Vanguard direct-consumer platform a ‘step change in customer experience’

By John Kenchington

Added 19th May 2017

Vanguard’s new direct-to-consumer platform has been hailed as a potential threat to established investment-distribution giants, in research by Platforum.

Vanguard direct-consumer platform a ‘step change in customer experience’
Head of Platforum, Heather Hopkins, said the Vanguard platform’s OCF charge of 0.23% for a typical tracker fund compared to an average of 0.50% across the UK’s range of platforms.
 
In addition, the account-opening process observed in Platforum’s recent testing was extremely fast.
 
“The process took all of three minutes – and two minutes of that time was spent on fund selection,” she said.
 
“That is a step change for customer experience. I tried to open a similar account with another D2C provider last year and was asked to mail a paper copy of my passport: with friction comes abandonment.”
 
Vanguard’s platform is only initially designed to offer products run by the firm itself. Vanguard is a US-headquartered mutual-structured asset manager that in the UK offers a range of ultra-low cost passive funds.
 
The platform will enable cost-conscious passive investors to access Vanguard's trackers without the need for other platforms to act as an additional intermediary.
 
The firm’s decision to launch the platform recently sent shares of distribution giant Hargreaves Lansdown tumbling by 8% in a day, as markets suspected it might trigger a price war in the sector.
 
Hopkins said Vanguard was a relatively new entrant into the UK market and had a way to go to achieve the type of brand awareness seen by groups like Hargreaves, JPMorgan Asset Management or Prudential.
 
But she also said the firm had published research in January showing that pricing had overtaking brand awareness as a more important factor in clients’ platform selection.
 
“Of course if the banks could get their act together, they should have all the ingredients for success in the market. Which is why we are watching Barclays closely,” she said.
 
“The upshot is that Vanguard will certainly get traction in the market although they aren’t going to eat Hargreaves Lansdown’s lunch – at least not yet.
 
“But Vanguard isn’t in a hurry – they have said it is a proposition for "generations to come"."
 

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