Will advisers embrace Vanguard's D2C push?

Will advisers embrace Vanguard's D2C push?

Vanguard's foray into the direct-to-consumer (D2C) space could disrupt the adviser market but may also represent an opportunity to help lower client costs.

The asset manager's online proposition, which charges an annual account fee of just 0.15 per cent, has been tipped to enhance existing cost pressures on fund firms, both in the active and passive space.

But in the advisory industry, specialists are divided on whether Vanguard's service will prove a threat or an ally to intermediaries.

Some advisers have indicated they expect to direct clients towards the offering as part of their existing service. David Hearne, director at Satis Asset Management, suggested his firm could develop an advised solution around Vanguard's proposition.

"I see our role as clients' buyers in the marketplace. [Telling a client to] Go and buy x from y, needs more than just pointing [a client towards a service]," he wrote on social media.

"I don't need access [to the service]. Now we find out if financial planning really does add value. Do we still need to be the gatekeeper of the money?"

On a cost basis, the direct proposition could prove a draw for advisers' clients. Only Vanguard products are available via its service, but the average product fee is just 0.14 per cent.

There will be no account fee above the first £250,000 invested, meaning this charge is effectively capped at £375 a year.

"The £375 price cap on the direct offering means that potentially a large number of clients will be better off in cost terms moving from their current advised platform to the new direct one," said lang cat consulting director Mike Barrett in a blog post.

"There are limitations, most notably the lack of a Sipp wrapper, the constrained fund range and the lack of adviser charge functionality, but if a client is happily invested in, say, [Vanguard fund range] LifeStrategy and nothing else, then the cost savings could be huge."

Graham Bentley, of investment consultancy gbi2, suggested advisers faced the risk of being abandoned by clients if these were transferred to Vanguard's service. But this would depend on the strength of an advice firm's broader offering, he added.

"There's a fear that a whole bunch of advisers have, that clients will say 'Thanks for moving me to this platform but I don't think I have to see you every three months and pay for the pleasure any more'.

"There's another cohort of advisers who are confident in what they charge and the value of financial planning. They should be ambivalent as to where the client puts their money."

Advisers' willingness to use the service could be further inhibited by the fact that it does not offer an adviser charging function.

"It's a D2C proposition so it won't support an adviser standing in the middle. I suspect they won't do that for a couple of reasons. One is it's a bit messy getting the client to do stuff and then come back to the adviser and getting valuations," said consultant Rory Percival.