Vanguard Review

• Vanguard’s emphasis on low fees, broad diversification, and a long-term investment focus makes them a good fit for long-term investors looking to keep costs to a minimum.

If you’re saving for retirement, or you’re a buy-and-hold investor and want an inexpensive platform, then Vanguard funds could serve you well. However, you’ll need to have a bit of money saved up as the minimum deposit is £500 (or £100 per month if you set up regular deposits) so this isn’t a platform for those who just want to dip a toe in investing with small sums: it’s geared towards those who can afford to put a decent amount away and are looking long-term.

If you’re a beginner, Vanguard’s popular ready-made funds could give you the easy solution and sense of reassurance that you’re seeking.

With Vanguard, you can only invest in funds, and only Vanguard’s funds at that, so this isn’t the platform for you if you wish to have complete control over the composition of your portfolio, down to the last stock.

Accounts

You can invest through a wide range of tax wrappers and investment vehicles at Vanguard. Here’s how it compares to other UK investment platforms:

Each account comes with different investment limits and different tax advantages, so it’s important to spend some time comparing them to work out which is right for you.

Stocks and shares ISA

As a rule of thumb, always invest in an Sometimes called an investment ISA, a stocks and shares ISA is an individual savings account that allows you to invest in shares, unit trusts, investment funds, and bonds. You will not need to pay tax on any income or capital gains earned on investments within an ISAISA before a general investment account as you will pay no income tax on the interest or dividends you receive from an ISA, and any profits from investments are free of Capital Gains Tax.

With a Vanguard Stocks and Shares ISA, you can either pick your investments from Vanguard’s range of over 85 funds, or if you prefer, let them pick and manage your investments for you.

Junior ISA (JISA)

Vanguard offers a A junior self-invested personal pension (SIPP) is a way of investing money for your child’s future retirement, free from capital gains and dividend tax. As it is designed to be started before a child turns 18, it must be opened by a parent or guardian although anyone can contribute. Once the beneficiary turns 18, they take control of the account, however, the money within the account cannot usually be accessed until age 55 (rising to 57 in 2028 and likely to rise further)JISA but it does not accept transfers from Child Trust Funds which is a shame and will rule this provider out for many potential JISA customers. If you’re looking to transfer a CTF to a JISA, then I’d suggest looking at interactive investor (ii), Hargreaves Lansdown, or AJ Bell instead, as they offer this service.

Self-invested personal pension (SIPP)

Vanguard was named a Which? Recommended Provider for its A self-invested personal pension (SIPP) is a type of private pension that allows you to control the specific investments that make up your pension fundSelf-Invested Personal Pension (SIPP) for the third straight year in 2023. Vanguard might have only launched its SIPP in 2020, but with its simple charging structure (one account fee covers it all), it has won customers over.

It’s a straightforward SIPP which gives you access to a choice of 76 funds and ETFs available on Vanguard Personal Investor, including Vanguard Target Retirement Funds and the popular LifeStrategy range. Our independent research into A ready-made portfolio is a pre-made collection of investments that have been put together by investment experts. They are designed to be a simple option for those who don’t want to choose individual stocks or funds for themselves.ready-made portfolio performance for those portfolios recommended as default/starter options for SIPP investors, shows that Vanguard’s recommended range – the Target Retirement Fund range – actually does very well when compared with the industry average (66.8%) and Vanguard’s competitors. Producing median average returns of 88.1% over ten years, that’s better than Fidelity’s 75.1%, and PensionBee’s 54.5%, and Nutmeg’s 39.7%.

So, Vanguard isn’t the most expensive, but it’s also not the cheapest provider on the market. And this presents a problem, because plenty of other providers also offer a selection of Vanguard funds. That means, in some circumstances, going directly through Vanguard is not the cheapest way to purchase a Vanguard fund.

You also need to factor in that you are getting fewer choices for your fees with Vanguard. While Fidelity charges £87.50 per year on a £20k investment compared to Vanguard’s £84, you do have the option of buying stocks and a full range of funds from across the market with Fidelity. AJ Bell’s fees come in even lower on a £20k investment: £50 for the year, and again, with AJ Bell, you have a far wider range of investable assets to choose from. It’s something to consider.

