Update 18 May 2012: Since this post was written, we have been informed by Interactive Investor that Vanguard funds are NO longer available on its platform. We are told that the company is piloting seven Vanguard funds to ensure its systems work, but will be removing them at the end of testing. We’re advised to inform you that “they will be not be available until further notice.”
We at Monevator are sorry for contributing to this confusion, which was prompted by the fact that readers kept telling us that the funds WERE available – reasonably enough, because they saw them there – and asked us what we thought.
Sure enough, we were informed by Interactive Investor staff that the funds were available to trade.
However, we were not told that the Vanguard funds were only available for a strictly limited period as part of a pilot scheme.
Interactive Investor have since confirmed that any investors who have managed to buy Vanguard funds during the test period will be unaffected by the end of the pilot scheme. You will still be able to track performance and receive valuations within your Interactive Investor portfolios. However, it is unclear whether you’ll be able to add to your Vanguard holdings through the broker.
Apparently Interactive Investor is engaged in ongoing negotiations with Vanguard about its entire range of funds, but we don’t know on what terms they will be offered, if at all.
We’re leaving this post up as an historical artifact, and as something to point readers to when they next ask us about this subject. This is the second time we’ve been confused by iii’s systems here, so we’re backing away slowly, closing the door, and running in the opposite direction. No more updates until we get an extremely official announcement, perhaps signed in blood.
At last! Vanguard index funds are now available through a broker that doesn’t impose platform fees, annual charges, dealing costs, or any other sneaky expenses that can nobble a small investor’s returns.
The broker is Interactive Investor (iii) and this development means Britain’s cheapest trackers can now be bought for sums as low as £20, which previously would have been suicidal in the face of flat-rate fees.
Seven funds from the Vanguard index fund range are available through iii, including a few of the instant-portfolio LifeStrategy funds.
However, this is a developing situation and I recommend you ring iii to check whether the funds you require are available.
When rumours first circulated a few weeks ago that iii stocked Vanguard, I was told that only Vanguard’s FTSE UK Equity fund was available. This despite the fact that the entire Vanguard range is listed on iii’s website. That toe in the water has now become a whole leg, so the possibility remains that iii will go all in at some point in the future.
The currently available Vanguard funds are as follows:
All funds are available in ISA accounts and are accumulation flavour.
Don’t take ‘no’ for an answer
One Monevator reader, Sam, has already reported being told a different story – that only the LifeStrategy 100% fund is available, and not in an ISA.
I have previously found with brokers that the story can change from operative to operative, depending on how au fait they are with their internal systems. So if you get a different tale, ask for a double-check and tell the rep to ignore NASDAQ listings – you are only interested in UK or Irish-domiciled OEICs.
Do let us know about your experiences in the comments section, too.
Sadly, iii’s website isn’t keeping up with events and there is currently no way to tell online which of the funds are available to buy and which are listed for information purposes only.
No doubt this situation will change in time – again many brokers often make funds available over the phone for a period before updating their website. So much for the wonderful world of instant digital gratification.
In general, if you want a fund that your broker doesn’t apparently stock, it’s always worth hounding them about it over the phone. They may well say ‘yes’.
A rare victory for the little guy
It’s taken three years for Vanguard funds to breakthrough on a no-fee platform and achieve the same no-strings-attached status as the HSBC index funds, for example.
The reason Vanguard has been resisted is that they don’t pay trail commission to platform operators (i.e. a fee deducted from the fund’s TER that makes it worth the while of your broker or fund supermarket to stock the fund).
Commission of this kind is due to be abolished by the end of the year under the FSA’s Retail Distribution Review (RDR).
The likes of Hargreaves Lansdown recoup their expenses through a platform fee, while Alliance Trust charges dealing fees for buying Vanguard funds.
Many have predicted that all low-cost online platforms will go down this route, making life extremely difficult for small investors as flat-rate fees take large bites out of modest contributions.
But iii have specifically added the following line to their charges sheet:
Charges for “non-commission paying” products – NIL.
It’s a positive sign that iii are seeking to differentiate their offering from other platforms as RDR approaches. There are no guarantees the situation won’t change, but it would surely be a PR disaster for a firm to stake out that position ahead of RDR, luring small investors in, only to move the goalposts a few months later.
So assuming the Vanguard funds aren’t being used as bait, and the website issues are sorted, this new ultra-low cost option adds up to great news for small investors.
Stop press
Before you take any big decisions, you should know that Vanguard is about to launch five physical ETFs on the London Stock Exchange. The Motley Fool has the scoop.
Apparently the FTSE 100 tracker will have a TER of 0.1%, which will make it an instant low-cost table-topper. Expect a listing in the next few weeks, and a Monevator report to boot.
Take it steady,
The Accumulator
Let me be the first to say it: Huzzah!
Now, the cynic in me is looking around to see how iii are benefitting from this; as you intimate perhaps they are looking to charge in the future (bait and switch)? Maybe Vanguard has offered them *something*?
Well, jolly good. Hopefully this will shake the other contenders into better shape too. I just hope they can’t turn around and screw us in 2 years time.
