Moneyfarm v Vanguard

|

Both firms can help you invest and grow your money but there is a key difference: Vanguard is an asset manager with a platform that allows you to buy, hold and sell its own investment funds, while Moneyfarm is a digital wealth manager offering risk-graded portfolios. Vanguard is cheaper, but your choice will also depend on how confident you are with investments. With Vanguard you’ll be making the investment decisions (unless you choose its Managed ISA option), while Moneyfarm has experts on hand to manage your investments for you.

What is Moneyfarm?

Moneyfarm launched in the UK in 2016, after running a similar service in Italy since 2011. The firm helps customers to get started with investing by harnessing technology. After you spend a few minutes filling out an online questionnaire, it matches you to suitable investments. The firm also has expert investment consultants to advise customers who need extra help, and an asset allocation team who actively manage its portfolios. On a pan-European basis, the firm has over 125,000 active investors and more than £3.5 billion invested on its platform. It has financial backing from some big firms, including Allianz Global Investors, M&G, Cabot Square Capital, United Ventures, and Poste Italiane.

What is Vanguard?

Vanguard is a popular player for investors who want to keep their investments simple, passive and low cost. Vanguard started in the US in 1975, becoming one of the world’s largest fund groups known for its low-cost passive fundsVanguard’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 £16 billion in assets on the platform. 

Moneyfarm v Vanguard – product on offer

Moneyfarm and Vanguard have the same account options – with both firms you can invest using stocks and shares Individual Savings Accounts (ISA), Junior Individual Savings Accounts (JISA), Self-Invested Personal Pensions (SIPP) and General Accounts. Both firms allow you to get started investing with a minimum lump sum of £500. Vanguard also lets you begin with £100 a month. 

Moneyfarm’s smart tech uses your bespoke investor profile, generated using an online questionnaire, to recommend the best portfolios for your investing style and appetite for risk. It chooses from three portfolio investment styles and then selects from 7 risk levels within the style. Its investment team selects and manages your chosen portfolio using Exchange Traded Funds (ETFs) as low-cost building blocks. ETFs are a type of investment fund, listed on stock exchanges, which replicate the performance of a pool of investments or an index.

The Moneyfarm questionnaire is quite detailed which means if you’re a complete novice you might find it a bit complicated. However, there is always the option to speak to one of the firms’s designated investment consultants. 

Vanguard gives investors access to 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 with different risk levels. The Vanguard funds are low cost, charging 0.2% on average. Vanguard has a tool to help you choose funds, which starts by asking 6 questions to help them understand your attitude to risk. Vanguard also offers a Managed ISA with ‘guidance from real human experts’ for investors who don’t want to make their own decisions.

With Moneyfarm, you’ll pay a management fee based on the total value of your investments, which starts at 0.75% for investments under £10,000, and reduces on a sliding scale down to 0.35% for those with more than £500,000 saved. Its annual fees would be £70 on an investment of £10,000 and £1,750 on £500,000.

Vanguard is cheaper, charging a low platform fee of 0.15% per year (£15 on an investment of £10,000), capping this at £375 per year for accounts with investments over £250,000. The Vanguard Managed ISA is more expensive, charging a total of 0.60% a year. 

On top of this with both Moneyfarm and Vanguard you have to pay the ongoing fees attached to the funds, which average about 0.2% with both firms. 

Moneyfarm v Vanguard – research, tools and features

Vanguard has a decent pension calculator to help you find out if you’re on target for the retirement you want. It also offers educational resources to help customers navigate the investment world. Moneyfarm has a good blog, with plenty of insights into the investment world provided by its chief investment officer.  

Moneyfarm v Vanguard – user experience

Customer reviews on consumer website Trustpilot give a good idea of overall customer satisfaction.

Moneyfarm has a good rating of 3.9 from over 990 reviews. Customers giving positive reviews often mention its easy navigation and accessibility. But a few feel let down by Moneyfarm’s customer service and investment performance.  

Vanguard scores slightly better at 4.0 (based on over 2594 reviews). Lots of the Vanguard reviews praise the customer service and the low fees, while there are a few negative reviews related to transferring money out. 

Notably, Moneyfarm asks its customers for reviews, but 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. So adding that information into the equation, Vanguard is the winner on customer service.

However, if you like a decent app, Moneyfarm wins. Its app has a 4.6 rating on the app store (based on 1,700 ratings). Vanguard doesn’t yet have an app available to UK investors, though says it has one ‘in testing phase’. 

Moneyfarm v Vanguard – quickfire advantages & disadvantages

Moneyfarm advantages

  • Good app
  • Technology to help you make investment choices
  • Designated investment consultants

Moneyfarm disadvantages

  • Higher management fees – very expensive for smaller sums invested

Vanguard advantages

  • Low platform costs capped at £375 a year
  • Tool to help investors choose
  • Managed ISA option for the less confident

Vanguard disadvantages

  • Most customers have to make their own investment choices
  • No app 

Our conclusion

There are a greater number of investment options with Vanguard but if you’re lacking investment confidence, you may find the choice daunting. Vanguard’s fund selection tool is useful guidance, but Moneyfarm’s online questionnaire is much more detailed and likely more reassuring if you’re a complete beginner. 

But also consider the fee difference, where Vanguard is the clear winner. Saving up to 0.6% a year on the platform fees by choosing Vanguard is perhaps a bigger deal than you may think. Over many years the compounding of relatively small differences in fees and charges over several decades can amount to life-changing sums. If you invested £5,000 over 25 years with an 0.15% charge and got an average annual growth of 6% from the investments, your fund would grow to £20,713. But a 0.75% charge would reduce the end sum to just £17,929. Use CompareandInvest.co.uk to find out what you’d potentially be charged for investing with each of these firms before making your final decision.