As you may have read I recently reviewed InvestEngine and it’s fair to say I was suitably impressed with the relative newcomer to the increasingly crowded investment platform space (that’s not a complaint by the way, competition is usually always a good thing!). Another platform I’ve looked at regularly and one of the old guard when it comes to investing platforms, Vanguard has been around since the 1970s and is one of the best known (if not the best known) investment platforms in the world.
Given how impressed I was with InvestEngine, particularly with it’s low fees, and considering Vanguards reputation as one of the best value ETF platforms around, I thought a Vanguard vs InvestEngine comparison might be helpful for those of you looking to decide on the most suitable ETF investment platform.
Vanguard vs InvestEngine: Quick Overview
- Both Vanguard and InvestEngine offer active (DIY) and passive (managed) investment options.
- While Vanguard offer index and active funds as well as ETFs, InvestEngine focus solely on ETFs.
- Vanguard only offer investment into their own ETFs and funds, while InvestEngine offer a huge range of over 500 ETFs from various providers.
- InvestEngine provide both desktop and app platforms, while Vanguard are desktop only.
- Both platforms offer exceptional value and some of the lowest fees available.
Vanguard is one of the worlds best known investment platforms, the birthplace of the index fund and has been around since the 1970s, with it’s UK operation, Vanguard Investor, opened in 2009. Vanguards core focus is bringing simple, diversified investment options, coupled with very low fees, to the masses. It’s something they do very well and as such they have a reputation as one of the best investment platforms for those looking to invest in ETFs and or index funds.
InvestEngine is a fairly new platform which is already receiving recognition throughout the industry. They are focussed specifically on ETF investing and along with a number of other positives, which I’ll cover in more detail further down the page, their big selling point is extremely low fees. But are we talking low or Vanguard level (the home of low fee investing) low fees?
Vanguard vs InvestEngine: Account Options
Vanguard certainly have the edge in terms of account types. However this is only going to be important to you if you’re looking for something out with an ISA or general investment account.
Vanguard Account Types
When it comes to account types Vanguard offer all the main options you might expect to see from a major investment platform. As well as the standard GIA (General Investment Account), there are the main tax advantaged accounts: ISA, Junior ISA and SIPP (Self Invested Personal Pension). The only real notable absentee from the list is the LISA (Lifetime ISA) which some platforms offer.
InvestEngine Account Types
In comparison InvestEngine is fairly light when it comes to account types with a GIA (which they refer to as Personal account) and an ISA. However an additional option that InvestEngine offer is a Business account. Providing the opportunity to invest your companies surplus cash – something which may be appealing to business owners watching their money earning very little from bank account interest.
Vanguard vs InvestEngine: Portfolio Options
Both Vanguard and InvestEngine provide portfolio options which can be DIY / active or managed for you / passive.
Vanguards ready made (passive) options come in the form of the very popular LifeStrategy and Target Retirement portfolios. LifeStrategy offers five portfolio options each with an increasing equity v bond split all the way up to the 100% equity fund. The Target Retirement portfolios, as the names suggests, are defined by target retirement dates e.g. Target Retirement 2060 Fund.
If building your own portfolio with Vanguard you will be restricted to only Vanguard funds (79 in total if you include the ready mixed equity funds). As well as ETFs there is the option to mix and match with index funds, bonds, ESG options and even to include ready mixed funds if you so wish.
Again simplicity is the name of the game for InvestEngine when it comes to their managed portfolios. You can choose between growth or income focus and then answer a few questions to assess your risk tolerance. InvestEngine will then assess which of their portfolios are suitable based on your goals and your risk tolerance.
On the DIY side you can build your portfolio by selecting from a large range of handpicked ETFs (over 500 at the time of writing) which cover a wide range of equities, bonds and commodities and also include ESG options.
Vanguard vs InvestEngine: Fees
This is where things get particularly interesting. While both platforms are undeniably cheap when it comes to fees, InvestEngine have the edge here – even beating Vanguard on fees for Vanguards own funds!
Vanguards reputation is built, in part, on low fees and transparency. As such before you invest with Vanguard they provide you with a very clear explanation of all fees involved and the overall cost of investing with them. Fees will of course vary depending on what you choose to invest in.
Costs are generally made up of an Account Fee (this the fee for using the platform) charged at 0.15% per year and is capped at £375 per year (so even if you have a portfolio in excess of £250k you wont pay more than £375 per year for the account fee). Ongoing costs (this covers the individual fund management) which range from 0.22% to 0.24% for read-made (passive) portfolios and from 0.06% to 0.78% for individual funds. Fund Transaction Costs (which covers dealing fees and taxes as part of the management of the fund) which range from 0.02% to 0.10%. Finally there is also a one off ETF cost when you buy or sell which covers the market spread / bid-offer spread and ranges from 0.02% to 0.15%.
