interactive investor and Vanguard have lower costs than some of their rival platforms but their charging structures are very different. While interactive investor 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, Vanguard offers less investment choice. So consider the type of investing that you plan to do alongside costs.
What is interactive investor?
interactive investor (sometimes referred to as ii) has a head office in Manchester and is owned by Abrdn, a global investment company which is a constituent of the FTSE 250 index of medium-sized companies listed on the London Stock Exchange. Founded in 1995, in recent years interactive investor has bought a few rival platforms, meaning it now has more than 400,000 customers and £50 billion of assets on its platform. It is best-known for championing flat fees in pounds and pence over the percentage of investments charging structure that is prevalent in financial services.
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 average 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 £16 billion in assets on the platform.
interactive investor 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). They are regulated by the Financial Conduct Authority and covered by the Financial Services Compensation Scheme (FSCS).
While interactive investor allows you to get started investing with as little as £25 a month, with Vanguard you need £100 per month, or a £500 lump sum. However, the investment choice is perhaps the biggest difference between the two platforms.
Vanguard gives access to a limited range of own-branded investments. This comprises 84 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.
interactive investor offers a wider investment choice of active and passive funds (including Vanguard’s funds, which are popular with interactive investor’s customers), plus UK and overseas shares, corporate and government bonds, exchange traded funds (ETFs) and investment trusts. interactive investor’s international shares offering is particularly good. Sophisticated investors might like the currency conversion option, plus the access to new shares and stock splits.
So, interactive investor wins on investment choice.
Another key difference relates to the platforms’ fees for investing, where both are relatively low cost compared to other rival platforms. It’s a choice between Vanguard’s percentage charging and interactive investor’s subscription fees.
Vanguard charges a platform custody fee of 0.15% per year (£15 on an investment of £10,000 and £75 on an investment of £50,000). It caps this fee at £375 per year for accounts with investments over £250,000.
Vanguard doesn’t charge extra for its ISA or, perhaps more importantly, its pension. However, 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.
interactive investor’s flat fees used to be better value only for investors with more than £50,000, but it has recently introduced fee levels that suit investors with lower amounts. For investors with up to £50,000, its Investor Essentials plan costs £4.99 a month and there is also a new beginner level Pension Essentials which charges £5.99 a month. On a portfolio of £25 to £50,000, these would be £59.88 and £71.88 a year, respectively.
Once you go above £50,000, you move to the Investor Plan, at £11.99 a month, and the Pension Builder plan, which is £12.99 monthly. Whatever the size of your portfolio, annual platform custody fees would be either £143.88 or £155.99, respectively. With interactive investor you can also add a pension to an existing plan for a lower combined fee.
Frequent traders should note that Vanguard has no dealing charges for buying or selling funds. But of course, you may want to hold shares and other listed investments alongside funds. If that’s the case, be aware that Vanguard doesn’t offer shares.
With interactive investor there are also charges related to the costs of buying and selling investments – and these may be different depending on the type of investment that you hold.
interactive investor charges £3.99 for trading in funds and UK shares, and £9.99 for international shares. Investors in its Investor plan get a monthly credit of £3.99 to use against trading fees.
Notably, all ii’s plans offer a free regular investing service, that doesn’t charge trading fees for drip-feeding as little as £25 a month into a wide range of funds and popular shares (including the FTSE 350). This means regular monthly investors don’t have to incur further charges beyond the subscription fees.
interactive investor also has a Friends and Family service that allows you to gift 2-5 people a free subscription by adding them to your plan.
A key difference in product range is that interactive investor has a standalone cash savings service provided by Flagstone that allows you to pick the best deal from over 25 UK banks and building societies. You can open an account with a minimum of £10,000. Flagstone takes a 0.25% management fee which is reflected in the rates offered through the service.
