Moving from active to Vanguard Passive?

[Aminatidi]

I have £165K with Hargreaves Lansdown and I'm considering opening an unwrapped direct account with Vanguard for new money (around £2k a month).

If it works out (psychological more than anything sensible) I may consider using them for next years ISA and even consider transferring some existing money across.

My understanding is that Vanguard cap fees at 0.15% with a maximum of £375.

Is that across an entire account?

Or if you had, say, a SIPP, ISA, and General account the cap is effectively 3x £375?

Has anyone started to migrate from an active setup that's basically working, to some/more passives?

Existing HL breakdown below so this is the spare cash plus new money.

1 CAPITAL GEARING TRUST 29.5% [N/A]
2 PERSONAL ASSETS TRUST 12.9% [N/A]
3 RUFFER INVESTMENT CO 12.2% [N/A]
4 Fundsmith Equity Class I 10.0% Global
5 Lindsell Train Global Equity Class D 9.5% Global
6 SCOTTISH AMERICAN INVESTMENT CO 7.4% [N/A]
7 SCOTTISH MORTGAGE INVESTMENT TST 7.4% [N/A]
8 MID WYND INTL INVESTMENT TRUST 7.3% [N/A]
9 Cash 3.8% [N/A]

[b0f77]

My understanding is that Vanguard cap fees at 0.15% with a maximum of £375.

Is that across an entire account?

It is capped at £375 on the entire account see here:
https://www.vanguardinvestor.co.uk/what ... -explained

This is what makes their new SIPP proposal attractive compared to the likes of HL, if one is happy with Vanguard funds.

I use an unwrapped VG account to unwind capital gains on my company stock purchase scheme transferring some into VLS60 each year.

I am doing a mixture of passives for my SIPP and some investment trusts for income in the ISA. Unfortunately VG have taken such a long time getting their SIPP together and I am already on the path building my SIPP in HL using ETFs wanting to draw down soon. I'm gradually transferring "legacy" pension pots into SIPP accounts (I want 2 SIPP accounts for a bit of platform diversity, so may well go for the VG SIPP).

[JohnB]

If you were going to move to Vanguard tracker ETFs (ie not funds), then they are free with HL unwrapped, and costs are capped at £200 if in a SIPP. So HL is not a bad place for trackers.

[tjh290633]

£375 sounds very expensive to me. I'm with Lloyd's branded version of the Halifax system, and pay £40 a year. I do not understand why anyone with a decent size portfolio would even contemplate going to a platform with percentage fees, even if capped.

TJH

[Hariseldon58]

In response to the OP

Moving from active to passive, I commenced this process somewhere around 2012 or so and had largely got to passive by autumn 2018, I thought that Brexit provided opportunities ( undue pessimism about UK) in overweighting UK Investment trust holdings and some other ITs. By April this year Brexit had not been resolved and I moved back to my Global Passive portfolio with tilts towards various factors but a degree of UK bias.

Recently I decided to simplify further, to a mix of ETFs, Vanguard Developed World VEVE, Vanguard Emerging Market VFEM ( cheaper to have a blend than Vanguard Global VWRL ETF) plus a kicker to Vanguard Global High Dividend VHYL ( a nod to value and in down markets big fat dividends cheer you up )

Sentiment may improve to sterling and I will take a small hit, but after 30 years of investing, the simplest lazy portfolio will do well enough. There are some cash, bonds (mainly US treasuries) and a direct commercial property as well.

I have made some good market timing calls in the past and this most recent one did not pan out but I exited the positions at maybe a small profit or loss.
I have decided that my previous smart calls might just have been lucky! Thus the low cost, simple approach, besides it frees up a lot of time to do more interesting things...

[xeny]

I'm with Lloyd's branded version of the Halifax system, and pay £40 a year.

TJH

Aren't there dealing fees on top of that though?

I'd agree that probably won't make up the difference (although a quick google suggests £10 for ETFs and shares? ) but especially if you also hold a pension and an ISA it's less uncompetitive than it looks at first glance.

[tjh290633]

I'm with Lloyd's branded version of the Halifax system, and pay £40 a year.

TJH

Aren't there dealing fees on top of that though?

I'd agree that probably won't make up the difference (although a quick google suggests £10 for ETFs and shares? ) but especially if you also hold a pension and an ISA it's less uncompetitive than it looks at first glance.

Yes, of course. I have posted elsewhere how my fees and charges have varied over the years, depending on the number of trades. Those trades are a mixture of trimming of overweight holdings (typically 2 to 4 a year) and reinvestment of the proceeds and of accumulated dividends into existing shares (typically 10 to 15 a year).

The costs are still far less than the management charges levied by fund managers, including Vanguard, which are additional to platform fees.

TJH

[Lootman]

I have posted elsewhere how my fees and charges have varied over the years, depending on the number of trades. Those trades are a mixture of trimming of overweight holdings (typically 2 to 4 a year) and reinvestment of the proceeds and of accumulated dividends into existing shares (typically 10 to 15 a year).

The costs are still far less than the management charges levied by fund managers, including Vanguard, which are additional to platform fees.

It's getting closer all the time though. For instance if you want to get one-stop exposure to the UK market then the Vanguard ETF symbol VUKE has an expense ratio of 0.06% a year, with tight spreads and faithful tracking of its index. No stamp duty, and no platform fee on most brokers.

We are seeing zero-fee ETFs in the US, and also zero commissions. Beta is becoming free.

[Aminatidi]

Thanks, some good info.

I'd be looking at the LifeStrategy range for new money.

