Vanguard, one of the world's biggest passive asset managers which attracted $315 billion from investors last year, is launching a new direct to consumer (D2C) online platform in the U.K. that harnesses technology to offer lower fees to retail investors.
The new launch is likely to add to the pressure on active fund managers and brokers, which typically charge more but historically claim a better stock market performance.
Passive, as opposed to active funds, have lower staff costs so can undercut them on price. They also tend to have better automation technology,
The U.K. Financial Conduct Authority (FCA) recently published its asset management market study that found "price competition is weak in a number of areas of the industry" and called for a competition
Vanguard will charge an administration fee of 0.15 per cent on its new D2C platform, in addition to underlying on-going fund charges that average 0.14
In comparison, the UK's biggest retail broker Hargreaves Lansdown, which has £60 billion of assets under
Vanguard's D2C U.K. online service will offer a range of index funds, ETFs, Target Retirement funds and other options, alongside a standard managed ISA, junior ISA or general account. A Self-Invested Personal Pension (SIPP) fund is promised at a later date.
The asset management sector as a whole faces a challenge from the growth of
At present U.K. regulations mandate some element of human direction so 'pure play' and totally mechanized services are not allowed, as they are in the U.S., but regulations can change.
The Vanguard's Personal Advisor Services
The U.S. service is open to anyone who has at least $50,000 (£40,000) to invest and has an annual flat fee of 0.3
The lower running costs of
This technology-led disruption to the marketplace is a growing feature of the asset management industry, particularly on the retail side where the lower fees are attractive for many end users.
In the U.K. the rise of financial technology (
In the U.S. Charles Swab has a pure play
Sean Hagerty, Head of Vanguard's European business, said in a statement accompanying the launch of its new U.K. online investment service, that the FCA interim asset management market study stressed asset managers' obligation to act in the best interests of investors, "including requiring the industry to show how it delivers value for money".
He believes new technology can help deliver this value for money and added that he agrees with the FCA conclusion that "fees have not decreased enough based on the economies-of-scale achieved by the industry."
Fees in the U.K. asset management sector, and elsewhere in the world, will come under pressure in future years from regulatory initiatives such as this and the technology-driven disruption from