IT It looks like Vanguard is not any longer the undisputed consumer champion it once was. Vanguards The USP has been shrinking for a while, however the recent announcement of a £4 monthly minimum fee for DIY investment services has put a stop to that.
Previously, Vanguard DIY investors paid a 0.15% platform fee calculated on their account balance. This made Vanguard an incredible value for beginners, young investors, and anyone who cannot afford to place away much.
However, from January 31, 2025, clients pays £48 annually for portfolios value lower than £32,000.
This is an enormous change.
How Vanguard’s Price Surge Affects Small Portfolio Holders
Anyone with a portfolio of £1,000 pays £48 in fees, or 4.8% of their account balance.
Previously they might have paid £1.50.
The numbers may not seem big unless you concentrate on that global stocks generate a median annual return of around 8%.
At this rate of interest, the vast majority of the instance investor’s return is eaten up by fees. Exactly the fate that Vanguard founder John Bogle desired to avoid.
As Vanguard himself saysquotes Bogle:
Investors need to know not only the magic of compounding long-term returns, but in addition the tyranny of compounding costs. Costs that ultimately overwhelm this magic.
Very true. And while all brokers struggle with their very own rising costs, an informed investor examining the choices will find that several other small portfolio platforms at the moment are more competitive than Vanguard.
Costly consequences
Vanguard’s £48 minimum means the platform is simply value considering if you may have at the least £19,200 accrued in an ISA/GIA or £13,700 in a SIPP. (See below for our alternative suggestions).
You can check the meaning of your personal numbers using the strategy described previously: Here’s easy methods to discover which platform is best for you.
Do that and in case your portfolio is value well over £32,000 you may wonder what all of the fuss is about. There can be no fee increase at this level.
On the opposite hand…
Vanguard Alternatives for Small Portfolios
Disclosure: Links to platforms could also be affiliate links from which we may earn a small commission. It has no bearing on the value you pay or how we judge the agents. This article just isn’t personal financial advice. When you invest, your capital is in danger.
The best Vanguard alternative currently is InvestEngine. InvestEngine’s platform and trading fees are exactly zero for all account types, including SIPPs.
InvestEngine has not yet enabled SIPP transfers. But an exception is now being made for Vanguard customers.
If you are wondering how InvestEngine can afford to supply its services without spending a dime, listed here are its own Explanation. But please read ours Zero commission broker Articles too.
InvestEngine is roofed by £85,000 as standard FSCS investor compensation scheme.
Unlike Vanguard, InvestEngine is a pure ETF platform. However, I do not think it is a barrier because it is with ETFs now cheaper as a fund for a lot of asset classes. And InvestEngine offers quite a few options, including from non-Vanguard providers.
Another fee-free alternative is Prosper.
Prosper is just as low-cost as InvestEngine. You also can read our own explanation here makes money.
Prosper is an app-only investing service that provides a limited variety of index funds and ETFs – but Vanguard products are the essential focus. While the offering could also be small, it covers the key asset classes and typically features a competitive index tracker for every category.
As well as the same old ISA and GIA, Prosper also features a SIPP in its range of accounts.
The company itself is comparatively latest. However, it’s protected by the FSCS system.
Cheapest Vanguard alternatives if you happen to prefer better-known brands
These options are value considering as they mix free fund trading with a low percentage platform fee:
Close brothers:
- Advantages: 0.25% platform fee, no trading fee for funds.
- Disadvantages: Expensive SIPP.
HSBC Global Investment Centre:
- Advantages: 0.25% platform fee, no trading fee for funds.
- Disadvantages: Limited variety of non-HSBC index funds. No SIPP.
Loyalty:
- Advantages: Cheap SIPP so long as you invest monthly – 0.35% platform fee, no trading fee for funds.
- Disadvantages: Minimum fee of £90 per yr if you happen to don’t invest monthly. Applies to accounts value lower than £25,000.
Santander Investment Hub
- Advantages: Cheap SIPP – 0.35% platform fee, no trading fee for funds. The same price as Fidelity, but no penalty for failing to speculate every month.
- Disadvantages: Bad Trustpilot reviews albeit from a limited pool.
AJ Bell would add:
- Advantages: AJ Bell’s Dodl is cheaper than the others except InvestEngine and Prosper – but provided that your portfolio exceeds the £4,800 mark.
- Disadvantages: Highly limited fund and ETF list. Minimum account fee of £12 per yr.
Are there another candidates?
There are just a few other commission-free trading apps available, but they do not take up the identical space as Vanguard. Although such firms offer ETFs, they primarily give attention to trading and speculation in high-risk assets.
However, you possibly can view lots of them through our Broker comparison table.
Transfer day
If you would like to transfer your account away from Vanguard, there are not any exit fees.
The transfer is sort of easy but can take just a few weeks.
If your latest broker doesn’t offer a Vanguard product, your investment can be sold for money and the funds can be transferred as an alternative.
This is Vanguards Outsourcing page.
These pieces explain what it is best to concentrate to:
What a shame
This is not John Bogle’s Vanguard anymore.
A fee cut for its index funds is vanishingly rare as of late. In recent years, the corporate has focused more on adding lively funds with higher fees to its portfolio. Now it’s putting pressure on small investors.
Under Bogle, Vanguard modified the face of the investment industry by relentlessly pursuing one easy proposition:
In doing so, it forced its competitors to turn into more like Vanguard – to the good thing about hundreds of thousands of individuals.
Now, nevertheless, Vanguard looks more like everyone else.
Be calm,
The accumulator
