It looks like Vanguard is no longer the undisputed consumer champion of old. Vanguard’s USP has been waning for a while but the recent announcement of a £4 per month minimum charge for DIY investment services has put the tin lid on it. (Note: this price rise does not apply to Junior ISAs.)

Previously, Vanguard’s DIY investors paid a 0.15% platform fee calculated on their account balance. That made Vanguard excellent value for beginners, young investors, and anyone who can’t afford to put much away. 

But from 31 January 2025, customers will pay £48 annually for portfolios worth less than £32,000.1. 

This is a huge change. 

How Vanguard’s price rise affects small portfolio owners

Anyone with a £1,000 portfolio will pay £48 in charges or 4.8% of their account balance.

Previously they would have paid £1.50.

The numbers may not seem large until you consider that global equities post an average annual return of around 8%2.

At that rate, most of the example investor’s return will be consumed by fees. Precisely the fate that Vanguard’s founder, John Bogle, worked to help people avoid.

As Vanguard itself says, quoting Bogle:

Investors need to understand not only the magic of compounding long-term returns, but the tyranny of compounding costs; costs that ultimately overwhelm that magic.

Very true. And while all brokers are grappling with their own rising costs, an informed investor surveying the options will find that several other platforms are now more competitive than Vanguard for small portfolios.

Costly consequences

Vanguard’s £48 minimum means the platform is now only worth considering once you’ve amassed at least £19,200 in an ISA / GIA or £13,700 in a SIPP. (See below for our alternative picks).

You can sense-check your own numbers using the method we’ve previously outlined: How to work out which platform is cheapest for you. 

Do that and if your portfolio is worth well over £32,000 then you may be left wondering what all the fuss is about. You won’t see any fee hike at that level.

On the other hand…

Vanguard alternatives for small portfolios

^{Disclosure: Links to platforms may be affiliate links, where we may earn a small commission. It doesn’t affect the price you pay nor how we judge the brokers. This article is not personal financial advice. Your capital is at risk when you invest.}

The best Vanguard alternative right now is InvestEngine. InvestEngine’s platform charges and dealing fees are precisely zero for all account types including SIPPs.

InvestEngine hasn’t previously enabled SIPP transfers. But it’s now making an exception for Vanguard customers. 

If you’re wondering how InvestEngine can afford to offer its services for free, here’s its own explanation. But please read our zero commission broker article, too.

InvestEngine is covered by the standard £85,000 FSCS investor compensation scheme. 

Unlike Vanguard, InvestEngine is an ETF-only platform. I don’t think that’s a barrier though as ETFs are now cheaper than funds for many asset classes. And InvestEngine offers plenty of options, including non-Vanguard providers. 

• Here’s our take on ETFs vs index funds.

Another zero-fee alternative is Prosper.

Prosper is every bit as cheap InvestEngine. Again, you can read its own explanation on how it makes money.

Prosper is an app-only investing service, offering a limited number of index funds and ETFs – though Vanguard products are prominent. The range may be small but it has the main asset classes covered, and typically includes a competitive index tracker in each category.

Prosper also includes a SIPP in its account line-up, alongside an ISA and GIA as usual.

The firm itself is relatively new. But it is protected by the FSCS scheme.

Cheapest Vanguard alternatives if you prefer better known brands

These options are worth considering because they couple free fund trading with a low percentage platform fee:

Close Brothers:

• Pros: 0.25% platform fee, zero dealing fee on funds. 
• Cons: Expensive SIPP. 

HSBC Global Investment Centre:

• Pros: 0.25% platform fee, zero dealing fee on funds. 
• Cons: Restricted number of non-HSBC index funds. No SIPP. 

Fidelity:

• Pros: Cheap SIPP so long as you invest monthly – 0.35% platform fee, zero dealing fee on funds. 
• Cons: £90 minimum annual charge if you don’t invest monthly. Applies to accounts worth less than £25,000.

Santander Investment Hub

• Pros: Cheap SIPP – 0.35% platform fee, zero dealing fee on funds. The same price as Fidelity but no penalty for failing to invest every month. 
• Cons: Bad Trustpilot reviews albeit from a limited pool.

Dodl by AJ Bell:

• Pros: Dodl by AJ Bell is cheaper than the rest except InvestEngine and Prosper – but only once your portfolio passes the £4,800 mark. 
• Cons: Highly restricted fund and ETF list. £12 minimum annual account charge. 

Any other contenders?

There are a few more zero commission trading apps available but they don’t occupy the same space as Vanguard. While such firms offer ETFs, they’re primarily focussed on trading and speculating on high-risk assets.

Still, you can check many of them out via our broker comparison table.

Transfer day

There aren’t any exit charges to pay if you’d like to transfer your account away from Vanguard. 

