Incorporated in the US by John Bogle in 1975, Vanguard has long been a leading financial services pioneer. They have built a strong reputation as a value brand, offering low-cost funds that do well overall – at least historically, there's no way to predict how any fund will do in the future! Part of the reason for its strong track record is its corporate structure. The funds people invest in own Vanguard – meaning the investors themselves own the company, not outside shareholders. In theory, this makes for a better product. That has certainly been the case in the US, but does Vanguard's success translate to the UK market? Let's find out in our Vanguard UK review!
Vanguard UK Review: What Does Vanguard Offer?
Before getting into the details of the platform, account types, fees, etc., it's first worth looking at what Vanguard offers. Knowing this information up front is essential as this site is for a somewhat specific audience.
Vanguard specializes in investment tracker funds. Previously, you could only buy these Vanguard funds through a third-party investment broker, such as Hargreaves Lansdown. However, to “cut the middle-man out,” Vanguard launched Vanguard Investor in the UK. This platform offers the full array of Vanguard funds but from Vanguard itself, not an independent broker. In theory, investing this way should be cheaper than opening an account with HL or another broker.
As such, this platform is a place to buy Vanguard funds. The next logical question is, of course, what are Vanguard funds?
In short, Vanguard offers mostly passive investment tracking funds. There are two types of funds: active and passive. Active funds have an active fund manager who decides when to buy and sell. The focus and level of risk in the prospectus outline the guidelines for these decisions. A low-risk fund specializing in tech stocks, for example, would not go out and buy BP. Passive funds aim to track a specific index, like the FTSE 100, and a computer can buy and sell as needed to replicate that index.
As you might imagine, these passive investment tracking funds have much lower fees than the active funds. Since many active funds don't beat the broader market, most investors can save a lot in costs with an equally good performance by investing in passive funds instead. You can buy a few active funds on the platform, but over 80% of what Vanguard offers is passive.
What Are Vanguard's Fees?
If you're intrigued by Vanguard's low-cost funds, you'd probably expect Vanguard's investing platform to be equally low-cost. And, for the most part, you would be right, although there are some platforms out there that are even cheaper than this one.
You'll find the first fee at almost any broker or share dealer in the UK, and that's the account fee. Vanguard charges 0.15% of the collective value of all your accounts to cover the cost of the online service, customer support team, and other business overhead. This fee maxes out, though. You'll pay 0.15% up to £250,000, at which point you'll only pay £375 per year, no matter how much you have invested.
If you're looking at Vanguard for your retirement portfolio, this cap is excellent as you may wind up having £1,000,000, let's say, after many years of contributing. And it's worth noting that this fee applies to the value of all your accounts combined. So, if you have one account worth £500,000 and another worth £500,000, the total of both accounts is £1 million. Since that value is higher than £250k, you'll only pay the £375 fee annually.
For those looking to buy ETFs, there are some costs associated with that. There are two ways to buy ETFs – you can either buy them as part of the daily bulk transaction (so at the end of the day, Vanguard batches all orders together and makes one big purchase), or you can buy them at the market price immediately. If you buy at the market price, you'll pay a share dealing charge of £7.50. All orders pay between 0.02% and 0.15% in one-off costs to buy the funds.
Most people would probably prefer to save £7.50 per trade and let Vanguard buy it as part of the batch order – especially if you buy small amounts with a long-term investment horizon!
Fund Management Costs
Fund management costs are not unique to the Vanguard Investor platform, but they're worth including in this Vanguard UK review because they give you an idea of whether or not these funds are a good deal. These are the management fees you'll pay for Vanguard to administer the funds and make all the trades. The ongoing costs are less than 0.25% for ready-made portfolios and range between 0.06% and 0.78% for individual funds. Fund transaction costs range between 0.02% and 0.1% for ready-made portfolios and between 0% and 0.93% for individual funds.
There are no entry or exit charges. Additionally, those who choose Vanguard's UK funds won't have to pay any performance fees.
Vanguard UK Review: What Are Some of the Funds They Offer?
Astute readers may have noticed quite a wide range of fund management costs. Some funds might have ongoing costs as high as 0.78%, while others charge only 0.2%. This wide range is an excellent indicator of the diversity of funds that Vanguard UK offers. No matter your investment goals, Vanguard likely has one or more funds that are perfect for your needs!
At the time of this writing, Vanguard Investor has 79 funds available, mainly in the medium-risk band. About half of the funds are globally-oriented, 20% are in the UK, and the rest focus on other countries like the US, Europe, or Japan.
Two of the best classes of funds are part of Vanguard's “Ready-Made Portfolios.” These funds are either “Target Retirement” or “LifeStrategy.”
Target Retirement funds are funds you can buy over time to retire in that year. For example, suppose you started buying a Target Retirement 2040 fund now. Since 2040 is quite a long time away, this fund would invest predominantly in equities to capture as much growth as possible. As 2040 approaches, the fund will automatically shift out of equities and into more stable assets, like bonds, helping to reduce your exposure to risk as you get closer to retirement age. These funds are perfect if you want “set-it-and-forget-it” investing for retirement. And, these funds only have an ongoing charge of 0.24%, meaning you'll keep more of your money for retirement!
The other fund type, LifeStrategy, is an excellent concept. These funds go by the percentage invested in equities relative to bonds. So, LifeStrategy 20% Equity means 20% of the fund's investments are equities while 80% of the value is in bonds. On the other end, LifeStyle 100% means 100% is in shares, and 0% resides in bonds. These have ongoing charges of just 0.22%!
There are numerous other funds, too, like ones focused on US equities or the FTSE. No matter what you want your investment strategy to be, there's probably a fund on Vanguard for you!
Vanguard Investor: The Site
One of the most significant financial trends is to make investing more accessible for people. Companies are raising millions of pounds in seed money to make it easier for everyone, even those just looking to put their first £100 toward their future retirement.
For the most part, registering with Vanguard is an intuitive and fast experience. You'll need your name, address, debit card details, phone number, bank account information, NIN, and date of birth. These are all standard information pieces you need to provide to open almost any account.
Once you have an account, the experience is straightforward, even if it is a little bare. You'll find core charting capabilities and a few financial services tools, like an asset mixer, cost calculator, and an investing personality calculator. You can quickly log in, find the fund you want to trade, and buy or sell it! You won't find anything fancy here, but it does the job.
Ultimately, the site works remarkably well, especially for a more casual investor or someone looking to buy these funds for the long haul.
Vanguard UK Review: There's No Mobile App
The one significant shortcoming of Vanguard Investor is that this platform does not have a mobile app. Their website works with mobile devices; however, there's no app that you can download from the Apple App Store or Google Play.
While it's relatively easy to use the website on mobile, it still seems strange that a company as large as Vanguard could offer a platform without an app. Having an app – especially for a large company – feels almost like a requirement in 2022!
Hopefully, Vanguard is either working on or will build an app in the future. There would undoubtedly be a demand for one!
Vanguard UK Review: Vanguard Has Fantastic Funds
As should be self-evident from this Vanguard UK review, there's a lot to like about Vanguard! They offer a wide range of funds that suit almost anyone's goals. Whether you're looking for a well-managed fund for retirement or you're looking for something that tracks the FTSE, you'll find the perfect fund for you on this site. And, since they are Vanguard funds, you know you're paying some of the lowest fees in the business.
While it's not perfect (the site is basic, and there's no app), there's enough upside that Vanguard Investor is relatively easy to recommend overall. If you're looking for a straightforward, no-frills platform with inexpensive fees to stash your retirement funds or open an ISA for tax savings, you'll want to check out Vanguard Investor!