Diversifying away from Vanguard

dllive

Hi all,

All my S&S ISA investments are on the Vanguard platform - quite a lot over the FSCS compensation £80k amount.

Its starting to give me the heeby-jeebies, so Id like to spread across other platforms (Fidelity etc) which offer passive index tracker funds.

Ive already started paying my 22/23 ISA allowance into my Vanguard account, so I cant create an ISA with another company this tax year, but can I transfer some of my existing ISA investments away from Vanguard to another platform?

Id be interested to hear what others have done in this situation, including what platform/funds they chose which offer the same diversification as Vanguard's LifeStrategy100 fund.

Or perhaps Im being too overly cautious to think about Vanguard failing?

Thanks

MX5huggy

You’re being overly cautious. 

Your money is not really with VG they have records showing you own funds which happen to be VG funds which in turn have records showing you own x shares in each company. You would get your money back……..

except the circumstances that shuts VG down are so catastrophic that your investments would likely be near worthless. 

VG LS 100 is basically a global tracker with a UK over weight to get the same elsewhere buy a global tracker and about 15% FTSE all share tracker. 

dunstonh

All my S&S ISA investments are on the Vanguard platform - quite a lot over the FSCS compensation £80k amount.

Its £85k and FSCS protection for investments doesn't work the same way as deposits.  So, its less of an issue.

Its starting to give me the heeby-jeebies, so Id like to spread across other platforms (Fidelity etc) which offer passive index tracker funds.

This is probably as you don't understand what the FSCS does for investments and are comparing it with deposit protection, which is different.

Id be interested to hear what others have done in this situation, including what platform/funds they chose which offer the same diversification as Vanguard's LifeStrategy100 fund.

VLS100 is probably the weakest of the VLS range as its effectively a global managed fund.   A global tracker would be a more preferable option for most.  It is also the odd one out in the range as it's the only one that isn't a multi-asset fund.  It is effectively there for completeness (20,40,60,80,100 works better than stopping at 80.  Plus, they get enough people using it. So, not a bad commercial decision from them either)

Or perhaps Im being too overly cautious to think about Vanguard failing?

Yes you are.   However, there are other reasons to go with a whole of market platform rather than a restricted one. For example, Vanguard does not have the best trackers in every area (no single fund house does).  So, being whole of market allows you to use what you consider the best funds in the various areas and not be limited to one fund house. 

DannyCarey

More than 5pc of Hargreaves Lansdown shares are being used to bet against the firm, making it the seventh most shorted stock in London, according to analysis of regulatory filings by Castellain Capital, an investment manager.

Interesting...

Albermarle

Or perhaps Im being too overly cautious to think about Vanguard failing?

If Vanguard fails with a Few Trillion Dollars of investments under their management, then we will all be going to hell in a handcart anyway.

Many people hold hundreds of thousands of Pounds of investments , with Vanguard, Fidelity etc . Millions in some cases.

dllive

Thanks for all your very helpful comments. I was slightly relieved that youre saying Im being overly cautious. However, then I read this: https://monevator.com/investor-compensation-scheme/ . (I read a lot of posts on Monevator, he's a big proponent of Vanguard and passive index investing). The people on this site - who are far experienced and wiser than me - suggest you should spread investments across platforms in case of platform failure.(?)

dunstonh

(I read a lot of posts on Monevator, he's a big proponent of Vanguard and passive index investing). 

Yes. Monevators bias towards Vanguard is clear to see.

 The people on this site - who are far experienced and wiser than me - suggest you should spread investments across platforms in case of platform failure.(?)

It depends on your platform choice.  If you are using some minnow that is loss-making (and many are), then you are taking on increased risk over one that is using mature, recognised software and is profitable.      The industry has mostly moved away from using in-house software to using third party software.    So, if your chosen platform is using old in-house software that is getting clunky then that is an increased risk.  The longer they put off moving to new software the more chance of problems.

MK62

While your money might be safe in the unlikely event of a platform failure, unfortunately, access to it might not be, at least for a period while it all gets sorted out......how long that might be is a bit of an unknown though tbh.......could be anything from a few weeks to months or more.......it's very unlikely to be as quick as the bank deposit protection scheme.

For some, this potential lack of access may not be much of a problem......for others though, it could be a disaster.....

bostonerimus

dllive said:

Thanks for all your very helpful comments. I was slightly relieved that youre saying Im being overly cautious. However, then I read this: https://monevator.com/investor-compensation-scheme/ . (I read a lot of posts on Monevator, he's a big proponent of Vanguard and passive index investing). The people on this site - who are far experienced and wiser than me - suggest you should spread investments across platforms in case of platform failure.(?)

The only way you can really be hit by "platform failure" is if it's a scam and your money isn't being invested. If a legitimate platform fails you still own the shares in the equities and bonds of your investments, but it could be very inconvenient. Something like the failure of a fund, like the Woodford debacle, is more probable, but that's usually down to bad management and poor performance of the assets owned...whether the circumstances surrounding H&L and Woodford were "legitimate" is debatable.

I've been a long time Vanguard investor because when I began with them they had the lowest fees around, now I'd say they compete on fees with some other platforms, I like indexing because it avoids the possibility of a "Woodford" and I also like that Vanguard is owned by it's US funds and hence by Vanguard customers.

Exodi

dllive said:

what platform/funds they chose which offer the same diversification as Vanguard's LifeStrategy100 fund.

There is a some irony in your comment, as the VLS funds have a significant home bias. VLS100 has a UK allocation of around 20.15% and Ireland at 16.63%. Compare this to the FTSE All-World Index (AW01), putting the UK at 4.03% and Ireland at 0.05% and it's clear to see you over significantly over-exposed to UK equities investing in VLS100. More appropriate options may have been FTSE Global All Cap Index Fund or VWRL.

It's also not a multi-asset fund unlike the other VLS funds, it's 100% equity, so it depends on your definition of 'diversification'. All round I think VLS100 is very rarely a good fit for any portfolio.

Dunstonh puts this perfectly:

dunstonh said:

VLS100 is probably the weakest of the VLS range as its effectively a global managed fund.   A global tracker would be a more preferable option for most.  It is also the odd one out in the range as it's the only one that isn't a multi-asset fund.  It is effectively there for completeness (20,40,60,80,100 works better than stopping at 80.  Plus, they get enough people using it. So, not a bad commercial decision from them either)

MX5huggy

It doesn’t have 16% in Ireland. Whatever information you are looking at is miss allocated one or more funds held within LS100 as being Irish as that is where the fund is set up, maybe the S&P 500 ETF that is about 15% of LS100 but clearly Is invested in US stocks.