Vanguard's halo is made of clay

[Stonge]

So even Vanguard has been leeching off its investors:

LS100 OCF 0.22% - but actual cost 0.45%, plus platform fee for the UK site

https://www.vanguardinvestor.co.uk/cont ... s-2018.pdf

Are there any honest financial companies? Rhetorical question. Money grabbing b.......s

[GeoffF100]

LS100 OCF 0.22% - but actual cost 0.45%, plus platform fee for the UK site

Not so. The OCF is 0.22%, and the transaction costs are 0.08%. If you invest directly with Vanguard UK, and pay their platform fee, the total is 0.45%, see note 5:

"Account Fee – Paid to Vanguard for the provision of the online service. It is an annual charge which is accrued daily and deducted proportionately in arrears on a quarterly basis. The rate of charge is 0.15% per annum of the value of your account holdings up to £250,000, such that the maximum annual charge is £375."

If you invest with iWeb, you do not pay the account fee, or any platform fee. Transaction cots are as low as 0.01% for some of Vanguard's market weighted index trackers, but the Life Strategy funds automatically rebalance, and this has a cost.

Vanguard does not make up the rules for calculating the OCF or the transaction costs. Vanguard takes costs from the AMC that others take from the fund. Vanguard has also criticised the rules for calculating the transaction costs, which give discretion to the fund manager on how they are calculated. I believe that market impact, which is usually the largest transaction cost, is not included at all.

[Stonge]

Thanks Geoff100 for clarifying that the Account fee is the same thing as the platform fee. I missed that. Good news, much better.

[GeoffF100]

It is also worth noting that Vanguard states:

"Transaction costs – these are costs incurred when buying or selling underlying investments held within the fund. They comprise of two components; (1) explicit transactions costs: the fees paid to brokers for trades and any relevant taxes such as stamp duty; and (2) implicit transaction costs: the costs incurred during the period of time the trades are executed. Vanguard has calculated implicit transaction costs using the methodology for the calculation of “Transaction Costs for New PRIIPs” as defined within the delegated regulation issued by the European Commission. This methodology estimates and models and may not be an accurate representation of the true costs incurred. Other methodologies are also allowed and this may mean that comparison with other providers is not possible."

In other words, Vanguard has understated the true transaction costs so that their understatements can be compared directly with the understatements of other fund management groups.

I have recommended Vanguard Life Strategy to people who clearly cannot cope with anything more complicated. Nonetheless, I am not a fan of automatic rebalancing. If your equities fall and keep falling, you keep selling your relatively safe bonds to buy more of them. A safer and less costly approach is:

(1). When saving, add to the bonds if they are below their target allocation and to equities otherwise.

(2). When withdrawing money, take it from the bonds if they are above allocation, and the equities otherwise.

You can use something like:

Fidelity Index World Fund P (GB00BJS8SJ34) OCF 0.13%

and

Vanguard Global Bond Index (IE00B50W2R13) OCF 0.15%

The transaction costs for the Vanguard Global Bond fund are not particularly cheap at a stated 0.08%. You can avoid these costs by using a Cash ISA for the bond element, but this makes matters even more complicated.

[Stonge]

iweb seems to have the disadvantage that you can't actually take money out of your ISA.

I've tried three times, on three different days, to transfer £2000 from my ISA to my current account and just get the message that 'This facility is not available. Please try again later.'

Seems a major drawback.

[GeoffF100]

I am sure that you can take money out of your iWeb ISA. The Terms & Conditions say:

"You can withdraw available funds held in any account at any time by using the online service so long as enough tradable funds remain to settle any outstanding buy orders and pay any costs and charges due but not yet paid, subject to Condition 11."

(N.B. I could not find a definition of Condition 11, but I do not believe that is relevant here.) Have you raised this issue with HSDL? Their online chat is the best way of raising issues, so that you get a transcript.

[GeoffF100]

I think "Condition 11" is "11. Our right to use your assets", and is indeed not relevant here.