Transferring is simple enough though it may take a few weeks. 

If your new broker doesn’t offer a Vanguard product then your investment will be sold to cash and the money moved over instead.  

Here’s Vanguard’s page on transferring out. 

These pieces explain what to watch out for:

• How to transfer a stocks and shares ISA
• How to transfer your SIPP
• What are the risks of being out of the market?

What a pity

This isn’t John Bogle’s Vanguard anymore.

A fee cut on its index funds is vanishingly rare these days. Over the past several years, the company focused more on adding higher-fee active funds to its roster. Now it’s squeezing small investors. 

Under Bogle, Vanguard changed the face of the investment industry through its relentless pursuit of a simple proposition: If it’s good for our customers, it’s good for us.

In so doing, it forced its competitors to become more like Vanguard – to the benefit of millions of people.

Now though Vanguard is starting to look more like everyone else. 

Take it steady,

The Accumulator

1. Account balances above that threshold are charged at 0.15% as before, with annual fees maxing out at £375. [↩]
2. Approximate historical annualised return, unadjusted for inflation [↩]

What caught my eye this week.

Was there ever a rationale way for investors with a 60/40-style equity/bond portfolio to avoid the worst of the government bond rout of 2022?

It’s a question that still bothers me. As a writer and an investing blog owner, mind you, not on my own account.

I didn’t own any bonds going into 2022 as an active investor. I’d felt gilts looked a poor risk-reward proposition for years.

But fret not – this isn’t a brag…

I found plenty of other ways to lose money in 2022. Indeed it was my worst showing on a relative basis in my investing lifetime.

However I didn’t own any government bonds. Which meant at least I didn’t suffer the indignity of seeing the supposedly ‘safer’ bit of a portfolio do worse than if I’d gone all-in on stocks.

Yield to no one

As I wrote in December 2022 in my recap of that woeful year:

Vanguard’s popular LifeStrategy funds have put in a Bizarro World performance:

• The supposedly lowest-risk LifeStrategy option – the 20/80 fund, with just 20% in shares and 80% in bonds – has done the worst.

• The best LifeStrategy fund to own in 2022 was 100% in shares.

This is the opposite of what we’ve come to expect from balanced funds like LifeStrategy.

And let’s be honest – it sucks.

True, the pain of 2022 has made government bonds investable again. That’s a genuine upside.

However for anyone who owned a lot of government bonds before the rout, such a silver lining must feel a bit like when your house burns down and at least you get the chance to plan a new kitchen.

Crying wolf about bonds

Whenever I reproach myself for not writing more about the risks of government bonds on very low yields, my co-blogger The Accumulator reproaches me in turn – by reminding me we did!

Long-time Monevator readers may recall such classics as:

• Why UK inflation-linked funds may not protect you from inflation [2016]
• How much will you lose if bond prices fall? [2020]
• Negative yields on bonds: what do they mean? [2020]

Also, I did fret openly about a potential government bond crash – way back in 2015!

Indeed – and even more tellingly – I first worried government bonds were getting overvalued in 2008, when the financial crisis was still raging and safety was a first resort.

As things turned out, the ‘low’ yields that spooked me then – yields which at the time had not been lower since World War II – still hovered above 3%.

Bond yields had far lower to go in the years ahead.

A wayback machine

In fact, gilt prices continued to climb inexorably – and hence their yields fell to near-zero – until 2022, when suddenly everything reversed.

So precipitous was the subsequent plunge that the iShares core UK Gilts ETF (ticker: IGLT) is still underwater compared to when I first fretted about low yields in December 2008!

IGLT is a distribution fund. Its price doesn’t include the return from dividends. But even if you’d reinvested your income from IGLT, the 16-year gains are puny:

Source: iShares

Over the same period a world equity tracker multiplied your money nearly six-fold. That’s not so much an opportunity cost as an opportunity catastrophe – unless of course you’d been prescient enough to sell your bonds in 2020.

But that’s hindsight speaking.

Good going until it wasn’t

We didn’t know for sure that the world wasn’t headed for another Great Depression in 2008 – or something even worse, if the ATMs had failed and all the banks went bust.

And even as yields fell further over the following 14 years, it still seemed futile to bet against bonds.

Yields would just be lower again the next year, and you’d be left with egg on your face.

The best a strict passive investor could probably do was to reduce their government bonds to a tolerable minimum and hold more cash (and other assets) instead.

But remember that for years that would have been a poor trade. The return on cash was nearly nothing. Yet bonds remained a decent investment, delivering steady returns well into the Covid era.

Our model Slow & Steady Passive Portfolio, for instance, outperformed our expectations for a 60/40 portfolio for years, in large part thanks to those relentless gains in bonds.

