Vanguard - The Best Investment Platform Ever?

Vanguard is the cheapest investment platform around and the reason for this is that it is structured to operate at cost. This is an incredibly unique structure because when Jack Bogle founded Vanguard in 1975 he made sure that the business was owned by its own funds. Essentially, this means that the investors in its own funds (ie its customers) are the owners of Vanguard.

Jack Bogle 1929 - 2019

This ensures that there is no incentive for Vanguard to charge high fees to turn a profit because there are no external shareholders to serve. So instead of paying dividends to external shareholders, any profits are redirected to their own customers in the form of lower fees.

If a business is not owned by its customers, which is pretty much all businesses, it is incentivised to turn a profit for its owners. There is nothing wrong with this, but it is the reason why all other investment platforms are at a cost disadvantage compared to Vanguard. This is because there is a conflict of interest to not only serve its customers but to also serve its owners.

This is how Vanguard can charge an incredibly low annual platform fee of 0.15% per fund you are invested in, which is capped at £375 pet year for accounts over £250,000. For example, if you have £100,000 invested in a Vanguard fund you would pay £150 in platform fees.

Examples of other investment platforms and their platform fees for the first £250k invested:

- Hargreaves Lansdown 0.45%

- Fidelity 0.35%

- Charles Stanley Direct 0.35%

- AJ Bell 0.25%

When you own any funds through Vanguard, it is safe to say that your interests and those of Vanguard are exactly the same. This is what makes the firm the best investment platform to use, which is clearly demonstrated when compared to the fees charges by other companies.