Vanguard’s platform will be cheaper than many of its competitors
Advisers have welcomed Vanguard’s entrance into the UK direct-to-consumer market, but say the offering’s lack of pensions wrapper and fund range will limit its appeal for now.
Yesterday, Vanguard launched an online investment platform for UK mass-market investors at a lower cost than many of its competitors. Hargreaves Lansdown shares fell 8.5 per cent on the news.
The new platform will charge 0.15 per cent on top of underlying ongoing fund charges and will have a minimum monthly contribution of £100 and/or a £500 lump sum.
Despite bringing costs down, Page Russell director Tim Page says in the short term Vanguard won’t make “a huge amount of difference” in the market until it starts offering a pensions wrapper.
The US firm said it will launch a Sipp “in due course.”
However, Page says Vanguard could be “the advisers’ friend” if it were to link UK advisers with “a certain segment” of clients.
The online investment service will partly replicate Vanguard’s existing US offering, limited to selection of its own funds.
Pilot Financial Planning director Ian Thomas argues offering only Vanguard funds will limit its appeal, as will not having the pensions wrapper. But he says there is no doubt Vanguard will put price pressure on competitors.
He says: “Whether Vanguard will make it will largely depend on their marketing and PR and expanded product range. At this stage I don’t think Hargreaves and Fidelity are out of the woods just yet.”
Platforum head of direct Jeremy Fawcett says established firms such as Hargreaves have weathered margin compression to retain success despite new entrants.
Page says the impact on UK advisers will be “significant” when Vanguard launches its own adviser service, but this will not be for a while.
He says: “Vanguard cannot cut and paste their US service into the UK because of the different regulations, otherwise they would have launched in the UK from day one.
Yellowtail Financial Planning managing director Dennis Hall says Vanguard could help to fill the advice gap at the transactional end of the market or where people start their investing journey.
He says: “If Vanguard brings a bit of pressure it’s good for the industry as there is still some fat in there.”