Vanguard has recently announced that in addition to the ETF’s and mutual funds (OEICs) currently offered, they will now offer a selection of wrappers to hold them in. Given one of my mantras is to always minimise investment expenses and given Vanguard’s low cost reputation this should be a great thing. Let’s take a look.
Firstly, let’s look at my SIPPs. I have two – one from Hargreaves Lansdown and the other from YouInvest. Over the years, despite pushing the actively managed variety through schemes like The Wealth 150, Hargreaves Lansdown have made it unattractive from an expense perspective to hold mutual funds in a SIPP wrapper. The first £250,000 attracts a charge of 0.45%, the next £750,000 a charge of 0.25%, the next £1,000,000 a charge of 0.1% and above that level there is no charge. In contrast shares, investment trusts, ETF’s, gilts and bonds attract a flat charge of 0.45% but importantly it’s capped at £200 per annum. This meant that when I first started transferring my expensive employers insurance company based Group Personal Pension (GPPP) into Hargreaves Lansdown I went straight for direct shares (REIT’s such as Hansteen, Segro, British Land, etc) or ETF’s (VERX, ISXF, VFEM etc). I currently have a little over £250,000 worth of wealth in my Hargreaves Lansdown SIPP meaning my annual wrapper expense is capped at £200 or 0.08%.
YouInvest have also been making it unattractive to hold mutual funds along with unit trusts and structured products. The first £250,000 attracts a charge of 0.25%, the next £750,000 a charge of 0.1%, the next £1,000,000 a charge of 0.05% and above that level there is no charge. In contrast shares, investment trusts, ETFs, gilts and bonds attract a flat charge of 0.25% capped at £100 per annum. I previously held mutual funds with YouInvest but have now moved everything across to ETFs meaning my £260,000 worth of wealth held in my YouInvest SIPP attracts annual wrapper expenses of £100 or 0.04%.
So will I be moving any of my SIPP’s across to Vanguard? At this point Vanguard is only offering a Vanguard ISA, Vanguard Junior ISA and a Vanguard General account. They are not currently offering a SIPP so the answer is no before I even compare expenses or ask myself whether I want to consolidate my mutual funds or ETFs to be solely those from Vanguard.
Let’s move onto my ISA. This is held with TD Direct Investing. TD charge £30+VAT per year for the wrapper but if you have a portfolio of at least £5,100 or have a regular investing facility that reduces to zero. That means my £185,000 of wealth held in shares and ETF’s attracts annual costs of 0%. In contrast Vanguards new ISA would attract expenses of 0.15% on the first £250,000 and would be 0% after that. So will I be moving my ISA to Vanguard? The obvious answer is no as it would increase my annual wrapper expenses before I even think of consolidation or what I would do with my directly held shares.
Let’s move onto my Trading Account. This is held with Hargreaves Lansdown. Similarly to the SIPP the first £250,000 of mutual funds attract a charge of 0.45%, the next £750,000 a charge of 0.25%, the next £1,000,000 a charge of 0.1% and above that level there is no charge. In contrast however shares, investment trusts, ETF’s, gilts and bonds attract no charges. In this account I have the majority my High Yield Portfolio (HYP), which are individual shares, and an ETF meaning annual expenses of 0%. So will I be moving my Trading Account to Vanguard? Given their annual expenses of 0.15% on the first £250,000 the easy answer is no for a couple of reasons. The first is expenses with the second being the ETF held is a gold ETF which Vanguard don’t offer an equivalent of and they also won’t let me hold direct shares. Another consideration if it was attractive would be Capital Gains Tax.
So for me Vanguards new wrappers (for now at least) are a damp squib so it’s back to enjoying the bank holiday for me. Is anyone moving to a Vanguard wrapper? If yes, why?