Don’t fight the last war

So where does all this looking back leave us as we ponder the future?

Well, arguably it’s all moot.

It’s one thing to say that perhaps there was a case for even a passive investing purist ‘market timing’ away from government bonds when the ten-year yield danced towards zero – and the expected returns from inflation-linked government bonds went negative.

But that isn’t where we are now. And there’s no reason to think we’ll see the like again in the next 50 years.

Those near non-existent bond yields were probably a special case.

In contrast, fiddling when the yield on the ten-year falls to 3.5% and you’d bought at 4% might be the stuff of a lucrative day job on the prop desk of an investment bank.

But everyday investors will surely to do worse for such tinkering…

…or will they?

Trigger happy

I’ll conclude with some interesting research shared by Jim Paulsen a couple of weeks ago on the U.S. flavour of a 60/40 portfolio.

For his purposes, Paulsen1 defines the ‘cost’ of holding a 60/40 portfolio as being how much it would lag a 100% equity allocation over any particular period.

This cost – in terms of foregone returns – is the price you pay for the lower volatility and downside protection of holding government bonds, with their guaranteed return of capital and knowable returns.

Digging into the numbers, Paulsen found that the cost has previously soared when the yield on a ten-year US Treasury bond falls below 4%:

Source: Paulsen Perspectives

There are probably two reasons for this observation over this period.

Firstly is the one Paulsen focuses on. When bond yields are low, you’re not getting compensated as much for owning government bonds in terms of income. On an inflation-adjusted basis, you might not be making money at all.

But secondly, I suspect there’s an equity timing signal buried here.

When government bond yields are very low, it’s probable people are more fearful than usual. They’ve likely bought government bonds for safety, presumably in part with money that could instead be invested in shares.

In that case equity valuations may be depressed – implying potentially higher returns from the ’60’ part of the portfolio going forward.

A new 4% rule…

Whatever the reason, Paulsen suggests the 4% yield level could act as a trigger for US investors to look again at their asset allocation should the ten-year US treasury yield fall below 4%.

Rightly he doesn’t suggest wholesale abandonment of a diversified portfolio, writing:

The 60/40 balanced portfolio makes sense for many investors and there is no reason to abandon balanced management even if the 10-year Treasury yield does decline again below the 4% trigger.

However, 60/40 investors may want to consider occasionally altering the balance mix depending upon which side of the Trigger they find themselves.

If you generally are a 60/40 investor, perhaps you could adopt the simple rule of being 50/50 when above the yield Trigger and switching to 70/30 when below the yield Trigger.

Depending on each individuals’ risk tolerance, this ‘toggle approach’ may not be appropriate.

But for those balance investors who may want to try and take advantage of the 4% Trigger and keep the ‘relative cost’ of balanced management reasonable, adjusting the mix slightly around the toggle may prove profitable, perhaps as soon as in 2025.

Finally I’d note that Paulsen’s backwards data dive only ran to 1945 (when, as I said above, bond yields were last very low) and also that this is US data, with its rip-roaring equity gains to greatly plump up the ‘cost’ side of the equation.

Still, food for thought. Especially if yields ever do descend into the depths again.

Have a great weekend.

[continue reading…]

1. For many years the chief investment strategist at giant US bank Wells Fargo. [↩]

Back in the mists of time (aka 2007) I planned Monevator to be as much about entrepreneurship as investing. That faded as we honed our niche, but I’m still delighted when I find a business success story in our ranks. Valiant has commented on Monevator for years, but I’d never guessed his background. It’s heartening to hear how achievement in the cutthroat world of business can dovetail with a commitment to passive investing, even with sums running into the millions. Enjoy!

A place by the FIRE

Hello! How do you feel as you take stock of your financial life today?

Rationally, I can see that I’m better-placed than 99% of people, and I’m very fortunate. I’ve worked crazily hard but I’ve also been the right person in the right place and should be financially secure for life.

But the same thought that’s driven me throughout my working life – fear of ending up living in a cardboard box – means that I’m never really content.

I tell my wife that if only I could win the lottery I would be truly content. She says I absolutely would not!

So you’re married… Children?

Yes, I’m in my early sixties and my wife is a year or so younger. We’ve two adult children. One is married and lives in London, not currently working. The other is single and lives and works in IT in Manchester.

Where do you live and what’s it like there?

We live in a small, rural village in Somerset. It’s very quiet, with quite an elderly population. We’re still amongst the younger ones. Wealthy incomers like us have driven prices up so not too many younger local families can afford to live here.

The nearest town is eight miles away and the broadband is rubbish, but overall we like it.

We also have an apartment on the river in South-West London, close to where my in-laws live.