Stocks and Shares ISA fees

As you can see from the table below, Vanguard is not the cheapest for ISAs either although, as with the SIPP, they do offer the bonus of dealing fees being included. (I haven’t included the Management Service fee in these calculations as the Managed Service is optional.)

As the above table demonstrates, InvestEngine offers the cheapest route to a Vanguard ETF. However, InvestEngine and the other low cost option, Freetrade, only offer Vanguard ETFs, so won’t offer the LifeStrategy range from Vanguard, for example. Again though, the point stands that it’s always worth shopping around for the Vanguard fund you want as it is possible to get them cheaper elsewhere.

Withdrawal fees

No charge.

Deposit fees

No charge.

A foreign exchange (FX) fee is added to all trades involving foreign currencies. If you buy a stock that trades in US dollars, for example, and your home account is in GB pounds, you’ll need to pay an FX fee.FX fees

No FX fees are due on Vanguard products.

Minimum deposit

Minimum deposits for Vanguard are relatively high: £100 per month, or a £500 lump sum.

Interest paid on cash

Vanguard pays interest on any cash held in your accounts but not invested, at a rate of 2.60%. That’s definitely not the most generous rate currently available (Interactive Brokers offers 4.74% and BestInvest offers 4.53% on cash in a SIPP account) but there are still plenty of providers (looking at you, big banks) which offer no interest at all which makes Vanguard’s rate relatively good.

As you’re only able to invest in funds with Vanguard, research is limited to the specific funds offered. That research is comprehensive however, and well-suited to the kinds of requirements and questions Vanguard’s investors are likely to have.

You’ll be able to research:

• Price analysis
• Past performance data
• Information on the fund’s objectives and risk score
• Number of stocks and bonds held, their median market cap, One way to determine a stock’s value is by comparing the company’s share price (P) to its earnings (E). The lower the P/E ratio, the better value it is deemed to be.P/E and The price-to-book ratio compares the stock market value of a company with the value of its assets on paper. It is used by some investors as a way to spot undervalued stocks.P/B ratios, and data on stocks’ return on equity and earnings on growth rate
• Distribution history
• Costs and charges data

What you won’t find, however, are analyst ratings and forecasts, social sentiments, charting tools or news feeds. Vanguard customers, therefore, are missing some of analysis and signals that can help with decision making.

When selecting a provider for your investments, it is very important to first ensure they meet certain minimum safety standards. We judge Vanguard to meet the threshold for a ‘safe’ provider because:

• Vanguard is authorised and regulated by the Financial Conduct Authority (FCA) in the UK.
• Vanguard utilises multi-factor authentication (a six-digit code) to keep your account secure when you log in, make a withdrawal, or attempt to change your details.
• To protect you against the risk of fraudulent withdrawals of money from your account, Vanguard asks you to nominate a single bank account for the purpose of receiving payments from them.
• Vanguard is covered by the Financial Services Compensation Scheme (FSCS). This means you may be entitled to compensation up to £85,000 in the unlikely event that the company is unable to meet their financial obligations to you.

Warning: It’s important to be aware that all investing involves risk and IBKR’s products are only covered by the UK Financial Services Compensation Scheme (FSCS) in limited circumstances. If you want to find out more about which investment products are protected by the FSCS, use this checker *Link to: https://www.fscs.org.uk/check/investment-protection-checker/>

Account security

All account information passing between your computer and Vanguard’s systems is securely encrypted.

The education offering on Vanguard’s website is rudimentary. There’s a library of blog articles offering some insights on personal finance topics and news, and 101 guides to investing terms and concepts, but it isn’t enough on its own to inform those looking to take charge of their own investments, so you’ll need to supplement your education with resources from other sources if you’re completely new to a product.

Explanations of the differences between different funds and asset classes, however, are clear and helpful enough to allow users to identify which may be better suited to their needs.

Vanguard’s UK-based team can be contacted via:

• Message
• Secure message from within your account dashboard if you are a client
• 24/7 Chatbot
• Phonelines are open Monday to Friday, 9am to 5pm

It’s great that Vanguard can be reached by phone. However, be prepared for delays. Trustpilot users report delays of more than an hour in some circumstances!

