AJ Bell v Vanguard

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AJ Bell and Vanguard both come with lower costs than some of their rival platforms. While AJ Bell is home grown, operating in the UK since 1995, Vanguard started in the US in 1975, becoming one of the world’s largest fund groups, and coming to the UK in 2009. When choosing between the two, you need to consider product range alongside the cost of investing. Vanguard may be cheaper, but offers less investment choice. 

What is AJ Bell?

Since it was founded as a small actuarial consultancy in 1995 by Andy Bell and Nicholas Littlefair, AJ Bell has grown to become one of the largest investment platforms in the UK and a constituent of the London Stock Exchange’s FTSE 250 index of medium-sized companies. It has more than 470,000 customers and £70.9bn of assets on the platform. The firm caters for everyone from professional advisers to DIY investors, including those who are just getting started.

What is Vanguard?

Vanguard’s US founder John C Bogle was a pioneer of index funds in the US and a proponent of low-cost investing by individuals. Index funds, also known as passive funds, don’t pick individual shares or bonds to beat the market, they track the performance of the entire market. In 2009 Vanguard’s UK platform opened its UK office. However, by only offering investments in Vanguard funds, it’s a reduced product offering compared to other UK fund platforms, which offer wider ranges of funds from different providers. Nevertheless, in March 2023 Vanguard passed the milestone of 500,000 UK customers, with £16bn in assets on the platform. 

AJ Bell v Vanguard – product on offer

Both platforms offer taxable general accounts, plus a range of tax-efficient investment accounts: stocks and shares Individual Savings Accounts (ISA), Junior Individual Savings Accounts (JISA) and Self-Invested Personal Pensions (SIPP).

AJ Bell also offers Lifetime ISAs, which may give it the edge if you’re aged 18–39, and eligible to open one. Plus, it operates a free cash savings hub for existing customers, that allows them to apply for multiple savings accounts without the paperwork. This allows you to hold your cash savings in one place and pick and mix between easy access and fixed rate bonds. 

While AJ Bell allows you to get started investing with as little as £25 a month, with Vanguard you need £100 per month, or can get started with a £500 lump sum. 

Vanguard gives access to a limited range of own-branded investments. This comprises 86 Vanguard funds, including index and active funds, exchange-traded funds (ETFs) and the popular LifeStrategy and Target Retirement Fund (TRF) ranges, which are like ready-made portfolios. The Vanguard Funds are low cost, charging 0.20 % on average.

AJ Bell offers a wider investment choice of active and passive funds (including Vanguard’s funds), plus UK and overseas shares, corporate and government bonds, ETFs and investment trusts. So, AJ Bell wins on investment choice. 

However, the other key differences relate to the platforms’ fees for investing, where Vanguard is the clear winner. 

AJ Bell charges a headline platform custody fee of 0.25%. On a portfolio of £100,000, this would be £250 a year. However, the fee reduces to 0.10% on amounts invested above £250,000, with no fees on amounts invested above £500,000. 

Vanguard charges a much lower platform custody fee of 0.15% per year (£150 on an investment of £100,000). It caps this fee at £375 per year for accounts with investments over £250,000. 

Vanguard also offers a Managed ISA with ‘guidance from real human experts’ for investors who don’t want to make their own decisions. This charges a total of 0.60% a year. 

Frequent traders should also note that Vanguard has no dealing charges for buying or selling funds, while with AJ Bell it’s £1.50 to buy and sell funds online.

But of course, you may want to hold shares and other listed investments alongside funds. While Vanguard doesn’t offer shares, AJ Bell has a standard charge of £9.95 to buy and sell shares online. If you make more than 10 share deals a month, your shares dealing charge drops to £4.95.

Also, if you only invest in shares (with no collective fund holdings) AJ Bell sets maximum custody fee caps as follows: £2.50 per month (£30 a year) in a Junior ISA, £3.50 per month in an adult ISA or Lifetime ISA (£42 a year), £10 per month (£120 a year) in a Sipp.

