Vanguard ETFs and fees comparison


#1

I can see in the app that at least VUSA is offered. Despite the information saying it has “a base currency of USD”, there are no FX fees to pay for this, because it’s a UK-listed ETF?

When Freetrade ISAs come out, I want to make the decision on who to move to: Freetrade or Vanguard’s own platform. If I’m only interested in holding VUSA, will Freetrade end up costing less in fees?

The flat £3/month platform fee means it will be £36 no matter how much money I’ve invested, while Vanguard charge 0.15%, so the fee after I have £40k will be £60. Being the same ETF, the fees related to that will be identical. Neither platform charges any other fees. Is that all correct?

The major difference and issue that I see is that via Vanguard’s platform it’s “accumulation” by default, as I understand it. So dividends are automatically reinvested. In the Freetrade app, the information just says “income will be distributed as cash”, which I presume means I have to manually reinvest? (And to confirm, there’s no fee by Freetrade for receiving this cash or reinvesting it?)

Is an automated solution for that going to appear? If manual, will I in theory lose money in the delay between receiving dividends and reinvesting?


(Kenny Grant) #2

These are interesting questions, thanks for asking. I will look forward to seeing the Freetrade answer about the fees, it’s often hard to compare different providers, and all the different fees involved can be confusing.

In this case, I think it depends if the ETF goes up or down in the short term while your dividends are cash. Probably doesn’t matter much long term and might even give you an opportunity to build cash and get it in at an opportune moment. I imagine they will look at Dividend Reinvestment plans at some point but it’s not on the short term roadmap, so for now it’s manual reinvestment only.


(Vladislav Kozub) #3

This is correct

Definitely not Freetrade. You can see their pricing structure here.

Whilst DRIP is not yet a benefit Freetrade offers, you can still manually reinvest for free. Once DRIPs are available, then you could avoid doing it manually.


Another big advantage of Freetrade over Vanguard is that you can invest in any other funds and shares if you would like at some point. Whilst I understand you go fully for S&P 500, it is always better to have an option to go for a variety of funds or even individual shares if you will one day wish so :slight_smile:


(Nicola Greenwood) #4

Hi @sendu,

You have a few questions here, so I have broken them down which will hopefully allow me to answer them best.

  1. Are there any FX fees for VUSA? As VUSA is traded on the LSE in GBP there are no FX charges for trading. The only FX to bear in mind is in relation to dividends as the income for this ETF is paid in USD, Freetrade don’t charge any FX fee for this but Crest will convert it to GBP.

  2. What are the fees? The ETF charge a 0.07% ongoing fee which is inbuilt in the price. Freetrade won’t charge any additional fees aside from the ISA fee that you have already mentioned.

  3. Are dividend reinvestments available? This ETF pays income, so if you wanted to reinvest the money into it then this would need to be done manually as at present we do not have a dividend reinvestment option.


Buying ftse250 tracker - what fees to expect
#5

By “Neither platform charges any other fees” I meant in this context of just investing in this ETF every month and doing nothing else other than a final withdrawal.


(Vladislav Kozub) #6

Definitely no other fees from Freetrade. I am not sure if Vanguard charges normal transaction fees on its own funds. If no, then they will be similar except the £3 vs 0.15% ISA charge.


(Chris) #7

This page covers all pricing queries.

https://freetrade.io/pricing/


#8

Thanks for the info. Let’s imagine that one day Freetrade had an automatic reinvestment feature, making the end-user experience of investing in this ETF the same between Freetrade and Vanguard.

But could it be that Vanguard manage to work with their own ETF differently, in that reinvestment does not require dividends being made out to cash and converted from USD to GBP, rather it just automagically buys up more of the ETF? Or would regulations and such mean that Vanguard would be operating in the same way as Freetrade, just another broker forced to receive dividends after a USD to GBP conversion, then buying more in GBP?


(Nicola Greenwood) #9

Hi @sendu, this is an income paying ETF not an accumulating ETF, but I can’t really speak on behalf of Vanguard and how they manage their own dividend reinvestment functionality.


(Rob N) #10

Yes, the Vangaurd fee will be £60 in year 1, but as your portfolio grows so will your fees. Goldman Sachs’ base case is the S&P hitting 3000 at the end of 2019 (+12%) so your year 2 fees would be £67 (slightly more if you include reinvested dividends), these would grow again in year 3 if the index gained and so on… This is a massive benefit of Freetrade - very low and flat fees.


#11

This is so important and ethical. It doesn’t cost freetrade any more to hold a million pound account than it does a 10 pound account. It’s just a number on a ledger.

Percentage fees are a scam perpetrated on an unknowing public by the incumbent finance industry for too long.