Key Points
- For ETF and share investors, Hargreaves Lansdown has lower annual fees than Vanguard over the long term.
- If you invest in funds, however, then Hargreaves Lansdown’s annual fee is uncapped and expensive.
- Hargreaves Lansdown’s Junior ISA is completely fee-free, making it the best value JISA in the UK.
- Vanguard wins on dealing fees, but Hargreaves Lansdown off free automatic investing.
If you thought investing your money in a Vanguard ETF was cheapest via Vanguard’s platform, you’d be wrong. Even going with Hargreaves Lansdown, the UK’s largest platform and one with a reputation for high fees, you’ll be far better off over the long term. In fact, for investors that avoid funds and trade infrequently, Hargreaves Lansdown is one of the UK’s cheapest platforms.
Annual Fees
Hargreaves Lansdown: 0.45%, capped at £45 per year for ETFs and shares.
Vanguard: 0.15%, capped at £375 per year.
So why does Vanguard cost so much more over the long term? The answer is that Hargreaves Lansdown cap their annual platform fee for ETF and share investments at £45 per year, so while the headline rate of 0.45% seems high compared with Vanguard’s 0.15%, it only applies to accounts under £10,000. And once your account hits £30,000, HL is cheaper than Vanguard from then on.
Vanguard’s cap only kicks in when accounts reach £250,000.
Verdict: If you are sticking to ETFs and shares, Hargreaves Lansdown will be cheaper in the long run. If you are looking for a platform to invest in Vanguard funds, such as the LifeStrategy range, then you are better off with Vanguard’s own platform.
ISAs
Stocks and Shares ISA fees: If you are investing within a Stocks and Shares ISA then there is no additional fees added by either Hargreaves Lansdown or Vanguard.
Junior ISA fees: The 0.15% Vanguard annual charge applies to their Junior ISA as well. On the other hand, Hargreaves Lansdown charge no fees at all. Zero annual fee and zero dealing charge. This makes it one of the best value Junior ISAs available, and a great way to maximise the head start your kids will have when they take over at the age of 18.
Verdict: There is no additional fee difference for investors using a Stocks and Shares ISA. For Junior ISAs, however, the difference is significant. With no annual charge or dealing fees, the Hargreaves Lansdown Junior ISA is the UK’s best value. If you max out the Junior ISA limit for 15 years, at an investment return of 7% your child will be about £3000 better off with Hargreaves Lansdown than with Vanguard.
SIPPs
Hargreaves Lansdown: 0.45%, capped at £200 per year.
Vanguard: 0.15%, capped at £375 per year.
The Hargreaves Lansdown annual charge cap is higher for their SIPP, kicking in at £200. Vanguard’s remains the same. This means that once your pot reaches around £45,000, Hargreaves Lansdown is cheaper from then on.
Verdict: With the cap at Hargreaves Lansdown higher for SIPPs, Vanguard becomes more attractive for small accounts. However, as time goes on and your SIPP (hopefully) grows, the HL cap provides significant savings over the long term.
Dealing Charges
Hargreaves Lansdown: £11.95, dropping to £8.95 if you did 10-19 deals the previous month, and £5.95 for 20+ previous deals.
Vanguard: £0
So while the annual fees are in Hargreaves Lansdown’s favour over the long term, there is a caveat, and that is the dealing charge the they apply when you buy and sell investments. At £11.95 per trade, it will take a toll on active investors. For those of us more sanguine about our portfolios, it’s a different story. If you invest in a couple of broadly diversified ETFs and rebalance your portfolio once a year, HL is still significantly cheaper over the long term.
Auto Invest: But what if you are investing an amount of your salary every month? Hargreaves Lansdown allows you to set up a direct debit that automatically invests for you each month for no charge at all. What this means is that for each of your monthly investments, the £11.95 dealing fee won’t apply.
Both Vanguard and Hargreaves Lansdown offer automatic investing free of charge. It is is one of the most powerful tools you have for building a long-term portfolio, one everyone should take advantage of.
Verdict: If you are regularly buying and selling investments then the Hargreaves Lansdown dealing charge will rapidly erode your returns. In that case you’re better off with the free dealing at Vanguard. If, however, you are an inactive long term investor, and you take advantage of auto invest, the dealing fees are less relevant.
Conclusion
It is perhaps surprising that Hargreaves Lansdown can be cheaper than Vanguard over the long term, even when investing in Vanguard’s own products. This dynamic is limited to their ETFs, however, since HL’s annual charge is uncapped for fund investments.
If you are a passive investor who holds just a few Vanguard ETFs for the long haul, and you don’t trade frequently throughout the year, then Hargreaves Lansdown comfortably beats Vanguard on costs. With Hargreaves Lansdown you also have access to thousands of different ETFs and shares, through a platform with all the tools and resources you may need.