For beginners, AJ Bell offers Dodl, a pared down offering with investment choice limited to seven different investment portfolios, 10 themed investments and 80 popular UK and US shares. Dodl charges less than the AJ Bell platform at 0.15 per cent. But it’s not listed on the AJ Bell main services page – you’ll have to go to the ‘new to investing’ section of the site to find it.

AJ Bell v Vanguard – research, tools and features

AJ Bell has a favourite funds list comprised of 86 investments, and a tool to filter these to help find a suitable investment for your circumstances.  Also, for those who find sifting through a shortlist of recommended funds too difficult, it offers four ready-made portfolios, each comprised of 5-9 funds from the favourite funds list.

For those who want their investment choice to be even simpler, AJ Bell offers its own manufactured funds. Each one is built by them so you don’t have to worry about picking your investments yourself. There’s no dealing charge to buy an AJ Bell fund. The annual ongoing charge is 0.31% for the Growth funds, 0.45% for the Responsible Growth fund and 0.65% for the Income funds. It also offers a Pension Builder fund, powered by the AJ Bell Balanced fund, charging 0.31%.

AJ Bell customers get free access to Shares Magazine articles and newsletters written by their inhouse experts, regular investment podcasts and educational events and webinars. And, for beginner investors, AJ Bell attempts to ‘take the fear out of investing’ with an investment app called Dodl. 

Vanguard has a tool to help you choose funds, which starts by asking 6 questions to help them understand your attitude to risk. It has a decent pension calculator to help you find out if you’re on target for the retirement you want. 

Vanguard also offers some educational resources to help customers navigate the investment world, but they are not as regular or as prolific as the AJ Bell output. 

AJ Bell v Vanguard – user experience

Indicating better overall customer service, AJ Bell has a higher TrustScore from consumer website Trustpilot of 4.8 out of 5 (based on 4,855 reviews) v Vanguard at 4.0 (based on 2,627 reviews). 

Note that AJ Bell asks its customers for reviews, while Trustpilot states it has no recent records of Vanguard asking their customers to review them. Overall, businesses that regularly invite their customers to write reviews tend to have a higher TrustScore than businesses that don’t.

AJ Bell’s main app has a 4.7 out of 5 rating on the app store (based on 9,000 ratings). AJ Bell’s Dodl app has a rating of 4.6 (based on 361 ratings). Vanguard doesn’t yet have an app available to UK investors, though says it has one ‘in testing phase’.

AJ Bell v Vanguard – quickfire advantages & disadvantages

AJ Bell advantages

  • Wider choice of investments, including shares
  • Lifetime ISA and cash hub
  • Apps with high ratings

AJ Bell disadvantages

  • Platform charges are higher 

Vanguard advantages

  • Low-cost platform
  • Guidance for those who want it
  • Tools to help investors choose funds

Vanguard disadvantages

  • Only offers Vanguard funds
  • No Lifetime ISA or cash hub
  • No app for UK customers

Our conclusion

For beginners who are comfortable with a limited choice of investments, AJ Bell’s Dodl charges the same as Vanguard. For those who want greater choice, the difference between AJ Bell’s 0.25% v Vanguard’s 0.15% platform fees may not seem such a big deal. However, the compounding of relatively small differences in fees and charges over several decades can amount to life-changing sums. If you invested £10,000 over 25 years and got an average annual growth of 6% from the investments, with a 0.15% charge your fund would grow to £41,425. But a 0.25% charge would reduce the end sum to £40,458. You essentially lose £967 to AJ Bell’s additional platform fees. With larger amounts and longer time scales, the amount lost will magnify due to the effects of compounding. Use Compare and Invest to find out what you’d potentially be charged.

You may think the additional fees are worth paying to take advantage of AJ Bell’s wider investment choice, including shares, and wider product choice, particularly if you want a Lifetime ISA. Nevertheless, plenty of investors are happy to stick with passive investing and to only use Vanguard’s fund range, noting also that Vanguard funds are popular on other platforms. The decision will come down to your personal preference.