I’m a novice investor with £5,000 in Vanguard and the new fees seem expensive. Should I move my money?

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I used Vanguard to invest in its Lifestrategy 80 fund. I invested around £5,000 when I started this year but I love the product and its simplicity.

However, given the rate changes being written about on This is Money and the introduction of a minimum amount, should I now move my stocks and shares Isa elsewhere?

Trading 212 seems good, as does InvestEngine, but I’m not sure which ETFs to invest in since this is all handled by Vanguard.

Any help on where to start would be greatly appreciated. Due to the period between now and my retirement, I generally take a risky approach, for which I mainly save. MC, via email

Harvey Dorset from This is Money replies: Vanguard’s rate shakeup came out of the blue and will no doubt have left many investors – especially those early in their investing journey – wondering whether this is still the best place for their money.

The fund manager, which currently charges 0.15 per cent on each balance, capped at £375 per year, told investors last week that it will start billing monthly from January.

The new £4 per month fee applies to Sipp, Isa and general account holders with a balance of less than £32,000.

For example, a customer with €20,000 in his account will see his costs increase from €30 per year to €48.

Vanguard said the new rates are needed to help cover “the rising costs of serving our customers.”

Steve Nelson, insight director of the LangCat, said: “Vanguard’s change is not surprising.

“Most of the price changes we’ve seen lately are the result of marginal changes at the edges, as opposed to large-scale changes in the reimbursement models.

“Vanguard is clearly protecting profitability at the more modest portfolio sizes, and that is well within its right to do so.”

“Investors need to take many factors into account when looking at how platforms compare in terms of costs.

‘The type of assets you invest in, how often you are likely to trade and what packaging you use are all examples that can influence pricing – in addition to the amounts invested.’

Despite the changes, Vanguard will still prove to be a cheaper option than other platforms for many, although this largely depends on the amount you have invested.

This is highlighted in our comparison table at the bottom of the story and you can find more detail in our regularly updated best shares Isas and investment platforms.

For someone with an investment of around £5,000, the new Vanguard charges will see them pay £40 more per year for the same service, pushing the costs well above several other platforms such as AJ Bel*, Bestinvest*, Hargreaves Lansdown* and of course Trading 212* And InvestEngine*.

However, Vanguard’s service is still cheaper than now-fellow subscription service Interactive Investor, which nets investors £108 a year, while Fidelity, Halifax and Iweb also work out more expensive for those with smaller investment pots.

For those with investments above the £32,000 threshold, which means they are still subject to a 0.15 per cent fee instead of a monthly payment, Vanguard appears to be a cheap option, but not the cheapest.

With a maximum fee of £375 per year, an investor with a pot of £1,000,000 will still pay the same fee as someone with a quarter of that, while investors using Hargreaves Lansdown*, Close Broeders AM or Charles Stanley Direct would pay £3,000, £2,250 and £2,125 respectively.

This means that it is smaller investors who will lose out as a result of Vanguard’s rate change and could consider moving their investments elsewhere.

This feels like a shame, as it has been a popular place for novice investors, who have been seduced by the low-end mantra.

Since Vanguard does not plan to charge fees for withdrawing or transferring your funds from its platform, there is still an option to switch platforms.

But knowing where to move your investments isn’t easy, especially from a platform like Vanguard, which only offers Vanguard funds.

These can still be accessed through other platforms, but they may come with a higher price tag.

In the meantime, Trading 212* And InvestEngine* are the cheapest options and don’t charge anything to use their DIY services, but they also offer limited options.

These platforms only offer different levels of ETF and stock investing and not access to funds.

Nelson said: “Fees are of course only part of the picture. Things like how much help you need in choosing investments, your impression and level of trust with a brand are some of the many other factors that determine what is a personal choice based on your own circumstances.”

Although priced similarly to Vanguard’s new fees, more comprehensive platforms such as Bestinvest and Hargreaves Lansdown also offer a much wider range of funds than Vanguard, as well as equity investments.

This means you are not limited to Vanguard-only funds, although these platforms also offer Vanguard’s products.

Bestinvest also offers free financial coaching sessions.

Investing costs

The table below provides an example of the investment costs for someone who holds mutual funds on some of the major platforms and makes 12 ad hoc trades per year.

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