Vanguard doesn’t yet have a cash offering for its customers.
interactive investor also allows customers to vote for free on the shares that they hold. It has championed this facility with supporting content and by making shareholder voting the default setting for customers, who receive notifications, informing them when they are eligible to place a vote. They will also be notified about important shareholder events, including AGMs. Since July 2023 interactive investor customers can also vote through its app.
interactive investor v Vanguard – research, tools and features
Both platforms offer daily market insights and investment education, though interactive investor’s output is more prolific and frequent, particularly the part relating to investment ideas.
interactive investor’s website allows customers to tailor the type of news content that they want to see, depending on product interest and level of expertise. interactive investor also reveals a picture of how its customers’ investments are performing via its quarterly Private Investor Performance Index. It also produces video and podcast content and hosts live events.
Both platforms also offer guidance to help investors narrow down their investment choices.
interactive investor has two recommended investment lists for investors in collective investments such as funds, investment trusts and ETFs, selected and managed by its independent research partner Morningstar. They are called the ‘Super 60’ list and the accompanying sustainable list is called the ‘ACE 40’. It also offers five model portfolios, put together using funds from these lists, that investors can replicate within their own investment accounts.
For beginner investors, interactive investor recommends six low-cost ‘Quick-Start’ funds with different risk levels and ongoing charges of 0.22 per cent, or 0.35 per cent for the sustainable options.
Vanguard has a tool to help you choose funds, which starts by asking 6 questions to help us 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.
interactive investor v Vanguard – user experience
interactive investor has a TrustScore from consumer website Trustpilot of 4.7 out of 5 (based on more than 24,000 reviews) v Vanguard at 4.2 (based on just under 3,000 reviews).
Note that Trustpilot states it has no recent records of interactive investor or 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. As the platforms have no difference on this factor, the scores indicate that interactive investor has better customer service.
interactive investor’s app has a 4.4 out of 5 rating on the app store (based on 9,400 ratings), while Vanguard doesn’t yet have an app available to UK investors.
interactive investor v Vanguard – quickfire advantages & disadvantages
interactive investor advantages
- Flat fee structure good for larger amounts invested
- Access to all funds, including Vanguard funds
- Cash hub
- Offers direct investing in UK and overseas shares
- Better customer service
- Good app for customers
interactive investor disadvantages
- Charges for trading in funds and shares
Vanguard advantages
- Low-cost percentage fees charging
- Guidance for those who want it
- Tools to help investors choose funds
- No charges for fund trading
- Doesn’t charge extra for pension
Vanguard disadvantages
- Only offers Vanguard funds
- No direct share investing
- No cash hub
- No app for UK customers
Our conclusion
Setting aside any cost comparisons, sophisticated or more confident investors might be attracted to interactive investor’s wider choice of funds, UK and international shares. Plus interactive investor’s cash savings service and app make it a more holistic offering. However, other investors may be happy with Vanguard’s more limited fund range, particularly as it’s low cost.
As Vanguard’s funds are available on both platforms (and are popular with interactive investor’s customers) it’s possible to do a clean cost comparison based on holding Vanguard funds. For beginners with smaller amounts to invest up to about £40,000, Vanguard looks more competitive than interactive investor’s Essentials plan. However, interactive investor Essentials is more competitive on investments worth £40,000 to £50,000. Meanwhile, interactive investor’s Essentials Pension beats Vanguard on investments worth £48,000 to £50,000.
After that, interactive investor’s main flat fee subscription plan works out better value for general account and ISA investors holding over £96,000 in Vanguard funds. Meanwhile, the interactive investor pension builder works out better value for investors holding more than £104,000 in Vanguard funds.
However, total costs will depend on the investments you wish to buy, plus the number of trades (buys and sells) that you’ll make. Frequent fund traders may find out costs rack up on interactive investor, while Vanguard doesn’t charge for fund trades. So try putting various scenarios into Compare and Invest to find out what you’d potentially be charged before making your decision.
Remember that over many years the compounding of relatively small differences in fees and charges over several decades can amount to life-changing sums. With larger amounts and longer time scales the amount lost will magnify due to the effects of compounding.