The 24/7 Chatbot seemed very sleepy when I tried it. Unfortunately, it refused to co-operate at all and just kept popping up a survey instead. All-in-all, the experiences I’ve had haven’t inspired confidence which is a shame, as one of the benefits of an older, more established platform over newer, smartphone investment brands, is usually a higher standard of customer service.

Trustpilot reviews don’t ease my concerns, either. The platform has an ‘Average’ score of 3.5 stars at present, and an alarming 55% of them are 1-star reviews. Something around the 10-15% mark is usual.

Complaints are largely centred around issues with transfers, delays withdrawing money, under-investment in customer care and poorly performing IT systems. It’s also worth noting that Vanguard’s score has dropped from 4-stars to 3.5 in just a couple of months. (I checked in on them at the start of the year and things weren’t as bad.) It may be a blip, and all providers receive their fair proportion of negative reviews on Trustpilot, but Vanguard is certainly receiving more negative reviews than most at present.

So that I could test out how easy it is to open and manage a Vanguard account, choose investments and execute trades, I invested £500 into a Vanguard FTSE 100 UCITS ETF.

Account opening

Opening an account with Vanguard was easy. There are three steps to the process:

1. Choose your account type

Choose from: a Sometimes called an investment ISA, a stocks and shares ISA is an individual savings account that allows you to invest in shares, unit trusts, investment funds, and bonds. You will not need to pay tax on any income or capital gains earned on investments within an ISAStocks and Shares ISA; a Personal Pension; a Junior ISAs (Individual Savings Accounts) (JISAs) are tax-free savings accounts for children under the age of 18. Only a parent can open a JISA but anyone can contribute. You can choose to save for your children through either a cash Junior ISA where you will earn interest on any cash in the account, or a stocks and shares Junior ISA where you will invest your child’s savings on their behalfJunior ISA; or a General investment account (GIA) is an account designed to provide access to investments. You may be liable for tax on any income or capital gains earned within a general investment account but this can be a useful vehicle for anyone who has maxed out their ISA allowanceGeneral Investment Account.

2. Choose your funds

Vanguard will ask you to think about your investment goals, your attitude to risk and how hands-on you want to be with your account.

With Vanguard’s Stocks and Shares ISA and Personal Pension, Vanguard can choose your funds for you. You just answer a few questions about how you feel about risk.

3. Choose how much to invest

You can invest from £100 per month, or a £500 lump sum.

Watch this video to view one of Vanguard’s account opening processes:

*Insert Loom video

Transferring your account

Vanguard states that ISA transfers take a maximum of 30 working days but I’ve not tested this myself as my funds are invested in a general investment account rather than an ISA. Depending on your existing provider (that’s often where the delays often stem from in transfers), and the type of pension you have, SIPP transfers can take anywhere from 1 to 10 weeks according to Vanguard’s own data, and occasionally longer.

Closing your account

If the money in your Stocks and Shares ISA or General Account is currently invested, Vanguard will sell your funds, then you can withdraw funds (and have any cash refunded) into your nominated bank account.

If Vanguard choose and manage your investments for you, you’ll need to send Vanguard a secure message, stating the amount you want to withdraw. They’ll do the rest for you. The whole process takes around five business days.
It’s annoying that you need to request this through a secure message and can’t just self-manage closing an account as you’d be able to do with the more tech-savvy newer providers. Legacy providers certainly need to up their game in this regard and swap out manual processes for more digitisation if they want to attract younger consumers accustomed to immediacy.

Buying and selling funds is a simple process at Vanguard. There are no choices to be made on order types as you’re limited to ‘next available price’.

That means your trade will go through at the next trade point.

Unfortunately, that could be a day or two away, during which time the fund’s unit or share price may have changed. In reality, as you’re buying a fund rather than an individual equity, the price isn’t likely to change dramatically, but it’s something to be aware of and which you may find off-putting if you like your trade prices to remain fully within your control.

Have a question about Vanguard that we haven’t covered? Ask it here and we will get back to you as soon as possible!