When do you consider you achieved Financial Independence and why?

I left my last permanent job in the 1980s, aged 27, and have never had a ‘proper’ job since. I worked as an IT contractor for some years, then started my own businesses.

By the time I was in my mid-50s I’d paid off the mortgages on both my family home and a holiday home, had plenty of savings, and owned a company generating a million a year in earnings. So I was probably already financially independent by then. But then in 2016 a global IT company bought my firm for many – though not tens of – millions and I was surely set for life.

What about Retired Early?

After I got the final tranche of money for the business sale – at the end of a two-year earn-out – I did stop working full-time.

I now work as a non-exec director to some small companies in the cloud computing sector. That takes up two to three days per month. I don’t really do it for the money – just the interest.

My wife runs a holiday let which I help out with. I’m also the treasurer for a couple of charities.

Assets: super secure

What is your current net worth?

Including SIPPs, ISAs, other equities, cash, and properties, between us we are perhaps worth £9m.

How does that divvy up? Any debts?

We own three houses outright, one of which we run as a holiday let.

Between us we have two SIPPs with a value of £2.1m. ISAs holding about £1.8m. We also have dealing accounts holding equity and gilts with a value of £560,000, Finally, cash savings of £1.2m.

We lent each child about £350,000 some years ago to buy a starter home. I put a lien on each so it probably counts as a loan. We will probably soon write these liens off and make them gifts.

What’s your main residence like? Do you own or rent it?

We own it. It’s a three-bedroom house which we had built to our own specifications, having demolished the existing one on the plot ourselves. It’s got great views, is of modern design and very energy-efficient, but otherwise it’s fairly modest.

From a financial point of view, it’s a folly. It cost about twice as much to buy the plot and demolish the old house and build the new one as the house would probably sell for. (Although we largely did the demolition ourselves with a sledgehammer and a quad bike. I’ve never been fitter than that autumn!)

Folly or not, it should do us until we die or need care.

Do you consider your home an asset, an investment, or something else?

It’s somewhere to live. We’ll be here until we die or have to go into a care home…is the plan.

Earning: entrepreneurial adventures

Tell us a bit more about your career.

I worked for a year at a defence establishment before university – in the late 1970s before it was fashionable to take a gap year – and I got into computing there.

I did a very scientific degree but when I left I fancied a change. So I worked for a couple of years selling exhibition space for conferences, then organising conferences myself and selling attendance to them.

After that I took an IT job in the mid-1980s, stayed in it for three years, and then moved to Australia for a while where I started IT contracting. I did that for a few years before starting a series of IT service firms. I eventually rode the wave of cloud computing.

What was your annual income?

At its peak, in the years before the sale of the last business, I was earning hundreds of thousands a year. When it became apparent that we would soon get bought I cut back on the drawings to boost the cash position of the business.

How did your career and salary progress over the years – and to what extent was pursuing financial independence part of your plans?

By the mid-1990s I was earning £2,000 a week as an IT contractor. I just saved as much as I could! I was convinced my good fortune would soon come crashing down, and the current contract would be my last.

In reality, aside from a few months after first moving to Australia, I was never out of work. But it never occurred to me that the good times would continue. I never truly believed that I was financially secure until the last business was sold and I achieved the earn-out.

Did you learn anything in building your career and growing income that you wish you’d known earlier?

Obviously with hindsight I can see the good times did continue. I’d probably have borrowed more.

When we had our first child we were living in a tiny end-of-terrace house. We borrowed £70,000 from my mother-in-law to buy a £140,000 detached house, which we lived in for 22 years and eventually sold for a million.

We should have borrowed much more. But my glass-half-empty nature would never allow it.

I started a SIPP at the urging of my accountant. As with many people in their 30s I thought the day I’d need a pension would never come. With the benefit of experience I wish I had put more into it when I could, and that I’d managed it better in the early days. I just used to follow some model portfolios, and I did not pay enough attention to charges.

Do you have any other sources of income?

We earn a bit from the holiday let, and I pay my wife from my non-exec director business because for historical reason she still needs two more years of earnings to qualify for the full state pension.

I drawdown enough from my SIPP each year to use up my basic-rate tax allowance. We’re in the process of putting the holiday let into my wife’s name so she can use more of hers up.

Did pursuing FIRE get in the way of your career?

No. I had no structured career to speak of after age 27. I just freelanced or ran my own businesses.

How did running a business affect your attitude to personal finances?

I felt a big responsibility to my employees. We had very little staff churn so a lot were with me for many years. By the time I sold the last business we had around 50 employees. We didn’t take the highest offer, but the one that we thought best fitted our own ethos, and which would keep the most staff.