I like drip feeding sometimes almost daily so "free" dealing and a low platform fee is something I could live with.

[hiriskpaul]

Thanks, some good info.

I'd be looking at the LifeStrategy range for new money.

I like drip feeding sometimes almost daily so "free" dealing and a low platform fee is something I could live with.

A little more complicated, but you could always drip feed to Vanguard and say once per year transfer to a no fee platform, such as iWeb (no fees for holding investments, £5 for each trade).

[GeoffF100]

It's getting closer all the time though. For instance if you want to get one-stop exposure to the UK market then the Vanguard ETF symbol VUKE has an expense ratio of 0.06% a year, with tight spreads and faithful tracking of its index. No stamp duty, and no platform fee on most brokers.

No, VUKE has an expense ratio of 0.9%:

https://www.vanguardinvestor.co.uk/inve ... stributing

If you want an expense ratio of 0.6%, you have to buy the unit trust:

https://www.vanguardinvestor.co.uk/inve ... _fund_link

You do not pay stamp duty when you buy the ETF, but it appears to trade at a premium to NAV, so you pay most of the stamp duty anyway:

https://www.bloomberg.com/quote/VUKE:LN

I do not know where Bloomberg got its yield figure though.

[TedSwippet]

No, VUKE has an expense ratio of 0.9%:

0.09%

If you want an expense ratio of 0.6%, you have to buy the unit trust:

0.06%

[GeoffF100]

Yes, of course, that is right. Sorry about that.

[MartynC27]

Recently I decided to simplify further, to a mix of ETFs, Vanguard Developed World VEVE, Vanguard Emerging Market VFEM ( cheaper to have a blend than Vanguard Global VWRL ETF) plus a kicker to Vanguard Global High Dividend VHYL ( a nod to value and in down markets big fat dividends cheer you up )

Sentiment may improve to sterling and I will take a small hit, but after 30 years of investing, the simplest lazy portfolio will do well enough. There are some cash, bonds (mainly US treasuries) and a direct commercial property as well..

I was wondering if the etf Vanguard Global High Dividend (VHYL) contains any EM Equities and do you factor VHYL in working out the Blend ?

The HL charging structure pushed me down the ETF route - I started of with blend of Regional ETFs - VUSA, VERX, VUKE, VAPX and VFEM but then I added some small cap ETFs (VMID, ISP6) and some Government and Corporate Bond ETFs which made the Portfolio a lot more complicated.

I am thinking perhaps a simple blend of - Vanguard Global Equity (VWRL) and Vanguard Aggregated Global Bonds Hedged (VAGP) set to a ratio matching my Level of Risk will provide an easier portfolio to manage !

[GeoffF100]

VWRL can be replaced with VEVE + 10% VFEM, which is cheaper. You an calculate the exact proportion of VEVE in VWRL by dividing the proportions of VEVE and VWRL invested in the US. You can check the resulting country allocations with a spreadsheet. They all match.

[MartynC27]

VWRL can be replaced with VEVE + 10% VFEM, which is cheaper. You an calculate the exact proportion of VEVE in VWRL by dividing the proportions of VEVE and VWRL invested in the US. You can check the resulting country allocations with a spreadsheet. They all match.

So on the HL platform - Equities (90%VEVE + 10%VFEM) / Bonds (VAGP) ratio set to my Risk Level provides a simple low-cost solution using etfs.

For maximum Total Return I feel there is no value in adding the Vanguard Global Dividend ETF VHYL mentioned by Hariseldon58. This etf is more expensive and has provided a lower Total Return over the last 5 years (Are funds selecting companies paying higher dividends in fact focusing on companies that have lower growth leading to a lower Total Return ?)

[bluedonkey]

I tried to calculate the yield for VAGP and come up with c.1% Is this correct? It's a new fund and so there are no published yields.

[MartynC27]

I tried to calculate the yield for VAGP and come up with c.1% Is this correct? It's a new fund and so there are no published yields.

Most Bond funds seemed to have performed poorly over the last 6 months following the release of this ETF. (This follows the excellent return of most Bond funds in the First 6 months of 2019.

The return shown on JustEtf over the last 6 months is for VAGP is 1.63% compared to 0.93% for a Government Gilt ETF (IGLT) and 2.5% for a Corporate Bond ETF (SLXX). This is what you would expect as it is a blend of DM Global Government and IG Global Corporate Bonds hedged to GBP. I think you would find the return of the Vanguard Global Bond Fund (OEIC) and the Bond component of Vanguard LIfeStrategy would probably be similar over the last 6 months.

[GeoffF100]

I agree that including VAGP is questionable. Restricting yourself to higher yielding shares reduces diversification. That potentially increases risk and reduces the risk adjusted return.

It is worth noting that the recently introduced VAGP has a lower OCF (0.10%) than the Vanguard Global Bond fund (OCF 0.15%).

[MartynC27]

I agree that including VAGP is questionable. Restricting yourself to higher yielding shares reduces diversification. That potentially increases risk and reduces the risk adjusted return.

The Vanguard Global Bond (VAGP) contains a range of over 4200 Global Government and Investment grade Bonds, average quality AA- , Average Duration 7.2 years and is probably the closest ETF you can hold which is similar to the Vanguard Global Bond Fund.

On the HL platform the Vanguard Global Bond Fund is more expensive when you add the uncapped fund charge.

VAGP is probably the most diversified Bond ETF available to provide a simple solution to avoid the uncapped HL fund charge which is similar to the Vanguard Global Bond Fund.