The Vanguard Financial Advice Revolution | MoneyWeek

Jack Bogle, the late founder of asset manager giant Vanguard, has made a huge difference in the finances of private investors around the world by popularizing the use of index funds. These offer an inexpensive way to copy the performance of an underlying stock index and in so doing beat most active managers over the long term. Bogle showed investors that if you can get the average return at a lower than average cost, you will experience better returns with less stress than someone looking for complex but expensive strategies instead. In other words, focus on what you can control (the price of the investment) rather than what you cannot (trying to beat the market).

Now, Vanguard is applying this ruthless focus on cost control to basic financial advice. And the result, as Boring Money’s Holly Mackay puts it, is “genuinely disruptive, in a positive sense.” Vanguard’s personal financial planning service is open to investors with at least £ 50,000 to save for their retirement through the Vanguard platform (see below). You take an online quiz about your finances, retirement goals, and risk appetite, and Vanguard places your money in a diversified portfolio of its own tracking funds. It then takes care of rebalancing regularly and making sure that you use your annual tax breaks effectively. If you have over £ 100,000, you have access to a team of financial planners. Those with over £ 750,000 will have a dedicated financial planner.

How much does it cost? Only 0.79% per year, all inclusive (therefore fund fees, trading fees, etc.). It is excellent value for money. A traditional advisor would charge a fee plus fund costs on top of that. In total, you could easily pay double the cost of Vanguard, or even more. Note that Vanguard only advises on retirement savings, and only offers its own products (it is a limited adviser, in the jargon). It won’t tell you about life insurance and other aspects of financial planning and currently only works with individuals rather than couples. But nowadays, most advisers will invest your money in a wallet that looks like Vanguard’s, anyway. As for other aspects of planning, you can always pay a specialist for specific advice as your finances get complicated.

You can certainly manage a diversified portfolio of core trailing funds on your own. But if you’re looking for a simple, inexpensive way to have someone manage a core portfolio that is simple and diversified for you, and take care of all the paperwork, rebalancing, and making sure you invest in a tax solution. advantageous way, then it seems to us an ideal solution. And if you’re already hiring an advisor, this news from Vanguard should inspire you to take a close look at what they do for you and if they can really justify their fees.

I would like to know what a platform was, but I’m too embarrassed to ask

If you are new to investing, the lingo of financial services companies can seem a bit confusing to you. An “investment platform” is simply a business that allows you to buy and sell investments and keep them in one place. The term is used interchangeably with other terms such as “fund supermarket” and, depending on the context, even more specific terms such as “stock broker”.

Investment platforms are “execution only”. All of this means that they don’t advise you on what to buy or sell – you make the decisions and the platform “executes” them. That said, the platforms usually come with a lot of news services and analysis tools that can help you research investments, while some also offer “best buy” fund listings that meet certain selection criteria, although these have sparked controversy due to a lack of clarity. on the precise conditions of inclusion.

When choosing the platform that is best for you, there are several factors to consider. Cost is of vital importance. The scale and cost structure vary from platform to platform and therefore can be difficult to compare without a good understanding of your own investing habits. The cheapest platform for a frequent trader of individual stocks will most likely be very different from the best option for someone with a portfolio of trailing funds that they rarely touch beyond an annual rebalance.

Cost is important, but it is not the only important factor to consider. The product line differs from platform to platform. So it helps to have a good idea of ​​what you want to invest in and check out the range of options on offer, especially if you want to buy something a little more exotic, like individual stocks listed on stock exchanges. foreign or somewhat more obscure backgrounds. Also check out customer service and accessibility reviews – some platforms are more user-friendly than others.