Vanguard is one of the most well-known wealth management firms in the entire world and is one of the most popular investment firms used in the UK. The UK investing platform was launched back in 2017 and has been met with a lot of praise and interest.
In this article, we’ll discuss Vanguard and answer your burning questions. We will talk about the service’s features, portfolios, pros, and cons. We’ll then give our verdict on whether Vanguard is an investment service that is worth trying. This is our Vanguard UK review.
Vanguard is one of the largest wealth management companies in the world and first launched way back in 1970 in the United States. It has since spread all over the world.
Vanguard is the largest provider of mutual funds in the world and heads some of the most well-known index funds in the world, including the Vanguard S&P 500 and the BlackRock portfolio. To date, Vanguard has over £4.5 trillion (yes, that’s a “t”) assets under management.
Vanguard launched its fund platform in the UK in 2017. Like most other investment providers, Vanguard provides a wide range of investment services, including stocks, shares, GIA, ISA, SIPPs, and more.
Being one of the largest financial firms in the world, there is virtually no financial issue they are unequipped to deal with. An interesting feature with Vanguard is that it says it is owned by the funds that people invest in, rather than by an independent body of shareholders.
This company design is meant to put more focus on investor outcomes above other business considerations.
Vanguard Investor is the name of the online platform and provides a wide range of investment tracker funds. Tracker funds are designed to be passive funds and work by tracking a specific index in the stock market.
In fact, this kind of investment tracker methodology is precisely the unique contribution that Vanguard has made to the landscape of wealth management. They were one of the first companies to push the importance of long-term indexed investments for building long-term wealth.
Passive Vs Active Funds
Let’s distinguish between active and passive funds. Actively managed funds are continually monitored by fund managers who make all decisions about fund composition and research.
The point of actively managed funds is to beat average market returns through research and providing clear investment direction and strategies.
Passively managed funds, in contrast, are meant to simply track a market index by investing in mutual funds. Passively managed funds can be run by a computer and usually have much lower overhead costs than actively managed funds.
Since passively managed funds are tied to an index, they will follow changes in the index, whether they are positive or negative. Passively managed funds are built on the assumption that over time, the general market trend is upwards.
Vanguard primarily works with passively managed investment tracker funds that are meant to mirror the performance of a given index.
For example, the Vanguard S&P 500 is one of their most popular mutual funds and is tied to the performance of top companies in the S&P 500.
The good thing about these kinds of investment tracker funds is that they let you benefit in equity from stocks without actually having to buy all those stocks, which would take a long time. Investment tracker funds also charge much lower fees than other kinds of investment management methods.
How Does Vanguard Work?
Vanguard’s online platform works exactly as you might expect for a UK investment platform. To create an account, you must be a UK resident at least 18 years old and must not be a tax resident of any other country.
Choose a username and password, then you will have to identify some personal information by providing your national insurance number (NIN) bank details, and proof of UK address.
Once your account is set up, you can go nuts with investing.
Vanguard currently offers 4 major kinds of accounts:
- Junior ISA
- General investment accounts
- Self-invested pension plans (SIPPS).
The main restriction to be aware of is that you can only invest in Vanguard-related funds.
Vanguard ISAs are classic stocks and share ISAs that let you invest on a tax-deferred basis for retirement.
ISAs have a £20,000 annual contribution limit for 2021 and you must be at least 18 years old to make an ISA. The Stocks and shares ISA have a 0.15% annual account fee and no extra charges for things like payments, deals, or anything else. You can also access your IS from any device 24/7.
The Junior ISA is functionally identical to the regular ISA except it is managed by the beneficiary’s parents or guardians. You must be a child’s legal guardian to open a Junior ISA in their name and full control of the account will transfer to them when they turn 18 years old.
General Investment Account (GIAs)
Vanguard’s general investment account is the flagship product of the investment platform, allowing you to invest your money into one of the 75+ funds that Vanguard offers.
There are no limits on how much you can invest, but keep in mind that everything in a GIA is subject to income taxes and capital gains taxes. Vanguard also has options for transferring a GIA from another provider and has special “Life Strategy” funds to choose from (more on those later).
GIA accounts have a 0.15% annual account fee that is capped at £375 a year. You can also start investing with as little as £100.
Self-Invested Pension Plans
Vanguard’s SIPPs offer everything that you could want from a pension plan, including tax-deferred growth, tax-free inheritance, and tax relief as taxes you would pay on your earnings go to your retirement funds instead.
Vanguard’s SIPP accounts give holders a huge amount of flexibility in the composition of their portfolio and have a low 0.15% account fee that is capped at £375 a year. Like with general accounts, Vanguard has options to transfer SIPPs from different providers to Vanguard.
