Vanguard has launched a financial advice offering in the UK that will charge a flat rate of 0.79%, a whopping three times less than what the industry charges on average.
Vanguard Personal Financial Planning promises to provide high-quality, low cost, retirement-saving advice based on a tiered approach. Support-service levels increase in line with investors' portfolios and as financial needs evolve.
The all-in cost of 0.79% comprises an advice fee (0.50%) that includes value-added tax (VAT) where applicable; ongoing fund charges (0.12%); transaction costs (0.02%); and a platform fee (0.15%, capped at a maximum of £375 or $672 per year). Clients do not pay entry or exit fees.
Vanguard's fee sits well below the industry average. UK regulator the Financial Conduct Authority calculated that advisers charge 2.4% on average on investible amounts for the initial advice and 0.8% per year for ongoing advice.
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Clients need a minimum of £50,000 ($90,000). This cohort receives digital advice that is implemented and managed by Vanguard and reviewed annually.
Those with larger balances of over £100,000 ($179,000) will receive more support via a team of financial planners available over the telephone or video, as well as an annual review. Clients with over £750,000 ($1.3m) have a dedicated financial planner.
Head of Vanguard Europe Sean Hagerty commented that for some investors, the cost of advice is a barrier.
"The data indicates people can pay more than 1.5% for advice, platform, and fund management charges. It's not uncommon to see fees north of 2%. With people living longer and working longer, these costs have the potential to make a considerable dent in their hard-earned retirement savings," he said.
Asked if Australia can expect this offering soon, the fund manager said that its current focus on the local market remains on supporting third-party advisers, launching Vanguard Super offer and continuing to evolve the Personal Investor service.
"Vanguard Australia has long advocated for the value of financial advice, and the critical role that advisers play in helping investors achieve better investment outcomes. We have invested significant time and resources to support the delivery of high quality, affordable advice, working with like-minded advisers to assist them in scaling their businesses and allowing them to deliver their advice services in an efficient and accessible way. Our recently launched Retirement Income Builder tool is one such example," a spokesperson said.