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Asset manager Vanguard is overhauling its UK platform fees in a move that will leave some “DIY” investors paying more and customers of its “managed” service paying less.
The changes are aimed at helping the company to cover the “rising cost” of servicing customers who choose their own investments, Vanguard said, while encouraging less experienced investors to have their money managed by the company.
Vanguard will introduce an account fee of £4 a month for “DIY” customers with up to £32,000 invested across Isas, personal pensions and general accounts. The previous charge of 0.15 per cent a year will still apply to balances above £32,000, and the total will be capped at £375.
But the change will make it more expensive for customers with less than £10,000 to invest compared with rivals, including AJ Bell and Hargreaves Lansdown.
At the same time, Vanguard is cutting a third off its fee on the “managed” Isa service, which involves an investment professional selecting and running funds on behalf of customers.
The aim is to help more people — in particular first-time investors or those with smaller pots — manage their money.
Ben Summers, head of UK personal investor at Vanguard, said: “Through serving 700,000 people in the UK, we have seen there are many first-time investors that need a helping hand to manage and grow their money.
“We’ve found that once people have made the important decision to start investing, they can lack confidence in the management of their investments, hold too much cash, and have trouble constructing portfolios with the right funds and level of risk.”
The cost changes, which will take effect at the end of January, come as the Financial Conduct Authority focuses on providing investors with more support. The watchdog proposed this week that pension holders should be able to receive “targeted support” for those that need help but cannot afford expensive full-blown advice.
Vanguard closed its UK financial planning arm in 2023 less than two years after it launched, due to insufficient customer interest.
The changes to the Vanguard’s managed Isa service mean its customers will pay a 0.2 per cent management fee a year, down from 0.3 per cent. Total fees, including this management charge, the platform fee and fund costs, will amount to 0.51 per cent.
Jeremy Fawcett, head of Platforum, a research and analysis firm, said “while the new minimum fee impacts smaller pots” for DIY investors, “it can be avoided by choosing the managed service. This is designed for people in the advice gap, needing a bit of help but unlikely to use a financial adviser.”
Figures from Platforum show a customer with £10,000 split equally across an Isa and a personal pension would pay a total fee of £70 a year with Vanguard, including the fund charges. By comparison, AJ Bell’s cost amounts to £47 while Hargreaves Lansdown’s comes to £67.
For managed services, Vanguard’s changes mean customers with £10,000 would pay £52 a year, compared with Nutmeg’s £62 and Hargreaves Lansdown’s £130.
