US investment colossus Vanguard has launched a low-cost financial advice retirement savings product in the UK to try and win business from the many savers who are reluctant to pay for an independent financial adviser (IFA).
The tracker fund group said it will charge a total of 0.79% per year ‘all in’ for its advised product, with the service including the cost of the investment funds and platform fee, and no entry or exit charges applied.
IFAs on average charge an initial fee of 2.4%, which falls to around 1.9% per year, according to the Financial Conduct Authority.
“For many investors the cost of advice is a barrier,” said Sean Hagerty, head of Vanguard Europe.
He added that research, including from the FCA, showed that over 90% of the UK’s adult population do not currently take advice.
Vanguard’s ‘personal financial planning’ service will give retirement savers a “comprehensive financial plan” based on when they aim to retire, their targeted level of income and their attitude to risk, before then recommending an investment portfolio solely based on its own equity and fixed income funds.
Vanguard will manage the portfolio on the investor’s behalf, rebalancing when needed, and reducing risk levels as retirement nears.
As investors’ portfolios grow they will be offered greater support service levels, with clients possessing portfolios of larger than £100,000 receiving access to a team of financial planners over the telephone or Zoom, and reviews every year or if experiencing a change in circumstances; while clients with over £750,000 have a dedicated financial planner for face-to-face support via video or in-person.
Even so, the service is less comprehensive than the personalised service offered by IFAs, which will often cover inheritance tax planning, property and insurance products.
Vanguard is aiming the service at clients with more than £50,000 already invested.
Having been the first proponent of low-cost funds that track stock market indices back in the 1970s, Vanguard has built on this with other low-cost products in recent years, including a self-invested personal pension (SIPP) charging 0.15% a year.
“This launch is genuinely disruptive, in a positive sense,” Holly Mackay of Boring Money told the MoneyMarketing trade website.
She added that many of her readers have been questioning the traditional model of paying 2% or more on an ongoing basis for a package of advice and investments, so this launch “seriously challenges the status quo”.