I am beginning to wonder if low cost investment dynamo Vanguard is becoming the new Aldi of the investment world and what this means for the sector.

This week the company set the cat among the pigeons with a new low cost SIPP launch.

It was clear from the accompanying information with the launch that a primary element of the offer was price. It’s cheap, like Aldi.

The Vanguard Personal Pension comes with a competitive 0.15% annual account fee and a cap across all Vanguard accounts in an investor’s name at £375 a year. The company claims the fees could save nearly £10,000 over 25 years compared to the most expensive SIPP.

If I had a SIPP I would take a look.

Vanguard launches SIPP capped at £375 annual fee

There was a bit of Twitterati consternation over whether it was really a SIPP, but leaving this aside the launch points to a clear direction for Vanguard to compete with nearly everyone on price.

Now I’m not a big fan of supermarket shopping but even I can see why Aldi is popular. Low prices and decent quality are attractive to sometimes cash-strapped shoppers or even just people who like a bargain, which is nearly all of us. 

Is Vanguard trying to occupy the same space in the investment supermarket world? It’s clearly looking like that. In US terms it could be called the Walmart approach - a giant, low cost operator.

Certainly all this is helping to fuel consolidation.

This week we’ve seen some huge moves announced in the investment sector: Jupiter buying Merian and Franklin Templeton buying Legg Mason are just two. UK platforms are consolidating too.

The threat from Vanguard and other low cost operators will likely have helped forge these deals and future deals too.

In the UK, Tesco and Sainsbury’s hugely under-estimated the appeal of Aldi. UK fund managers will not want to make the same mistake.

Many planners will see themselves in a different ball game as the financial ‘corner shop’ in their communities but corner shops too have had to differentiate themselves to survive. The same will be true for planners.

• Apologies. Due to a production error this comment article was not published this morning as planned.

Kevin O’Donnell is editor of Financial Planning Today and a financial journalist with 30 years experience.  This topical comment on the Financial Planning news appears most weeks.

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