Fee raising broker Hargreaves Lansdown is offering Vanguard index funds through its online trading platform for the first time.
Vanguard offers the UK’s cheapest index funds, and if the testimony of Monevator readers is anything to go by then Hargreaves Lansdown spared itself a lot of ranting phone calls over its new platform fees by suggesting that the cost hikes could enable it to sell Vanguard.
And that’s what’s transpired. Here’s the skinny:
- All the Vanguard trackers listed by Hargreaves Lansdown so far incur a platform fee of £2 a month per fund. Bad news for investors with small holdings, who suffer disproportionately from flat-rate fees.
- Crucially though, the broker is offering Vanguard’s LifeStrategy funds – the passive investor’s equivalent of a matryoshka Russian doll, enabling you to nest a diversified portfolio inside a single fund for only £2 a month in platform fees.
- You’ll need to be able to invest a minimum of £1,000 per fund, or £50 a month (per fund) with the broker’s regular investment scheme.
- The full Vanguard range isn’t available through Hargreaves Lansdown yet. The Irish-domiciled funds are missing, which includes a couple of tasty treats like emerging markets and global small cap. The word is that they will follow in due course.
Those platform fees still hurt
The arrival of Vanguard’s dirt cheap trackers will certainly draw some of the sting of the new platform fees for investors wedded to Hargreaves Lansdown’s platform. The broker’s trump card is that it doesn’t charge dealing fees on Vanguard funds.
But if you’re a new investor tempted by Vanguard funds – or you’re happy to consider a switcheroo away from Hargreaves Lansdown – then take the time to explore your alternatives:
- Bestinvest: High-ish flat-rate management charge, no dealing fees.
- Sippdeal: Low-ish flat-rate management charge, dealing fees.
- Alliance Trust: Lowest flat-rate management charge (except SIPP), dealing fees.
Which is the cheapest route to Vanguard? It depends on how many funds you need, how often you trade and what kind of account you want. I’ll run through some of the scenarios in next week’s post.
Stop the press! In another development, Hargreaves Lansdown has just bagged an exclusive on a FTSE All-Share index fund that’s even cheaper than Vanguard’s.
The ‘SWIP FTSE All Share Index (SWIP Foundation Growth) B class fund’ is from Scottish Widows, has a name longer than a python, and sports a TER of 0.11%. That compares to 0.15% for Vanguard’s equivalent and 0.27% for HSBC’s.
The platform fee is £2 per month so again, it’s not so cheap for small investors in comparison to offerings from rival platforms.
Curiously, there comes attached a mysterious message from Hargreaves Lansdown that implies this offer is available for a limited time only:
If you would like to invest in this fund at the fixed offer price we need to receive your order by close of business on 12 December 2011 (midnight for orders placed online).
Exclusives and limited offers? The term fund supermarket is being taken more literally than ever.
Take it steady,