There is also an optional £7.50 ETF trade fee. However you only need to pay this if you want to trade using the live price. Alternatively you can trade ETFs for free using the standard dealing service.
Vanguard Fee Examples
As an example of how all those fees work in practice if you were to invest a £20,000 lump sum into the managed ready-made LifeStrategy 60% equity fund the estimated total cost to you would be £82 per year.
For a simple DIY portfolio example if you were to invest a £20,000 lump sum into the S&P 500 ETF (VUSA) you would pay an estimated £58 per year in fees.
One of InvestEngine’s major selling points is also low fees and transparency. Coupled with an even simpler fee structure than Vanguard. With no set-up fees, no withdrawal fees, no dealing fees and no ISA fees.
For managed portfolios with InvestEngine you will pay a flat 0.25% platform fee (the equivalent to Vanguards ‘Account Fee’) along with ETF ongoing costs which average out at 0.15% for managed growth portfolios and 0.25% for managed income portfolios. Plus the market spread costs which average 0.07%.
Where InvestEngine really excels is their DIY investment portfolios which carry zero platform fee. That’s right, ZERO fee to use the platform. The only fees you will pay with an InvestEngine DIY portfolio is the ETF ongoing charge (which you would pay regardless of which platform you use) and the market spread (which averages 0.07% per year).
Note that the displayed fees above only include the costs charged by the respective platforms. They don’t include any additional fees such as ETF ongoing charge and market spread.
InvestEngine Fee Examples
As a practical example a £20,000 lump sum invested into a managed growth portfolio with InvestEngine would cost you an estimated £94 per year. So slightly higher than the Vanguard ready-made portfolio example above at £82 per year – but for this, InvestEngine will regularly adjust your portfolio to suit your risk level as the markets move, whereas you must choose your own ‘ready-made’ portfolio and hope it suits you with Vanguard.
Using the same example we used for Vanguard for an InvestEngine DIY portfolio with £20,000 lump sum invested into the Vanguard S&P 500 ETF (VUSA) you would pay just £28 estimated. So that’s less than half the Vanguard fee for a like for like DIY portfolio investment. Not to mention that fact that’s using one of Vanguards own ETFs!
Vanguard vs InvestEngine: Platform Features
Aside from the investment options and fees another important factor is the overall user experience of the platform. While a lot of these may be considered more nice to haves than essentials it’s worth taking a look at what’s on offer and what’s included for your platform fee.
Vanguard is all about simplicity and that extends to their platform experience. Really there isn’t much to write home about when it comes to unique or additional features. While you can access your account and invest from any device there is only a web based interface, so no mobile app available as yet for Vanguard UK investors.
When it comes to your portfolio breakdowns in terms of regions and sector, you can view all of that on the web platform. There is also the option to set up a recurring monthly top up into your portfolio.
InvestEngine has a bit more to offer when it comes to platform features. First off as well as the web based platform there is also a dedicated mobile app where you can carry out all the same actions that are available on the web platform.
There is also a couple of nice additional features such as the portfolio analytics section where you can see how your entire portfolio is broken down by asset type, companies, sectors and geographical regions. There is also the share your portfolio outline feature which provides a shareable link to your portfolio’s outline which shows the ETFs you’ve chosen and their target weights.
In terms of portfolio management you can set up monthly top-ups, choose to auto-invest available cash (based on your chosen portfolio weights) and auto rebalance your portfolio based on your target weights.
Vanguard vs InvestEngine: Verdict
If you’ve read this far then you can probably make up your own mind as to what is the most suitable platform for your individual needs. Ultimately the right choice for you will come down to individual circumstances such as whether you are looking for a managed or diy option, do you need an ISA or pension account, do you want access to ETFs out with Vanguards own fund options.
Winner? Is InvestEngine better than Vanguard?
As mentioned the best choice will vary depending on your personal circumstances. Both offer some of the lowest fees around when it comes to managed portfolios and when it comes to DIY ETF investing InvestEngine are currently the best value platform available to UK investors.
Taking into account the low fees, combined with the huge range of ETFs on offer and the additional platform features, I would have to say for my money, as it stands InvestEngine is my top pick for those looking to invest in ETFs.
Is InvestEngine Safe?
Yes, absolutely. InvestEngine is safe. They are incorporated in the UK and are authorised and regulated by the Financial Conduct Authority [FRN 801128]. What this means is that there is strict oversight of the company, its processes and procedures, and its financials by the FCA. But it is important to understand that this is different from market risk. The FCA protects investors from fraud or malpractice at the broker or investment firm, but it does not protect you from losses if the market were to go down. That is why it is important to remember that investing carries risk and you could lose your capital if the market goes down. You can read more about it here.
by Jon Craig
I am the creator of Project Financially Free and I started this journey to both educate myself and share my insights on personal finance. I’m passionate about financial literacy and I invite you to join me on this transformative path. See more.