Starting January 31, 2025, Vanguard is introducing a new fee structure that may affect investors with smaller portfolios. This update has sparked discussions among investors about whether to stay with Vanguard or explore alternatives like Dodl by AJ Bell, Hargreaves Lansdown, or even platforms like Trading 212. Let’s break down the details, considerations, and strategies you need to know to help you make an informed decision on the Vanguard’s New Fees.
Vanguard’s New Fee Structure
Vanguard will implement a minimum monthly account fee of £4 for clients with total invested balances below £32,000. This translates to £48 annually for such accounts. Notably, this change does not apply to:
Junior ISAs
Accounts holding only Managed ISAs or Managed Pensions
For portfolios of £32,000 or more, Vanguard’s annual account fee remains at 0.15%, capped at a maximum of £375 per year.
Evaluating the Costs: A Comparison
Here’s how the fees stack up for a portfolio of £31,999 across Vanguard, Hargreaves Lansdown, and Dodl by AJ Bell:
| Platform | Annual Fee | Pros | Cons |
|---|---|---|---|
| Vanguard | £48 | Low-cost structure for index funds; simple platform. | Limited fund choice (Vanguard-only funds). |
| Hargreaves Lansdown | £143.99 | Access to a wide range of investments and robust tools. | Higher fees erode returns for smaller portfolios. |
| Dodl by AJ Bell | £47.99 | Affordable fees with access to funds and shares. | Limited advanced trading tools. |
For smaller investors, Dodl by AJ Bell offers the most cost-effective solution while maintaining flexibility in investment options.
Why I Chose Dodl by AJ Bell
With a portfolio of £12,000, I decided to transfer my investments to Dodl by AJ Bell. Here’s why:
Cost Savings: Dodl’s annual fee for a portfolio of £12,000 would be £18 (calculated as 0.15% of the portfolio size), making it a more cost-effective option compared to Vanguard’s minimum fee of £48 for portfolios below £32,000.
Flexibility: Dodl may not provide a broader range of funds and shares compared to Vanguard or Hargreaves Lansdown. Instead, it focuses on offering diversified investment strategies, making it a competitive option for certain investors.
Compounding Advantage: Lower fees leave more money in your account to grow over time.
Considering Other Platforms
Trading 212
Trading 212 is another attractive option, especially for investors starting out or transferring ISAs. It offers commission-free trading and a user-friendly interface. However, it does not currently provide pension services, which ruled it out for my needs.
Hargreaves Lansdown
While Hargreaves Lansdown is a premium platform with extensive investment options, its higher fees make it less appealing for smaller portfolios. However, for those requiring advanced tools or specific funds, it may justify the cost.
Key Factors Beyond Fees
Fees are important, but they’re not the only consideration when selecting an investment platform. Here are some additional factors to weigh:
Investment Options: Does the platform offer the funds, shares, or ETFs you’re interested in?
Ease of Use: Is the platform intuitive and easy to navigate?
Customer Support: How responsive and helpful is their support team?
Additional Features: Consider research tools, educational resources, or automatic rebalancing options.
Long-Term Goals: Ensure the platform aligns with your retirement or wealth-building strategy.
Recommendations for New Investors
If you’re just starting out and don’t yet have a substantial portfolio, here’s what to consider:
Dodl by AJ Bell: A great choice for low fees and flexible options.
Trading 212: Ideal for beginners focusing on ISAs, thanks to its no-fee structure for basic investments.
Vanguard: Still a solid option if you’re investing solely in Vanguard funds and plan to grow your account beyond £32,000.
The Best Time to Start Investing
It’s easy to get caught up in analysis paralysis, but remember: The best time to start investing was yesterday. The second-best time is today. Even with a small portfolio, the act of starting and staying consistent is key to long-term financial growth.
The Bottom Line
For those with portfolios close to £32,000, staying with Vanguard could make sense, as the fees are capped at £48 per year. However, for smaller investors or those looking for broader investment options, transferring to a platform like Dodl by AJ Bell or Trading 212 (for ISAs) might be a smarter move.
As always, this is not financial advice. Do your own research and consider consulting a financial advisor to ensure your investment choices align with your goals.
What are your thoughts on the Vanguard changes? Let’s discuss in the comments or reach out to explore the best options for your portfolio!