What Are Vanguard Doing?

Summary

Vanguard's upcoming fee changes, effective January 31, 2025, will introduce a £4 monthly fee for investors with portfolios under £32,000, significantly affecting smaller investors. This change raises concerns about fairness, as smaller investors now face higher fees that could limit their investment growth. While Vanguard has been a champion of low-cost investing, the new fees and poor customer service in the UK have led many to seek alternative platforms. The video explores alternative investment platforms like InvestEngine, AJ Bell, and Fidelity, urging investors to remain agile and choose the best value providers.

Takeaways

• 😀 Vanguard will introduce a £4 monthly minimum fee from January 2025 for investors with less than £32,000 in total across SIP, ISAs, and general investment accounts.
• 😀 The fee increase disproportionately affects small investors, especially those with portfolios around £1,000, making it harder for them to see real growth in their investments.
• 😀 The timing of the announcement, just before Christmas, has been criticized as unfair, as it gives investors little time to make changes before the fees are implemented.
• 😀 Vanguard’s service quality, especially in the UK, has been under scrutiny due to complaints and compensation payouts, raising concerns about the value for money.
• 😀 Smaller investors, who may have only £100 or less to invest each month, are particularly impacted, and their ability to grow their investments is severely limited by the fee hikes.
• 😀 The fee increase raises concerns about Vanguard moving away from its founding principles of low-cost investing and targeting smaller portfolios in favor of larger investors or managed services.
• 😀 There are concerns that Vanguard’s focus on increasing fees for passive investors while lowering them for managed services signals a shift away from its original value proposition.
• 😀 Alternatives to Vanguard include platforms like InvestEngine, AJ Bell, HL, Fidelity, and Trading 212, which offer more competitive fees and better flexibility for smaller investors.
• 😀 InvestEngine, in particular, offers the lowest platform fees on the market and is now accepting Vanguard transfers, making it an attractive option for those seeking lower-cost alternatives.
• 😀 Investors with smaller portfolios should regularly review their platforms to ensure they are getting the best value, as the investment platform landscape is constantly evolving.
• 😀 The speaker personally invested in Vanguard and has been a long-time advocate, but due to the new fee structure, they no longer recommend Vanguard for new or small investors, especially those with portfolios under £30,000.

Q & A

What is Vanguard's new fee structure and when will it be implemented?

Vanguard will introduce a minimum fee of £4 per month (or £48 per year) starting from January 31, 2025. This fee applies to portfolios with less than £32,000 across their SIP, general investment accounts, or stocks and shares ISAs.

Why does the presenter believe the fee change is unfair?

The presenter argues that giving customers just six weeks to switch before the fee change, especially during the Christmas period, is unfair. They also highlight that Vanguard may be overwhelmed by transfer requests during a time when many of their staff are on annual leave.

What impact will the fee increase have on smaller investors?

Smaller portfolios, particularly those with around £1,000 invested, will see a significant increase in fees. For example, if an investor is putting £1 a month into their portfolio, the fees will take up a substantial portion of their growth, making it harder for them to see returns after inflation and fees are accounted for.

How does Vanguard's fee increase compare to traditional finance companies?

Vanguard's new fees, especially for smaller portfolios, are now comparable to those charged by more expensive money managers and financial advisors in the UK, even though Vanguard was originally founded to offer low-cost options to smaller investors.

What criticisms has Vanguard received regarding its service?

Vanguard's UK platform has faced complaints about poor customer service, leading to compensation payouts. The presenter suggests that smaller investors, who may be putting more pressure on resources, are being charged higher fees to offset these service challenges.

How has the market reacted to Vanguard's fee increases?

The reaction from the investment community, particularly in Facebook groups, has been mixed, with some people criticizing Vanguard for targeting smaller investors. There are also opinions that those who cannot afford the fee increase should not be investing, though the presenter disagrees with this view.

Why does the presenter believe Vanguard might be pushing small investors toward managed services?

Vanguard may be encouraging smaller investors to use their managed services by raising fees on the basic platform. The presenter speculates that Vanguard sees these investors as needing more support, and the fee changes could be an attempt to push them toward managed services that offer more guidance.

What alternatives to Vanguard does the presenter suggest?

The presenter recommends several alternatives, including Invest Engine, which currently offers the lowest fees for SIPs on the market, AJ Bell, HL, and Fidelity. These platforms are established and offer more features than Invest Engine, such as employer contributions and drawdown support.

What are the main differences between Vanguard's UK and US platforms?

The US platform has lower fees and a more robust app, providing more services to investors, including the ability to invest in Vanguard funds. In contrast, the UK platform lacks some of these features and has higher fees, especially for smaller portfolios.

Does the presenter still recommend Vanguard for larger portfolios?

Yes, the presenter still believes Vanguard is a reliable platform for larger portfolios, as it offers a solid investment option for those with significant capital. However, the new fee structure makes Vanguard less appealing for smaller investors.