Vanguard - personalised service

DoublePolaroid

Malthusian said:

DoublePolaroid said:

As Sharktail alludes to, I wonder how much over-performance it’s possible to expect even in a best case scenario with their managed service given they can only ever invest you in a handful of their relatively few in-house offerings many of which themselves overlap considerably in terms of holdings. 

Overperformance should never be expected. The point of paying for financial advice is to get financial advice. Not to generate free money from the adviser beating the market by more than their fee.

That’s fair enough. 

In which case, if I wanted such a service, I’d probably go the whole hog and pay an IFA, potentially higher cost notwithstanding. 

dunstonh

DoublePolaroid said:

Malthusian said:

DoublePolaroid said:

As Sharktail alludes to, I wonder how much over-performance it’s possible to expect even in a best case scenario with their managed service given they can only ever invest you in a handful of their relatively few in-house offerings many of which themselves overlap considerably in terms of holdings. 

Overperformance should never be expected. The point of paying for financial advice is to get financial advice. Not to generate free money from the adviser beating the market by more than their fee.

That’s fair enough. 

In which case, if I wanted such a service, I’d probably go the whole hog and pay an IFA, potentially higher cost notwithstanding. 

Actually, cost would not be much different.  The most dominant adviser ongoing charge is 0.50%.  Exactly the same as Vanguard.   However, Vanguards service is aimed at smaller investors with low financial needs/objectives whereas IFAs tend to focus on larger amounts with those with more needs.

wjr4

I’m surprised that so many people on this forum slate IFAs but are more than willing to pay a tied financial adviser for purely investment planning, rather than looking at their overall life plan (what a financial planner does). Is it just because of the initial adviser charge? 

Thrugelmir

vulcanrtb said:

Thanks for the insight folks, I am a little nervous as I personally don't believe the "second shoe" has dropped yet in this pandemic in terms of the smaller companies that might go bust, put people out of a job, which means less money in the economy to spend with the bigger companies etc etc.

Bigger companies are equally as likely to trim their headcount in response to events on the ground. No one is immune to the impact in one form or another. Not as the pandemic is the only challenge that lies ahead. 

Malthusian

wjr4 said:

I’m surprised that so many people on this forum slate IFAs but are more than willing to pay a tied financial adviser for purely investment planning, rather than looking at their overall life plan (what a financial planner does).

I'm not sure anyone on this forum pays a tied adviser. Whenever DunstonH or ANOther says "Don't use a tied FA, always use an IFA" opinions to the contrary are non-existent.

Tied advisers are really popular (look at SJP and others), but not round here. The intersection between people who use tied advisers and people who use forums called "MoneySavingExpert" is almost nil.

Plus Vanguard Personal Financial Planning does look at your overall life plan, according to their bumph. Whether they would do as thorough a job as an IFA, given that any time spent looking at parts of your life plan that can't be solved with a Vanguard product is wasted time for the Vanguard adviser, is a different matter.

It is virtually impossible to give advice on any other basis in the UK regulatory system. If advice turns out to be bad because the adviser was "only looking at your investments" it's a fact-finding failure by the adviser and an easy complaint win.

Albermarle

wjr4 said:

I’m surprised that so many people on this forum slate IFAs but are more than willing to pay a tied financial adviser for purely investment planning, rather than looking at their overall life plan (what a financial planner does). Is it just because of the initial adviser charge? 

For what it is worth my feeling is that an IFA becomes better value the more complicated your life/financial affairs are .
Blended families, trusts , high income , high pension/property assets , big potential  IHT liabilities etc getting older maybe as well .
They seem expensive/overengineered just to invest a £100K pot in a multi asset fund for a 40 year old , especially as you say there is a hefty initial charge.

dunstonh

wjr4 said:

I’m surprised that so many people on this forum slate IFAs but are more than willing to pay a tied financial adviser for purely investment planning, rather than looking at their overall life plan (what a financial planner does). Is it just because of the initial adviser charge? 

You need to remember that the followers of the church of Vanguard cannot possibly consider that anything that Vanguard does is bad.   So,  in their eyes, paying Vanguard 0.50% p.a. for a reduced service is so much better than paying 0.50% p.a. for a full advice service with an IFA.

Albermarle

dunstonh said:

wjr4 said:

I’m surprised that so many people on this forum slate IFAs but are more than willing to pay a tied financial adviser for purely investment planning, rather than looking at their overall life plan (what a financial planner does). Is it just because of the initial adviser charge? 

You need to remember that the followers of the church of Vanguard cannot possibly consider that anything that Vanguard does is bad.   So,  in their eyes, paying Vanguard 0.50% p.a. for a reduced service is so much better than paying 0.50% p.a. for a full advice service with an IFA.

Although not a convert myself , I can see that for a smaller investor ( minimum £50K ) 0.5% a year, and no initial fee fills a gap in the market. 
Presume an IFA would want a couple of grand initial fee and 1 % pa for funds less than £100K?

Welcome back by the way !

dunstonh

Although not a convert myself , I can see that for a smaller investor ( minimum £50K ) 0.5% a year, and no initial fee fills a gap in the market. 
Presume an IFA would want a couple of grand initial fee and 1 % pa for funds less than £100K?

The Vanguard service would probably be better for sub £100k in most cases.     When you are talking more than that, it swings more to IFA as the amount gets bigger.    Often an IFA will take on very large cases with little or no initial fee where there is ongoing. 

However, if you are talking sub £100k, then its more likely that a simple multi-asset fund and no advice service is necessary. Or a transactional advice service just to put things in place but with no ongoing advice fee.

Malthusian

Albermarle said:

Although not a convert myself , I can see that for a smaller investor ( minimum £50K ) 0.5% a year, and no initial fee fills a gap in the market. 
Presume an IFA would want a couple of grand initial fee and 1 % pa for funds less than £100K?

I would call it more of a loss leader than a gap in the market. There's always a gap in the market for selling tenners for nine quid.

Regulated advice is highly labour intensive, even a no-frills service done over the phone, and I struggle to see how even a big company can deliver it for less than £500 a year.

All these services (whether pre-existing juggernauts like Vanguard or VC-funded startups like Nutmeg) trying to "bridge the advice gap" run into the same problem; as soon as investors build up enough funds to be profitable they tend to jump ship.

If I was pitching the project within Vanguard I would be focusing on fund retention rather than the income from the advice fees itself. If an investor who's built up £200k in Vanguard starts to think they might want a second opinion other than their own, so they ring up Vanguard and ask for some advice, and the advice they get is good enough to dissuade them from seeking out a local IFA or SJP for a few years, then the advisor has made Vanguard not just an extra £1,000 a year but the £740pa they'd've lost if the investor had taken advice elsewhere. That kind of logic tends to struggle to make itself heard in big companies however as it requires big picture thinking.

What would soon put me off as a client of Vanguard advice would be having a different adviser answer the phone every year. I'm in danger of getting really snobbish but I can't see how giving restricted advice on Vanguard funds over the phone could be anything other than a career stepping stone.