In the event only four were released. But even then one had also become a good friend and things have never been the same with her since, which is a source of regret.

By the end we were having to find a quarter a million a month in pay and employer’s National Insurance (NI), and £30,000 more for other overheads. That did concentrate minds, and sometimes led to sleepless nights.

I don’t think the current government understands how much small business owners are risking – although the previous government wasn’t great either.

What motivated you to leave paid employment to become a contractor?

In the mid-1980s I was working in the City of London – a real boom time. I was employed in a sought-after technical role earning £10,000 a year. I was surrounded by more experienced people getting £400 a day.  

After two years of that I thought I was as good as them, and left anyway to try my luck in Australia – where my role was also much sought-after, making immigration easy – and chanced my arm as a contractor. I stuck out contracting for ten years, though I came back to the UK after three years.

How did freelance contracting turn into a business with employees?

The transition came organically. I was already running a couple of contracts which I was largely sub-contracting to others. And I had a number of customers who wanted my technical and management skills. Down the years I’d met some really good people, and when one customer in particular asked if they could outsource the bulk of their IT to me – backed up by another contractor with whom I’d worked well – I took the plunge.

I never really looked back from there. Even so, in the early days there were just four of us and a handful of contracts. It was a long haul to use those original contracts (all with quite big names in their sectors) to acquire new customers and build a business with 50 employees.

We also had a big break in substituting for another supplier engaged to one of the big beasts in a particular new sector. We did a good job and so kept that partnership. Then that sector really took off and burned brightly for a while.

Did you offer anything unique?

In IT services there are literally thousands of small suppliers jostling for attention in a very crowded market. Our strategy, driven by our top salesman, was to present ourselves relentlessly both to customers and to the large vendors as THE people to turn to in that new sector I mentioned.

It sounds easy to stick to a strategy. But when you’re a small business struggling to boost sales and meet payroll and overheads every month it takes a great deal of self-discipline to persevere with your core messaging and to turn down easy money from ‘non-strategic’ sources.

Finally, my tech director spotted the potential of cloud computing and we rode that wave successfully too.

So some of our success was spotting a trend and exploiting it. But a large part was being in the right place at the right time!

What was the biggest challenge you encountered?

Sales was vital. Coming from a largely technical background I found managing techies quite easy. Ditto finance and admin, but sales is a different world.

Most sales people are quite avaricious and competitive (in a good way) but in my experience the best also at heart want to be valued. And like most people they perform best when they believe in the product and service they’re pushing.

Unlike most jobs, where there is to a greater or lesser extent subjectivity in assessing performance, there’s no hiding place in sales. You have a target and you either hit it or you don’t. There’s no ambiguity.

I felt I spent more time managing our 3-5 sales people – I never had a sales manager – than all the other teams put together!

Did FIRE-type thinking and business strategy gel at all?

My aversion to debt meant that we grew our businesses fairly organically. Occasionally I was tempted to borrow to buy a competitor but – with the exception of one small complementary business – we never completed on a handful of potential deals to do so. This may have been a mistake in the years after the Global Financial Crisis. We found ourselves competing with other companies much less well-run than us, but who were able to keep operating and competing fuelled by very cheap debt.

Should we have gone for it? Maybe, but I’m happy enough anyway.

So no regrets?

One of our largest customers was owned by a well-known billionaire, who had taken an interest in that business because it had great potential in the event of a regulatory change. Watching him at close quarters was breathtaking – the utterly ruthless elimination of every last bit of cost. They just slashed and burned, and somehow they kept going despite disillusioned staff, elderly technology, and poor customer service.

In fairness, the business they rescued from administration to become our customer would have failed without him. But he always paid late, and argued about every last penny. He personally authorised every invoice over £5,000, despite having a massive media empire.

I could never run my business like that. Probably in consequence I could never be a billionaire. But it was a window into the world of a true tycoon.

Do you feel entrepreneurs get the same acclaim in the UK as they do in the US, or even Australia?

I would say they do not.

It doesn’t seem to be much of a stigma to have a failed business on your CV in the US, but it certainly is in the UK. And  – perhaps this is just a function of some of the media I read, such as The Guardian – many people in Britain seem to openly despise anyone making profits and creating jobs.

The UK seems to have a mindset of preferring public sector jobs to private. In many parts of the country the pay scales and benefits in the public sector – which outside London have no local variation –  are so good that small businesses are frozen out, particularly in poorer areas where the public sector pay rates are thereby relatively high. Private companies can’t compete for good staff.

I was lucky in that by growing my businesses organically, we didn’t need much seed money. Where we did, I could fund it myself. But others I know have found it very difficult to borrow from banks and have been asked to put up a lot of security. 

