20 reasons to stay away: Vanguard lists strict criteria for advice service

Prospective clients may find it trickier than first thought to make use of Vanguard's new financial planning arm, especially if they hold things such as multiple workplace pensions or want to invest in ESG, International Investment's sister title Professional Adviser can reveal. 

On Monday (19 April), Vanguard launched a financial planning service for accumulation savers, Vanguard Personal Financial Planning (VPFP). 

The advice arm will service those who have more than £50,000 to invest through its Vanguard UK Personal Investor platform and will recommend "a tailored investment portfolio made up of a finely-tuned mix of low-cost and broadly diversified equity and fixed income funds".

However, the firm's initial disclosure document lists 20 reasons why an investor would not be eligible to receive advice from VPFP. For example, the document states that if a prospective client requires "holistic financial advice" including estate planning or income protection, or if they require advice covering the combined finances of them and their partner, then VPFP would not be suitable for them. 

Other reasons to not consider using VPFP as an advice service include serious ill-health, wanting to retire before 55 or after 75, or if they are currently contributing to two or more workplace pension schemes.  

VPFP also said if a prospective client is a beneficiary of a pension scheme inherited from someone else they would not be eligible, neither would someone with a Lifetime ISA or someone who only wants to invest in ESG. 

As for those who hold investments with another ISA provider and have contributed to it in the current tax year, the initial disclosure document said they would have to transfer it to a Vanguard ISA first or wait for the new tax year before receiving advice.

For those who qualify, it will cost 0.79% to access the advice service, including ongoing fund charges, transaction and platform fees. VPFP is a restricted service, recommending only Vanguard products and investments. 

Discussing the logistics of its advice service, Vanguard head of Europe Sean Hagerty told Professional Adviser earlier this week that he has plans for it to continuously add more capabilities for clients, developing on from its rather basic starting point. 

The next step for the firm post-launch, said Hagerty, will be an option for couples so that they can make investment goals together - it is currently only offering advice for solo investors. This is likely to be added within the next month. Following that, there will be functionalities to help with goals other than its fundamental aim of advising on those saving for retirement, as well as support for drawdown.

Despite the low-cost service and its various restrictions, Vanguard has maintained its financial plans will be "pretty comprehensive" and its advisers will ensure they are considering the client's goals and how they can help them achieve those goals, remaining "disciplined throughout".

The full list of reasons VPFP's advice would not be suitable for an investor are listed in the document as below:

• Require holistic financial advice that includes, for example, estate planning, life cover or income protection
• Require financial advice covering the combined finances of you and a partner
• Are in serious ill-health
• Want advice that takes into account all available products across the investment market
• Have high-cost unsecured debt to service (this does not include other types of secured debt you may have, including but not limited to, any mortgage secured against a property)
• Do not have accessible emergency cash
• Hold a stocks and shares ISA from another provider and contributed to it in the current tax year.
  If you'd like to receive our advice you'd need to either: (a) Transfer this ISA to a Vanguard ISA first. Before doing this you should think about whether it is in your best interest. We can't advise you on any transfer made prior to joining the VPFP service and you should think carefully about whether it's right for you, as there are risks involved in any transfer, or (b) Wait until the new tax year starts.
• Are a US person
• Have unrealised capital gains in your GA (in excess of your annual allowance which is currently £12,300) that you do not wish to crystallise (we will sell the holdings in your GA in order to purchase the fund allocation as recommended in your financial plan)
• Are currently contributing to two or more workplace pension schemes
• Are the beneficiary of a pension (a scheme that you have inherited from someone else) that you want to form part of your retirement planning with Vanguard
• Wish to invest only in ESG (environmental, social and governance) investments related to your retirement savings
• Want to maintain total control of your investment decisions related to your retirement savings
• Are self-employed and have set up a private limited company. It may be more tax efficient to pay your pension contributions through the business as an employer pension contribution. The VPFP service does not support employer contributions into the Vanguard Personal Pension

Vanguard also provides reasons that you may be suitable for its financial planning arm. If you are five years or more away from retirement, have at least one existing Vanguard account opened or are comfortable investing exclusively in Vanguard products, then it might be for you.

As for who VPFP's advice service may be suitable for, the document said they:

• Are aged between 18 and 74 years
• Are a UK resident for tax purposes
• Have investible assets or disposable income to invest (we look at how best to invest what you have already earmarked for retirement planning. Contributions you have already made to tax wrappers in this tax year will need to be considered and deducted where they are part of your retirement savings)
• Have at least one existing Vanguard account opened on the Vanguard Personal Investor platform being any of a general account ("GA"), individual savings account ("ISA") and/or Vanguard Personal Pension with an aggregate value of at least £50,000
• Are five years or more away from retirement; Are investing to achieve a retirement goal through a combination of pensions, ISAs and other accounts, and do not need access to all of your investments prior to retirement
• Want ongoing advice and are willing to pay for it
• Are willing to allow us to make investment decisions on your behalf
• Are comfortable with digital financial advice services
• Are comfortable investing exclusively in Vanguard products and services
• Are willing to take investment risk.

'VPFP offers comprehensive advice'

When asked why there are so many reasons to not be suitable for VPFP, a spokesperson for Vanguard told PA: "Vanguard Personal Financial Planning is a goal-based financial planning service, focusing on helping investors prepare for retirement. It offers comprehensive, tailored financial advice to help investors achieve that goal, including bespoke portfolio management, tax-smart planning, and an ongoing service for an all-cost of 0.79% including advice, fund, platforms costs and VAT where applicable.

"We will add further capabilities in line with the needs and demands of investors. Areas for consideration include joint couples planning, decumulation and additional investment goals, but we are keen to hear feedback directly from investors and encourage them to get in touch. There will be no additional costs for the services we add."

They said: "We decided to start with a focus on retirement planning because preparing for retirement is the area of most concern for most investors. Despite this we know nine out of ten adults do not currently take financial advice. We want to help more people achieve better outcomes for their retirement."