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Vanguard has a new share trading app with $0 brokerage fees

Posted: 1 April 2020 5:45 pm
News

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We took a look at the features and fees of the latest share trading platform in Australia.

Index fund mammoth Vanguard Group is the latest player to jump on the zero broker fee bandwagon with the launch of its new share trading platform Vanguard Personal Investor (VPI).

It's an exciting development from the world's largest managed funds provider and likely a sign of new things to come in Australia's online broker space.

But as always, there's a big catch – you only get free brokerage if you're investing in Vanguard exchange traded funds (ETFs) or managed funds.

The brokerage fee to buy ASX shares is $19.95 or 0.15% (whichever is greater) per trade and you can't access any non-Vanguard ETFs.

In addition, there's also an account fee of 0.2% per year based on your portfolio, which is capped at $600 – a fairly big annual fee considering many online brokers have no account fees.

Vanguard Personal Investor fees

  • Brokerage fee for Vanguard ETFs: $0
  • Brokerage fee for ASX shares: $19.95 or 0.15% (whichever is greater)
  • Account fee: 0.2% p.a. of portfolio (capped at $600)
  • Withdrawals/deposits: $0
  • Account opening/closing: $0
  • Minimum investment: $500 per trade
  • ETF management fees (MER): Business as usual – there are no discounts here

The news marks an interesting turn for the investment firm and may go some way into explaining why there are no Vanguard ETFs on micro-investment apps CommSec Pocket or Raiz Invest.

In a note to the press at launch, Vanguard Australia’s Managing Director Frank Kolimago said it was an important step for the company toward catering for customers.

“For more than 20 years, Vanguard has helped Australians work toward their financial goals, but we recognise that we could make investing with us a more seamless experience," said Kolimago.

“We are launching this new offer to investors during a time when market volatility is high, as the uncertainty of the impacts of the coronavirus continue to roil markets. But this challenging period will eventually pass. And Personal Investor will help long term investors to be well positioned to benefit when it does.”

Which shares are available?

It's not immediately clear which stocks and ETFs you get access to, so I reached out to Vanguard for the details.

According to a Vanguard spokesperson, you only have access to the 300 biggest ASX-listed companies by market cap – also known as the S&P/ASX 300 index. Seemingly the only ETFs available are ASX-listed Vanguard funds.

There's a minimum investment of $500 per transaction for both shares and Vanguard ETFs. This is a little out of the ordinary – typically, trading platforms require a minimum initial investment of $500; however, that minimum is normally dropped for subsequent trades into the same company or ETF.

Global shares and ETFs are not yet on offer, but Vanguard has promised they're working on it.

Are the fees worth it?

While common in the US, apps with zero brokerage fees are a rarity in Australia and mostly in the realm of robo-advisers or specific to US stocks only, for example, Stake or Interactive Brokers.

Of course, nothing is ever really free in the investment world, even if it appears so.

Vanguard Personal Investor's annual account fee of 0.2% minimises the benefits you get from paying no commissions. Even if you use the app to specifically invest in Vanguard products, your annual fee will eventually erode your initial savings.

On the plus side, it could be a good strategy for investors that want to regularly transfer money into their ETF of choice over the course of a year.

Average broker fees in Australia are around $10-$30, depending on the size of the investment. This means frequent trades or investments into an ETF can have a big impact on profits over the course of a year.

The other fee worth mentioning is the ETF management fee (MER), which is charged by every ETF provider and taken out of the fund's returns.

You can check out our list of Australia's cheapest ETFs here and take a look at what kinds of fees are usually charged – bearing in mind, performance figures are post-fee.

The other downside is there's no mobile version of the app yet, you'll need to sign-up on your browser to access it.

Verdict? It's certainly an interesting move, but the account fee probably isn't worth it from my perspective and I want to be able to access more than the top 300 ASX companies. That being said, I can't speak for everyone; jump on the website and let me know what you think!

There's currently no waiting list to join Vanguard Personal Investor, although you will need to be over 18 years old and an Australian resident for tax purposes.

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