When is independence not independence?

An odd thing sometimes happens when we first show new clients the financial plan we’ve built for them. They say: “My portfolio is rammed through with Vanguard funds. How can you say it’s independent? What if they get it wrong? What if they run out of money?”

At that, we have to explain: “Just because we’ve recommended several funds from a single fund provider doesn’t mean your portfolio isn’t diversified. Remember, we’re not trying to beat the market. We’re trying to replicate the market. And, at the moment, the best tools for doing that are by Vanguard”.

Here’s why:

  • They don’t pick individual stocks. They have great index tracker funds that, guess what, track the index – and it always rises over time
  • As a regulatory requirement, your money is ring-fenced. It’s held by a third party, so you are protected if Vanguard were to experience financial difficulties. We think it’s unlikely, as they have about $7 trillion under management

That said, nothing is set in stone. Obviously, if the situation were to change, we’d recommend a different provider. Until then, you might like to learn a bit about them.

About Vanguard

Vanguard is the world’s largest mutual fund organisation, trusted by over 30 million investors.

The man behind Vanguard is John C Bogle (1929-2019). He was an altruistic man who set up the company as a ‘mutual’, with no outside interests. It means all the staff are shareholders – the same business model as John Lewis.

This was in the 1970s, a time when he was kicking against the trend for individuality. Index funds were the new shiny thing. And all the active fund managers were against him.

For more about the company, you might like to read his book, Stay the Course: The Story of Vanguard and the Index Revolution.

We’ve also written about Vanguard before:

For further information, please email us to ask for our Investment Policy and read Appendix 4.

Lance Baron

Certified Financial Planner (CFP) based in East Sussex, UK. We support people in Southeast England with more than £500K to invest by building a financial plan that will help them live the life they want… until age 100