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Buying Vanguard - direct or via AJ Bell?

Index tracking funds and ETFs
zico
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Buying Vanguard - direct or via AJ Bell?

#328806

Postby zico » July 26th, 2020, 2:58 pm

Apologies if this question has been asked before, but just wondering whether it's better to set up a Vanguard account to buy their funds direct, or whether to use AJ Bell to buy them?
Planning to invest about £60k, spread over 5 or 6 passive Vanguard trackers, with regular investments, every month buying extra units in 3 of the funds.

Are there any other factors to consider - e.g. ease of dealing, compensation schemes, exit charges?

mc2fool
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Re: Buying Vanguard - direct or via AJ Bell?

#328822

Postby mc2fool » July 26th, 2020, 4:27 pm

zico wrote:Apologies if this question has been asked before, but just wondering whether it's better to set up a Vanguard account to buy their funds direct, or whether to use AJ Bell to buy them?
Planning to invest about £60k, spread over 5 or 6 passive Vanguard trackers, with regular investments, every month buying extra units in 3 of the funds.

Are there any other factors to consider - e.g. ease of dealing, compensation schemes, exit charges?

I take it you've done the maths for your pattern of buying and size of holding?

Basically Vanguard will charge you an annual custody fee of 0.15%pa of the value of your portfolio and let you buy & sell their investments for free.

IWeb will charge you a one-off £25 for opening the account, then nothing for an annual custody fee and £5 per trade.

AJ Bell will charge you a custody fee of 0.25%pa of the value of funds in your portfolio and £1.50 per trade. For ETFs (rather than funds) the custody fee is capped at £30pa and the dealing fee is £9.95.

IWeb obviously wins big once you've got a stable portfolio whereas Vanguard will be better for smaller portfolios with a lot of trades. You'll need to do the maths for your case. ;) Sounds like you might be better of with Vanguard to start and then switching to IWeb once you're all invested.

Re ease of dealing, compensation schemes and exit charges. I've no experience with either Vanguard or AJ Bell but as all of Vanguard's pages have an "Invest Now" button I'd imagine that it'd have the edge on ease of dealing in Vanguard funds. :D OTOH it won't be exactly difficult with most brokers, it certainly isn't with IWeb.

Compensation schemes, all are FSCS covered, so the same, and as for exit charges, I am very surprised to see AJ Bell charges £25 per holding, as the trend is towards no exit charges, and that's the situation with both Vanguard and IWeb.

I think the only other thing to consider is that the Vanguard a/c only offers Vanguard funds/ETFs, so if you do ever decide you want to buy something else, well, you can't.....

zico
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Re: Buying Vanguard - direct or via AJ Bell?

#328850

Postby zico » July 26th, 2020, 8:09 pm

mc2fool wrote:
Basically Vanguard will charge you an annual custody fee of 0.15%pa of the value of your portfolio and let you buy & sell their investments for free.

IWeb will charge you a one-off £25 for opening the account, then nothing for an annual custody fee and £5 per trade.

AJ Bell will charge you a custody fee of 0.25%pa of the value of funds in your portfolio and £1.50 per trade. For ETFs (rather than funds) the custody fee is capped at £30pa and the dealing fee is £9.95.

IWeb obviously wins big once you've got a stable portfolio whereas Vanguard will be better for smaller portfolios with a lot of trades. You'll need to do the maths for your case. ;) Sounds like you might be better of with Vanguard to start and then switching to IWeb once you're all invested.



Thanks for your reply. I may be misunderstanding you, but given what you say about the fee structures, wouldn't it be better for me to make initial investments of around £60k on IWeb, and then create a Vanguard account for regular monthly top-ups?
IWeb sounds incredibly cheap for simply long-term holding of investments. Are there really no other fees if I don't do trades via them?

mc2fool
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Re: Buying Vanguard - direct or via AJ Bell?

#328852

Postby mc2fool » July 26th, 2020, 8:37 pm

zico wrote:Thanks for your reply. I may be misunderstanding you, but given what you say about the fee structures, wouldn't it be better for me to make initial investments of around £60k on IWeb, and then create a Vanguard account for regular monthly top-ups?

Ah, sorry, 'twas I that misunderstood you ... I read it as you were planning on starting with zero and building up to the £60K with the monthly purchase.

But, yes, if you're starting with £60K then yes, do as you say. £60K in Vanguard would cost you 0.15%pa = £90 for the first year, so saving that by bunging it into IWeb will more than cover their £25 opening fee and 6 * £5 dealing fees for the initial purchase trades. And then it's free after that. :D

IWeb sounds incredibly cheap for simply long-term holding of investments. Are there really no other fees if I don't do trades via them?

There are only charges for their SIPP, their dealing a/c and ISA have no regular fees. https://www.iweb-sharedealing.co.uk

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Re: Buying Vanguard - direct or via AJ Bell?

#328976

Postby zico » July 27th, 2020, 2:28 pm

That's really helpful, thanks.

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Re: Buying Vanguard - direct or via AJ Bell?

#328978

Postby scrumpyjack » July 27th, 2020, 2:35 pm

One factor you may want to look into is that I think if you are with Vanguard they operate on single pricing whereas if you buy on the market you'll pay the market spread.

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Re: Buying Vanguard - direct or via AJ Bell?

#328991

Postby mc2fool » July 27th, 2020, 3:19 pm

scrumpyjack wrote:One factor you may want to look into is that I think if you are with Vanguard they operate on single pricing whereas if you buy on the market you'll pay the market spread.

I take it you're talking about ETFs, as there is never a spread for OEICs, and you don't buy OEICs or UTs on the market anyway.

However, for ETFs, I don't think you are correct. https://www.vanguardinvestor.co.uk/what-we-offer/fees-explained, which lists the fees and charges for their account, includes "Additional ETF costs / One-off costs 0.02% to 0.23%" and if you click the "i" circle next to that you get:

"When you invest in a Vanguard ETF you'll incur a one-off cost due to something called the "bid-offer spread". This is because an ETF trades like a share in that there is an offer price (the price you can buy an ETF for) and a bid price (the price you sell the ETF for). The difference between the bid and the offer price is called "the spread"."

They do have two unit trusts (FTSE 100 and FTSE All Share trackers) and UTs usually do have a spread, but if you click on Vanguard full costs and charges about half way down the above linked-to page you'll get a PDF which includes:

"One-off costs: Vanguard ETFs incur one-off costs in the form of a Bid-Offer Spread on any trades made. We estimate the spread using a rolling 30-day average per fund which may differ from the actual spread incurred. Currently Vanguard mutual funds do not incur one-off costs."

And if you check the HL page for the Vanguard FTSE 100 Index UT you'll see that there is no spread. https://www.hl.co.uk/funds/fund-discoun ... cumulation


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