and four actively managed funds.

There is a minimum one-off investment of £500 or £100 for monthly contributions. The annual platform fee is 0.15% for the first £250,000 and free above that, so it is essentially capped at £375 a year. Fund charges are on top of the platform fee and are not included in the calculator.

We  added Vanguard to the calculator  (there are now 32 DIY platforms  to compare) and we ran some numbers using our online calculator to see how they stack up:

Scenario 1: £20,000 in an ISA, trading funds 4 times a year.

Vanguard take stop spot with an annual fee of £30. There’s a cluster of platforms with an all-in fee of £50 while Hargreaves Lansdown appears in 19th place with an annual cost of £90.  The most expensive platform for this scenario is the Share Centre with fees of £214.

Scenario 2: Total investments of £50,000 in a GIA with £20,000 in exchanged-traded instruments. 10 trades a year in both funds and exchange-traded instruments.

Vanguard is the cheapest in this scenario (because it doesn’t apply any dealing funds for ETFs), followed by Fidelity and Cavendish Online.  The most expensive platform for this scenario is Selftrade at £560 per year.

Vanguard is cheap for GIAs

Functionality and user experience

It took no time to set up an account.  The  site is well laid out and the user journey is simple, straightforward and painless.  The platform is easy to navigate, fully automated and paperless (you can upload  documents through the platform) with none of the faff and delay that you get on elsewhere. For example, we added a bank account and then changed it, and the authentication process (by mobile and email), was painless.  Vanguard also makes it easy to transfer in your Vanguard holdings from elsewhere.

There is a nice little ‘investing education’ section which covers the funds and the wrappers and gives access to guidance and tools. It also contains a section on their ‘latest thoughts’.  The fund section is particularly good since investors can toggle between overview or detailed information on every fund. Fees, strategy, number of stocks etc are clearly set out.

Our view

Vanguard has launched a simple and low-cost proposition for investors who are comfortable making their own decisions with the help of the guidance and tools on offer. The upside is that the proposition is cheap as chips and gives investors direct access to Vanguard funds without the need of going through other platforms. The downside is that only Vanguard funds are available, so if variety is your thing, this might not be the platform for you.  Equally, if you’re looking to set up a pension, you’ll need to wait until next year for the Sipp.

The list of available funds is comparatively short so there is no danger of overwhelming investors with too much choice. Overall there are 15 blended funds: five LifeStrategy, nine are Target Retirement and one global balanced actively managed fund. There are also 32 equity and 18 fixed income funds, most of which are passive or ETFs.

All in all a nice little site.

Click here to run your own comparisons and here for our platform overview.

To find out more about the cost of investing, watch our video.