Great news!!!
I’ll be interested to see when the life strategy funds are available to buy online…
@Marc, it could just be in the hope eventually you’ll start meddling (active investing 😉 ) with your portfolio, purchasing individual shares or managed funds, which do make iii a profit.
…or it could be be bait-and-switch!
Noticed this move last week but unfortunately they don’t yet offer the one I would be interested in which is the UK Income Index. I have requested the addition and they say they will monitor demand so anyone out there please contact iii. I currently hold in my sipp with Sippdeal but it attracts a ‘custody fee’ of £50 pa – maybe this will make them review?
One other point, you can tell which funds are available by going to the dealing platform (funds) and insert ‘vanguard’ in the search box.
Anyone actually managed to place an order in their ISA yet ?
Spoke to II – they say I can’t trade the Vanguard LifeStrategy Funds in my ISA….so not yet..?
Congratulations on finding the good news again.
But…..by coincidence I was trying this morning to trade in one of the Vanguard funds you list (LifeStrategy 80 % Equity Fund) through an iii ISA. The response each time was
“this instrument is not currently tradable within an ISA”.
My first phone call to them only got the advice to try their website to see if it is ISA-listed. It is.
Can anyone help with this confusion?
Hi
I tried to trade the 80% and the 100% lifestyle fund in my wifes Interactive ISA and got the message ” this fund is not ISAable”
I have written to interactive to ask them how to trade these funds successfully.
@All — Oh dear, sorry to hear there’s still confusion out there. As The Accumulator says we actually had this article ready to go 3-4 weeks ago and then put it on hold because of similar confusion, which we thought had now been clarified.
Voilà! In view, a humble value veteran, cast vicariously as both vagary and villian by the vicissitudes of vile viziers…
Just have to wait for iii to sort out the admin and make them ISA-able.
@ John H – can you be more specific about where that search box is? Wherever I search for Vanguard on iii, I get the full range (listed for information only), not a cut down list of available funds.
Anyone who isn’t getting a result, try on the phone. I will recontact iii and see if I can get to the bottom of this.
@ Beagle23 – Vive your verbose vivacity.
Vanguard LS 80% (ACDT) is showing as available to purchase online in my iii trading account but not in my ISA – this as at 06.30 18 May
Please see updated comments above. We’re as frustrated as you are by this.
“@ John H – can you be more specific about where that search box is? Wherever I search for Vanguard on iii, I get the full range (listed for information only), not a cut down list of available funds.”
On the actual trading platform, under the ‘trade now’ tab – click on ‘funds’ tab and then enter ‘vanguard’ in the search for a fund box.
The following are shown as available to purchase:
Vanguard FTSE Dvp Wld Ex UK EqIdx A (FUND:FPC9)
Vanguard FTSE DvpEur XUK EqIdx A (FUND:FPD1)
Vanguard FTSE UK Eq Idx A (FUND:FPC5)
Vanguard LifeStrategy 100% Eq Acc (FUND:ACDV)
Vanguard LifeStrategy 20% Equi Acc (FUND:ACDM)
Vanguard LifeStrategy 80% Equi Acc (FUND:ACDT)
Vanguard US Equity Index A (FUND:FPD3)
While everyone including me waits for the Vanguard funds to hit iii consider the mix (something similar is also used by the Accumulator elsewhere on this site) of:
HSBC American Index Retail Acc (50%)
HSBC European Index Retail Acc (25%)
HSBC Japan Index Retail Acc (12.5%)
HSBC Pacific Index Retail Acc (12.5%)
This is similar to a Dev World ex-UK fund. The weightings are mine for ease of maintenance (although not as easy as a single fund would be). Some of the developed world is missing (notably the USA outside the SP 500 and Canada). On the plus side TER works out 0.285% – less than the Vanguard “real” Dev World Ex-UK fund at 0.30%.
There are always alternatives!
Simon
I sent a follow-up query to Interactive Investor on their Secure Messaging service yesterday. Response was sent promptly on 2012-05-17 18:13:21. I have been out of touch till now so have only just spotted this:
“I can confirm that the Vanguard fund mention in your recent message is ISA eligible /LifeStrategy 80 % Equity Fund/.
Our dealing department are currently updating this and it will be available to trade in your ISA within 3 working days.”
So, maybe, maybe?
Also, I have read that Vanguard are launching ETF trackers this coming week with a TER of just 0.1%.
@ John H & Oldfatherlear – thanks for taking the time to clarify. Good stuff. Better get ’em while they’re hot though. iii have told us the funds are only available as part of a pilot scheme, which they say has ended.
The FTSE 100 ETF will be 0.1%, the S&P 500 ETF will be 0.09%. Damn cheap.
@ Simon – good shout. Looks like we’ll still be needing that solution for a while yet.
Will ETF trackers have decent NMS or liquidity when wanting to sell?
(A different Simon to the one above)
How frustrating. Still, if nothing else, I suspect iii have quickly gained an unambiguous insight into the demand that’s out there for this. We watch with interest.
