Moving to Vanguard to save on investment fees

Prudent3

I am a novice when it comes to investments so have relied on a financial advisor to date.  I have a pot of around £200k split between a stocks and shares ISA and SIPP.  Recent review of costs are working out at 2.1% which seems high in comparison to the Vanguard Life Strategy portfolio.  I’m inclined to move but obviously concerned that I’m not seeing the full picture.  Would appreciate any thoughts on this.

Dazed_and_C0nfused

Prudent3 said:

I am a novice when it comes to investments so have relied on a financial advisor to date.  I have a pot of around £200k split between a stocks and shares ISA and SIPP.  Recent review of costs are working out at 2.1% which seems high in comparison to the Vanguard Life Strategy portfolio.  I’m inclined to move but obviously concerned that I’m not seeing the full picture.  Would appreciate any thoughts on this.

Fees are one thing (and 2 1% seems high) but do Vanguard have funds you wish to invest in?

Prudent3

I was thinking for the Lifestyle Strategy portfolio which is a ready made portfolio.

Linton

There are 3 types of fees which you need to consider separately:

1) Advisor fees - if you dont have an advisor these wont apply.
2) Platform fees -  These pay for the storage, transaction costs and online access to your SIPP/portfolio and are explicitly taken directly from your SIPP or pension. 
3) Fund manager fees - these pay the costs of running the individual funds and are taken from the overall fund assets.  You never directly see these as returns and published performance data is after fees have been taken.

So, do you have an advisor? Which funds and platforms are you using and how is the 2.1% total in fees made up from the 3 categories?

Vanguard is unlikely to be the cheapest option for 2 pots totalling £200K.

Prudent3

Yes I do have an advisor.  Fees are as follows:
Platform fee 0.25%
Portfolio costs: 0.53%
DFM service: 0.25%
Financial Planning: 1.0%
Product fee (yearly) £180

Albermarle

Prudent3 said:

Yes I do have an advisor.  Fees are as follows:
Platform fee 0.25%
Portfolio costs: 0.53%
DFM service: 0.25%
Financial Planning: 1.0%
Product fee (yearly) £180

Platform fee is normal, but can be cheaper
Portfolio costs are not excessive if it includes some more specialised funds that may cost a bit more, but could be cheaper.
DFM service fee - normal
Advisor fee - a bit high
Product fee ?

Problem is when all added together it is high at >2% .

Do you get any other advice from the advisor apart from your SIPP/ISA, such as tax, inheritance planning, family finances etc? Advisors tend to be better value if you benefit from additional services, rather than just investing an ISA/SIPP.

Have you compared how the current portfolio has performed against your preferred VLS fund ?

Similar thread may be of interest.

Dumping IFA portfolio to go DIY — MoneySavingExpert Forum

dunstonh

Platform fee 0.25%
Portfolio costs: 0.53%
DFM service: 0.25%
Financial Planning: 1.0%
Product fee (yearly) £180

Platform fee of 0.25% for £200k is not high but 0.15% is easily achievable 
Portfolio costs indicate a mix of managed funds and passive funds.     
DFM charge indicates and old school DFM.     (the DFM we use charges 0.08% by comparison)
Financial planning charge is in the ballpark relative to your value
Product fee is a strange one.   There are some platforms charge an explicit fee for a wrapper but most do not.

About 1.2% overall would be the ballpark for an IFA on decent terms on your fund value (percentages generally drop with the more you have - So someone with 3 times the amount of you could be at around 0.83%).  That should give an idea of where your charges sit compared to others with advisers.  In this day and age, you shouldn't be going through 2%.

If you have an IFA they could do better.  If its an FA then you get what you are given.  If you DIY then you can do better but what you are looking at may not be optimal.  Not bad, but not optimal.

Linton

If you need an advisor I believe you should be able to get a cheaper ongoing cost for a high street IFA for DFM+financial planning, say <1%

Are you using a large national company (if so can you say who?) or a small local business? £200K is not seen as a large pot needing specialist attention.

Are you in or near retirement or some way off?  In retirement fnancial management gets more complex than if you are still just contributing from earnings.

GeoffTF

Prudent3 said:

I am a novice when it comes to investments so have relied on a financial advisor to date.  I have a pot of around £200k split between a stocks and shares ISA and SIPP.  Recent review of costs are working out at 2.1% which seems high in comparison to the Vanguard Life Strategy portfolio.  I’m inclined to move but obviously concerned that I’m not seeing the full picture.  Would appreciate any thoughts on this.

Yes, that is sensible, and will save you a lot of money. It is possible to save even more money, but using Vanguard and Life Strategy is dead simple. Just choose the VLS fund that most closely matches you current equity percentage. If you complicate matters, you could easily go wrong. There is nothing to stop you consulting an advisor in the future, if your circumstances materially change.

JG1A

Vanguard Lifestrategy funds are complete portfolios in one fund, ideal for investors who prefer to invest and not worry about portfolio composition. Select the portfolio you want and that's it. I'm surprised that IFAs are still charging % fees, I thought that a fee for work done was the new norm.

Albermarle

JG1A said:

Vanguard Lifestrategy funds are complete portfolios in one fund, ideal for investors who prefer to invest and not worry about portfolio composition. Select the portfolio you want and that's it. I'm surprised that IFAs are still charging % fees, I thought that a fee for work done was the new norm.

AIUI ongoing fees remain the norm, partly because the clients prefer it. Remember most will not be very up to speed with personal finance, so a regular annual/6 monthly review is simpler/more reassuring for them, than pro actively organising irregular one off sessions.