That’s okay I guess if the rewards are there for the risks. But recent tax changes – especially the drastic reduction in Business Asset Disposal Relief (BADR) – must make potential entrepreneurs question whether it’s even worth bothering? 

I’m certainly not interested in starting another business that would involve employing people. Employer’s NI is too high. I’ve already used up my lifetime BADR allowance and I’d pay 24% CGT on disposal of any business I sold. 

I already have enough money. It’s no longer worth the heartache!

“Why didn’t I start Monevator in Australia?” mused The Investor, editing another article as a cold rain fell outside.

Saving and spending: living a quiet high life

What is your annual spending?

It’s been an unusual few years, as we’ve been building the house which, with the land, cost over £1.6m. But I would say that our run-rate spend is about £100k a year.

It’s really expensive running three properties. Almost £15,000 a year in Council Tax alone.

Do you stick to a budget or otherwise structure your spending?

No. Aside from the multiple homes we don’t have expensive tastes or hobbies. We’re not interested in cars (although we have a fairly new electric car, and we also have a 12-year old Mini and an elderly Land Rover). We don’t travel all that much (though I go First for long haul if we do). We eat out infrequently.

What percentage of your gross income did you save over the years?

I probably always saved at least one-third of what I earned.

Chunky! What’s your secret to saving?

I vividly remember a contract I was doing after I returned from Australia. At that point I was probably on £400 a day but driving a five-year old Cavalier. One of the other contractors had just got a really smart sports car and told me I was an idiot for living like – as he saw it – a hermit.

But to me it’s important not to spend every penny you have. Bad times could be just around the corner (although in fact they never were!)

Do you have any hints about spending less?

Don’t borrow, except a mortgage.

Do you have any expensive passions, hobbies, or vices?

No! I have a very dull life.

I go to a lot of live sport – lower league football and cricket – and I have subs for all the sports channels, so I suppose that’s an extravagance.

My last business was big in IT for sports and so the TV subscriptions used to be an allowable expense. No longer!

Investing: progressively more passive

What kind of investor are you?

Nowadays I’m almost entirely a passive investor, having recently sold a large chunk of Fundsmith that did really well for us.

What was your best investment?

Probably Fundsmith. My wife and I were in from almost the start – my account number is in the hundreds – and they turned a £100,000 investment into something north of half a million over ten years.

In terms of pure percentage appreciation, though… I bought a few hundred pounds worth of Bitcoin a few years ago, just to learn a bit about the process. I checked how it was doing for this interview and was amazed to see it’s valued at almost £22,000!

I’m still a sceptic, but might buy some more if and when the next crash comes. However my bank (First Direct) makes it very difficult to buy via reputable sources.

Also, not an investment but my accountant talked me into taking ‘2012 Protection’ on my SIPP. Although this is less of a boon that it was before the abolition of the Lifetime Allowance, it still entitles me – at the time of writing – to take an extra £182,000 tax-free from my SIPP.

Did you make any big mistakes along the way?

I probably didn’t look at costs enough early doors.

I had several million at once to invest after the last company sale. If I’d discovered Monevator by then I’d have done it myself. But instead I used an IFA who guided me into a fairly conservative fund with a big-name institution.

Now I know that – in terms of performance and low-cost – a DIY combination of tracker and gilts would have been the way to go.

I started to diversify into gilt funds a couple of years ago. In a fatal mistake borne of arrogance and laziness I didn’t take the trouble to understand how the funds worked properly, and I (deservedly) lost big money in 2022.

I still like gilts. But now I’ve taken the time to understand them, buy individual ones, and hold them to maturity.

I also sold a fair bit in a panic at the start of COVID. I should have held my nerve!

What has been your overall return, as best you can tell?

I’ve only really started to take notice since I got the big bucks when I sold the last business, and had to invest a very large sum at once. I took some advice and used a managed fund from a big bank, which I sold last year and reverted solely to trackers.

When I sold, the value of the fund had gone up by about 50%. Probably not as good as VWRP!

How much were you able to use your ISA and pension allowances?

My SIPP has done okay, given that I stopped contributing to it in 2012 in return for protection. I’ve withdrawn £200,000 from it over the past four years and it’s still worth £1.8m.

Given that I was planning around the now-defunct Lifetime Allowance of £1.8m I think I’ve managed it as well as I could have.

We’ve both contributed fully to ISAs, and PEPs before them, since inception.

Neither of us is an ISA millionaire though. In that respect we probably should have invested better!

To what extent did tax incentives and shelters influence your strategy?

We’ve exploited both SIPPs and ISAs fairly tax-efficiently. As I mentioned earlier I also cut back my drawings from my business in its latter years. This improved its cash position but it also meant that I was able to get out the free cash and pay just 10% CGT on it.

