There was a very important figure published last week.
It wasn’t the bank rate; it wasn’t the tapering of quantitive easing from the Federal Reserve; and it wasn’t the latest Link dividend monitor.
It was the fact that, in the past quarter, Vanguard had taken on more new clients than Hargreaves Lansdown.
For financial advisers I think that is highly significant.
I like Vanguard, it’s cheap and cheerful. If you’re a new investor it is very easy to understand. With the market environment that has persisted for the past 14 years (even including the Covid dip) it has looked remarkably easy to make money by tracking a share index – even the FTSE.
Hargreaves is a different kettle of fish. It’s for more high-net-worth savers, has more sophisticated options and is far more expensive. It’s John Lewis, but with 10 times better profit margins.
Now let’s think about the average person, and for this I use myself, because I think my investing journey is not untypical.
When I was twenties and first started investing I just wanted something simple: a low-cost platform that allowed me to make regular smallish contributions. I certainly didn’t need, nor could afford a financial adviser, not least because my affairs and my needs were simple.
There was no Nutmeg or Vanguard in those days, so I ended up in a very straightforward Isa and overpaying in to my pension. Had those platforms been around I would have likely used them.
By my thirties things were getting more complicated, but I was more interested in money (not least because I actually started to have some) and in where I invested. So I moved to an investment platform, opened a self-invested personal pension and a stocks and shares Isa and started to choose funds. I made some mistakes, I got some things right.
Now I’m in my mid-forties, on a good wage, with a family and a large mortgage. Do I need a financial adviser now? Yes, probably one could help. But it seems like a large expense given how few actually investable assets I have in context – remember, I just bought a big house.
Anyway, why would I move given that all my investments are already in one place and, having learned from my earlier mistakes, I am now a much more confident investor?
So what now happens when I get to 55? Having looked after my investments all those years? I’m probably not going to want financial advice then either – certainly that is the reaction from many Times readers who are in this position.
The question is: with so many younger people now going it alone from an early age on platforms such as Vanguard, how can financial advisers ever win these customers?