Pros and cons of buying lifestrategy funds directly from Vanguard UK

Nanaman

I'm thinking about investing a large sum - in excess of £100,000 - in a Vanguard lifestrategy fund and leaving it there for 10 years or so. I understand that as UK resident I can buy directly from Vanguard when investing over £100,000 without the need for using a platform with its associated expenses. But I remember reading somewhere else, I can't remember where, that there may be pros and cons to this. I was wondering if anyone knew what the pros and cons of investing directly with Vanguard UK might be. Is it genuinely cheaper than using a platform and do I miss out on any other benefits provided by a platform, i.e. viewing performance through a platform website, or any considerations I've not taken into account.

Thank-you in advance for any advice/opinions/information anyone can provide.

Glen_Clark

Nanaman wrote: »

I'm thinking about investing a large sum - in excess of £100,000 - in a Vanguard lifestrategy fund and leaving it there for 10 years or so..

Hopefully that would create a capital gain, but that would leave you exposed to capital gains tax. If you invested through a platform you wouldn't have to keep it all in a Vanguard ETF - you could sell some cheaply and re invest into a similar ETF to use up your CGT allowance each year.

masonic

The main drawback is that Vanguard does not offer ISA or SIPP accounts (the former may be of less interest to you if the money is currently outside of an ISA). Another drawback is that in a crash, if the value of the fund falls below a certain level, you may be required to top it up in order to keep the investment with Vanguard. You would certainly miss out in the online account management area.

If you pick a platform like iWeb and buy VLS in a lump sum, then hold over the 10 years, your total annual cost would be something like £10.50 spread over that time scale.

george4064

As previously mentioned, the main drawback is that by investing directly with Vanguard you wont be able to hold in a tax free wrapper like an ISA.

Glen_Clark

masonic wrote: »

Another drawback is that in a crash, if the value of the fund falls below a certain level, you may be required to top it up in order to keep the investment with Vanguard.

That level is £75k
(With a starting investment of over £100k you couldn't put much of it in an ISA anyway.)

TheTracker

SIPP/ISA isn't a drawback if you are already filling those vehicles (55k/year) and foresee fulfilling them going forward for the next 5-10 years from income. The next drawback is CGT. You'd need to do some calcs here but I suspect it would only make sense to go direct if you had other investments outside wrappers that allowed you to utilise the CGT allowance. Selling your direct vanguard investment and rebuying it thirty days later would nuke any fee advantage, and be clumsy. Next, I'd structure my holdings outside the wrappers to be the less risk items such as bonds, so perhaps maybe at the 400k outside wrappers and assuming a stable long term income of £150k to fill ISA/SIPP mark it makes mathematical sense, but then I'd not be buying a lifestrategy fund but a more asset class targeted tracker, and anyway you'd be saving a minuscule amount over just using platforms. In other words, it's not something worth doing. For what it's worth, I have six figures outside wrappers and don't intend to touch it for 10+ years and I only invest in trackers (mostly vanguard) and I would not do this. The only possibility I would do something like this is to invest in trackers otherwise unavailable on platforms without advisor input, eg DFA Value trackers, but the minimum value is so big you'd need millions.