The limit on this relief has since been slashed from £10m to £1m, which I have already exceeded. That is one reason why I have not started another serious business.

How often do you check or tweak your portfolio or other investments?

I probably check once a month, and re-balance once or twice a year. Rarely anything dramatic. I did however sell that tranche of Fundmsith in anticipation of a large CGT rise in the recent Labour budget.

Were you ever tempted to apply insights you gained in business to active investing? It’s interesting that you worked in tech, but the active fund you mention – Fundsmith – is hardly a tech play…

Never tempted, really. I’ve dabbled in the occasional stock or sector pick, but I’ve come to realise that I and most other people know nothing and can predict nothing. So I am happy with a passive style.

I do have a few VCTs and EISs which I didn’t mention before. Perhaps £100,000 and £60,000 of each respectively. In the EISs I do tend to pick sectors which I know something about. I have also invested a few tens of thousands in a friend’s cloud business.

Fundsmith was just a punt on a recommendation that paid off by Merryn Somerset Webb, whose podcasts and writing I enjoy almost as much as Monevator!

Wealth: mo’ money no problems

We know how you made your money, but how did you keep it?

Paying down debt, particularly mortgages, as soon as possible.

This may not always have worked to my advantage.

When I sold the business in 2016, the IFA who advised me on investing the lump sums was keen to have me borrow against these to invest further in equities.

In hindsight this would have been a profitable strategy. But I lack the mental attitude to take that kind of risk.

Which is more important, saving or investing, and why?

Well…both! Bigger picture, I am torn between two approaches, both of which I was introduced to by Monevator.

Nick Magulli wrote a book – which I bought because Monevator told me to – Just Keep Buying. As the title suggests, the ethos is to buy stock the minute you have spare cash, and don’t worry about it. The best time to buy equities is now.

On the other hand, another Monevator-recommended column (I forget whose) said that if you’ve won the game already, stop playing.

I think I probably have. There’s enough money to keep us comfortable. I don’t want to be the richest man in the cemetery. Nor am I obsessed with leaving my kids as much as possible. I can afford to buy pretty much anything I really want.

I don’t need large real-terms growth, so I should probably take a step back and be conservative.

Orthodoxy would have someone at my age – largely decumulating – being at most 50/50 equities/bonds. I think I can probably live with 60/40, or even 70/30. As long as I have, say, five years of anticipated spending money in cash or gilts to minimise the need to sell in a slump.

But right now we’re only about 30% equities (14% Gilts, 10% Gold and 46% cash). That’s because of the Fundsmith sale and – here I feel the wrath of Lars Kroijer et al at my back, asking why on earth I think I know better than ‘Susan’ – now just doesn’t seem like a good time to buy more global trackers.

There’s an interesting contrast between your relatively cautious stance as an investor and the riskier lifestyle of having been an entrepreneur…

I don’t think I am actually that cautious an investor!

I have fairly conventional assets (global trackers, gilts, cash, gold) but until quite recently I was pretty bullish on the percentage of assets I held in equities.

Even now am planning to get back to 60% equities – which is high for a decumulator I think?

When I started my IT contracting journey, my dad, who’d worked himself up from tea boy to sales director at the same business for 30-plus years, kept telling me I should ask for a permanent and secure job. But even by then – early 1990s – I think those days had gone.

Unless it’s in the public sector, is there a really secure job any more? 

I accept that employees in the UK have a reasonable amount of tenure after two years – which the current government plans to extend to all employees from day one. This will be a disaster through the law of unintended consequences! But even so, people can be managed out for relatively small sums.

So whilst as an an entrepreneur I didn’t have the security of a permanent job, I also kept a very close eye on the worst case at all times. I never put myself at risk of losing everything.

Many do of course, for example by putting up homes and so on as security. Some become billionaires through it. 

But I don’t think I ever had the risk-taking mentality to earn more-than-you-could-ever spend big bucks.

When did you think you’d achieve financial freedom – and was it a goal with a timeline?

I never thought I would until I did.

Even now I worry.

What would you say to Monevator readers pursuing financial freedom?

Be realistic, and have an enumerated plan.

I no longer use the IFA who helped me invest the proceeds of my last business sale, but he did one thing that really helped me. He sat me down with Mrs Valiant and we worked out a plan of expenditure over ten years – to take us to state pension age, when we’ll get a £25,000 a year injection I hope – and then used that to suggest the balance of income and investments needed to achieve it.

Of course that plan has required adaptation down the years and it’s far from perfect.

But I do believe that a clear, spreadsheeted plan – which like rules are for the guidance of the wise but the blind observance of fools – is a great help.

How long did you use an IFA for? Were they not helpful when the sums to manage got well into seven figures? Or did your accountant handle all your tax advice?