Vanguard LifeStrategy Funds
One feature of Vanguard’s investment platform is its LifeStrategy Funds. There are 5 life strategy funds, each of which has different equities exposure in multiples of 20%. (e.g. there is a 20% equity fund, a 40% fund, a 60% fund, etc).
All LifeStrategy funds have excellent market performance and are structured to yield optimal ratios of risk/reward for investors depending on their investment preferences.
The riskier allocations for the LifeStrategy fund put more stock in emerging markets and corporate equities which consequently yields higher returns.
Vanguard Target Retirement Funds
Vanguard also has its target-date retirement funds that are ready-made to hit benchmarks by certain timeframes. The composition of the target retirement funds changes over time and starts off with more equities and shares.
Over time, portfolio allocations change to put more money in bonds so the portfolio gets less risky as time goes on and the target date draws near. Target date funds start with timeframes as little as 5 years up to 50 years.
Index and Active Funds
Index funds and Active Vanguard funds take up the most space on Vanguard’s investment roster and they currently offer 39 different index funds and active Vanguard funds.
These funds range from very conservative and focusing mostly on bonds to much more aggressive and focusing on stocks. Vanguard also has a singular money market fund that focuses on European sectors. All of these funds have different ongoing charges that end up being reflected in the price of the security itself.
Is Vanguard Legit? Is My Money Safe?
Yes, 100%. Vanguard is one of the most well-known wealth management companies in the world and manages trillions of pounds in wealth.
Vanguard secures all accounts with time-out features, additional security codes for transactions, encrypted online withdrawals. They use standard bank-level protocols to protect your financial and personal information.
Further, Vanguard is regulated by the Financial Conduct Authority (FCA) and part of the Financial Services Compensation Scheme. Up to £85,000 of your investments will be protected in the unlikely event the company goes under.
So all in all, Vanguard is extremely safe to use and your money is secure. They will not steal anything and hackers will not be able to get into your account. Plus, there are several additional features you can use to improve your account security and prevent hackers and other bad actors.
What Are People Saying About Vanguard?
Overall, Vanguard has a very popular reception on the internet. Not only is the company global in its reach but it has good reviews. We checked out Vanguard UK’s Trustpilot page and here is what we found.
The company has a 3.8 out of 5 rating from nearly 200 reviews. The majority of reviews rank the Vanguard-specific funds very highly and praise that you are able to pick and choose between the 75+ Vanguard funds to custom make a profile.
There are a few handfuls of complaints though. Most complaints are aimed either at investment selection or slow customer service, particularly with regard to transferring accounts from other platforms.
A common complaint we found is that it takes a long time to transfer ISA accounts in both directions. As far as available investments go, Vanguard only allows you to invest in Vanguard funds, which may be too restricting for some investors.
Vanguard also manages to keep fees low and transparent. All accounts have a low 0.15% annual account management fee and fees on funds come in at about 0.20% on average.
In other words, it is very cheap to invest with Vanguard’s online platform and in fact, they are one of the cheapest brokers to use. They do charge periodic one-off bid-offer spreads on some trades, but these fees are so small that they are negligible from the investor standpoint.
Vanguard Pros & Cons
- Global recognition. Vanguard is a globally recognized wealth management company and manages trillions of pounds in assets. They are the single largest fund provider in the world and manage some of the wealthiest people’s money.
- Excellent-quality funds. Vanguard’s funds are the focal point of the service and include over 75 handcrafted funds that span virtually every industry out there. The funds range in composition between fully equities and fully bonds and there are a few specialist funds that have a unique focus.
- Low fees. Vanguard has a low and transparent fee structure. You pay a 0.15% annual management fee for all accounts and fund fees average around 0.20% per fund. These are very low for a UK online brokerage.
- Funds, funds, funds. Vanguard is the de-facto inventor of the investment tracker fund and they have over 75 handcrafted funds to choose from. You will certainly find something that captures your interest.
- Investment selection. You can only invest in funds that are run with Vanguard, so some investors might find the platform restrictive.
- Limited research. Strangely enough, Vanguard does not have a large research library for beginner investors.
So, is Vanguard good for the beginner investor? We say yes.
When it comes to index investing, Vanguard Investor UK offers some of the best investment products on the market.
Vanguard funds are well known around the world for any client and are great for someone who wants to meet investment goals. Vanguard might not be a good choice for the interactive investor but for passive asset management, it is one of the best options in the UK.
So we highly recommend Vanguard asset management over other investment platforms. It is a good starting point for investing and can be a good idea for savings.
Vanguard fund performance is also one of the best features of their products. Low-cost index funds and equity funds are the content of the investing future and a new way to manage finances.