Vanguard: New Minimum Monthly Account charge

Albermarle

Kniphofia7 said:

I got the email too.  Time to look into something else for my small SIPP balance.  I'll want to access it in a couple of years anyway.

That is probably what they want you to do. Small customers must be  unprofitable I would think.

tigerspill

So there are only changed to total investments lower than £32k?  Or are there changes for all sizes of investments with them?

Hoenir

equitydealer said:

Funny, for a company that used to champion lower fees they are going in the wrong direction  

Why should larger accounts subsidise smaller ones. The base cost of an operational account is the same across the board. Both Employers National Insurance and increased National Minimum Wage costs for example need to be recouped. 

Albermarle

tigerspill said:

So there are only changed to total investments lower than £32k?  Or are there changes for all sizes of investments with them?

So the cost if you had exactly £32K,  0.15% = £48 or £4 a month .
So it is a minimum charge but will have no effect once you go over £32K.

equitydealer

Hoenir said:

equitydealer said:

Funny, for a company that used to champion lower fees they are going in the wrong direction  

Why should larger accounts subsidise smaller ones. The base cost of an operational account is the same across the board. Both Employers National Insurance and increased National Minimum Wage costs for example need to be recouped. 

Don’t think you quite understand. Vanguard was established to bring savings to the masses, read about Bogle who founded the company. I’m in the process of moving my six figure ISA and SIPP away regardless of this announcement as there are cheaper fixed rate providers, as are others I know. Now they will start losing customers with smaller holdings too. After today’s announcement I’m moving my wife’s ISA out too. Remember today’s smaller investors are likely to be tomorrow’s larger investors. They have shot themselves in the foot. 

Alexland

Hoenir said:
Why should larger accounts subsidise smaller ones.

It was a point we noted in the forum when the Vanguard Investor platform launched in the UK - their business idea was to be attractive on small accounts in the hope people would get into a contribution pattern that with investment growth caused the accounts to eventually become profitable especially as their £375 fee cap is rather high compared to some of the other better value other platforms. I guess that idea didn't work out for them. At least their fee cap has not increased with inflation otherwise it would be around £500 by now.

Fidelity probably have the right approach of not applying a minimum fee while people are regularly contributing and it's a shame that Vanguard didn't copy that idea but then it wouldn't stop the minority taking advantage of it to keep switching to iWeb etc. Maybe I feel a bit guilty for tipping off Monevator and causing them to write that article on this ninja method about 5 years ago.

Swipe

They are now splitting the free across accounts and will no longer just take it from a General Account. So I now need to either set up a direct debit for fees or keep cash in my SIPP, ISA and GIA.

eskbanker

equitydealer said:

Hoenir said:

equitydealer said:

Funny, for a company that used to champion lower fees they are going in the wrong direction  

Why should larger accounts subsidise smaller ones. The base cost of an operational account is the same across the board. Both Employers National Insurance and increased National Minimum Wage costs for example need to be recouped. 

Don’t think you quite understand. Vanguard was established to bring savings to the masses, read about Bogle who founded the company. I’m in the process of moving my six figure ISA and SIPP away regardless of this announcement as there are cheaper fixed rate providers, as are others I know. Now they will start losing customers with smaller holdings too. After today’s announcement I’m moving my wife’s ISA out too. Remember today’s smaller investors are likely to be tomorrow’s larger investors. They have shot themselves in the foot. 

If anything Vanguard was established to bring investing to the masses, but that's really the fund manager you're referring to, rather than the much later introduction of the UK platform.

They've only shot themselves in the foot if they haven't modelled the impact of such a decision - any large organisation making such changes will do so in the full knowledge that some of its customers won't be happy (especially smaller ones) and will take their business elsewhere, so they will have crunched the numbers rather than this being some sort of surprise to them.

zagfles

Swipe said:

They are now splitting the free across accounts and will no longer just take it from a General Account. So I now need to either set up a direct debit for fees or keep cash in my SIPP, ISA and GIA.

You don't need to keep cash, they'll just sell investments if there's not enough cash.  

Alexland

eskbanker said:
some of its customers won't be happy (especially smaller ones) and will take their business elsewhere

Some of its customers will probably fail to take their business elsewhere and their modest account valuations will be destroyed by fees over several years.

There are still some cashback deals available for opening/moving even very small accounts elsewhere.