I had one or two IFAs after I started making decent money contracting. But I was an awful client really.   

The first one I had was a lovely guy and we talked football incessantly. But even when I asked him to his face he just couldn’t come up with firm recommendations. It was all: “on the one hand, on the other…” In the end I gave up on using him because of this.

Later on I tried an IFA that a non-exec director we used recommended, and he wanted to be wholly prescriptive. One time he wanted to put 10% into commercial property. I invited him to look out of our office window at the vast array of ‘For Let’ boards stretching to the horizon.

But I didn’t want to go with a managed approach either. I always resented the fees. I’m better off managing my money with simple Lars Kroijer-style strategies. If it goes tits I only have myself to blame.

Even as the portfolio grows so substantial?

When I sold my last business I had millions to invest, and wanted some help with the selection and the mechanics.

This was a decade ago. I’d have more confidence to do it myself now.

As mentioned my IFA was quite good at forcing us to sit down and work out our medium and long-term objectives. And he did negotiate a good management fee rate with a reputable supplier.

But in the end the performance wasn’t great. Also he kept suggesting more off-the-wall things that I was obviously never going to do – lending money to an ex-Premier League footballer was one highlight!

The IFA wasn’t earning much if I wasn’t re-investing or re-cycling the funds, so we decided to part company. I have been self-invested since.

I get most of my tax advice from my accountant. On occasion – when selling a business, for example – I use a specialist tax advisor recommended by my accountant.

I’m interested in this unusual and long-standing relationship you’ve had with your accountant. You must have both been very young when you first worked together. Presumably his career grew as your business expanded?

I needed an accountant when I started contracting in 1988, so in my mid-twenties. He’s probably about five years older.

After initially using a local accountant – who was used to Mr-Bun-the-Baker businesses and was fine getting me up-and-running – I felt I needed someone more specialist. I found an accountant writing in a specialist contracting magazine and I liked his straightforward, play-it-straight-on-tax approach. We’ve worked well together for over 30 years now.

The curious thing is that – as he’s based in the North and I’m in the South – I’ve only met him in person maybe a dozen times in all those years!

One of the best pieces of advice he gave was to take 2012 SIPP protection. Even though the Lifetime Allowance has been abolished for now, it still means I can take £450,000 from my SIPP tax-free rather than the new limit of about £290,000. That saving alone is probably greater than all the audit and advice fees I’ve ever paid him. He’s truly brilliant in my view.

His practice did grow as mine did, wholly incidentally of course, and he’s quite a big fish in his area now. The advice is all very conservative and we swing the lead very little. Although I may have missed out on some allowances and questionable wheezes, it’s worked well for me.

Any other business?

When did you first start thinking seriously about money and investing?

In my mid-thirties.

Did any individuals inspire you to become financially free?

My accountant, who as I say I’ve been with for over 30 years. And also my father, who was a salesman. My father taught me always to be as straight as a die with other people over money. And also to have self-awareness: £50 might not be that much to me but it might to an employee or a small supplier, so always pay expenses quickly. I hope I have lived true to this.

One of my businesses was started with a junior partner. We got on amiably enough but were never besties and didn’t socialise out of work. Nonetheless I trusted him implicitly never to f*** me over.

Trust is such a vital part of my work and my financial journey.

Can you recommend your favourite resources for anyone chasing the FIRE dream?

Lars Kroijer (writings and webinars), Tim Hale (book), and Monevator.

What is your attitude towards charity and inheritance?

I try to give generously, especially to smaller charities which get crowded out. I always try to support friends or acquaintances who are doing things to raise money (although I dislike people doing a bucket list entry they wanted to do anyway under the guise of charity). And I give a lot of time to the two charities for which I am a trustee.

I could and should probably give more money to charity, but I’m frightened I’ll end up needing all I have to avoid living in a cardboard box.

I don’t like this aspect of my personality.

And inheritance?

I’d like to leave some money to my kids but I also try to help them as much as I can now. One has a really good and well-paid job and the other is struggling financially. It’s difficult to remain even-handed.

What will your finances ideally look like towards the end of your life?

In reality I wouldn’t be surprised if I end up with as large pot as I have now. All will go to my wife, if I die first, or to my kids.

I probably should be doing much more planning and giving away now for tax efficiency. But I’m terrified that I will end up… well, you know the rest!

Now and then I’m reminded of the vast range of backgrounds behind the usernames I’ve interacted with on Monevator for years. Hearing Valiant’s life story and outcome has certainly been one of those times. Please remember Valiant is just another reader sharing his story, not a gnarly old blogger like me. Useful feedback and questions welcome. Personal attacks of any sort will be deleted. Read our other FIRE studies.