Interactive Investor have announced that they will apply a £20 quarterly charge from 1st July which gives:
“The first two real time trades (funds or equities) you make in each quarter, or a combination of regular monthly investments and real time trades up to the value of £20 in each quarter.”
iii are also introducing a £1.50 fee for regular monthly investing in funds which used to be free. The £1.50s soon mount up if you invest you whole ISA allowance in a wide variety of funds,
Gutted…
I have a number of cheap index trackers with an iii ISA.
I suppose now it’s time to decide whether to consolidate them all, and purchase a single vanguard lifestrategy fund (with HL for £24 per year), or move over to someone else (though I suspect now HL and iii have done it, the others will follow).
I love the fact their justification is to encourage us to trade more!
It looks like there’s a trend going on with platforms introducing fees with RDR coming at the end of the year, first with HL and now iii
The investors with iii ISA that are worst hit would be the ones that invest using their regular investment on only a few trackers like HSBC and ETFs, since the trades would never amount to £20 per quarter and the income rebate from low cost trackers won’t amount to much (do they even receive income from trackers?)
Now is it worth moving out of iii to somewhere else? Something like Bestinvest would be more attractive now since it has lower fees and access to Vanguard funds, or would it be better to sit tight and wait for what the other platforms with the upcoming RDR changes
This is terrible, and just less than a month after I opened an account with them too.
If I decide to close my account with them will I get charged a fee? They mentioned: “…but if you do wish to move your accounts then you will need to make arrangements to transfer your account to another broker. The standard transfer charges will apply.”
Surely I can just transfer out all my funds in cash and it won’t be a problem?
The only thing making me consider staying is the new Retail Distribution Review legislation they mentioned, which may change how the other firms charge fees as well…
Not too pleased with their commission rebate too, given that our funds have so little AMC as it is.
looks like multi index trackers are out the window do to fees
scrapping ftse-all-share for american index S&P500
scrapping emerging markets for a world index
@All — Yes, unfortunately this was quite predictable. I think the name of the game in the run up to and post-RDR will be to keep costs low, not to expect costs to be free. Rather like with ‘free’ banking, we’re paying here for the greater transparency and the end to the disastrous kickback system of the pre-RDR era, even if many of us would never have gone near a broker-recommended active fund ourselves. Without those subsidising the platforms to the same extent we’ll have to pay somewhere, whether in the explicit holding fees on platforms that enable you to buy the cheapest funds, or by holding directly and for free into slightly less cheap to run ones through a higher TER (e.g. Legal and General).
There may be ways around it at the moment but I wouldn’t bank my strategy on a fee of two quid per holding not going up to three quid, say, unless you like moving money around to get the best deal (and I appreciate many passive investors do — more power to you, seriously).
It is worth remembering that these charges are tiny compared to the annual fees of old. I’m not saying they’re not frustrating, or that we won’t on this blog remain committed to trying to find ways to keep them to an absolute minimum and sharing that with you (whether technical details like who is cheapest, or the big picture stuff that is really the nub) but I would hope nobody gets frustrated with the whole business because they’re paying say 80 quid a year in charges. We’ve received a lot of emails about this change from iii (thanks to all of you!) and a few have sounded very downbeat. But over the long-term, 80 quid a year, say, if it’s fixed and independent of the growing sum you have invested, wouldn’t be such a terrible deal — the private pensions of our 20 years ago were scything out 5-10% up front and then taking out 3-4% at least a year!
Co-blogger The Accumulator will hopefully have a post on this by Tuesday. Thanks again all for coming here to share your thoughts, for the emails, and so on! Together we are stronger than them! 😉
(p.s. Sorry for all the ‘quids’ in this comment, I’m on a foreign keyboard! 😉 ).
The iii/Vanguard Saga
The site still shows both the Vanguard LifeStrategy 80% Equity Acc and the 20% Equity Acc versions as available. After some prodding, the 80% option has now gone live within ISAs- I actually managed to invest within mine! The 20% option still gets a ‘not available within an ISA’ response, but further enquiries have brought a promise that it should be there very soon. Progress.
All of the Vanguard funds now seem to be available on iii.
“All of the Vanguard funds now seem to be available on iii.”
no they do not, the list of their offerings actually available to buy is woefully short.
Perhaps they are still experimenting. I checked half a dozen and they were all there when I posted. Some now don’t have a Buy button, but these ones do:
Europe: http://www.iii.co.uk/investing/factsheet/FPD1
UK: http://www.iii.co.uk/investing/factsheet/FPC5
US: http://www.iii.co.uk/investing/factsheet/FPD3
Emerging: http://www.iii.co.uk/investing/factsheet/FPE6
Incidentally, not all of those four funds appear if you simply insert Vanguard into the search box whilst you are logged in to your iii account. You have to find the fund factsheet, then click on Buy, then log in to your account.
The iii search box seems to have caught up now. If you type Vang into the search box when you are logged in to your account, it comes up with an extensive list of the Vanguard index funds, including some that were not available a month ago, such as the Small Cap.