Vanguard vs Fidelity: what’s the difference?

If you’re considering investing with a big firm, you may be looking at Vanguard or Fidelity.

We explore the main differences between the two firms and the pros and cons.

Vanguard vs. Fidelity: what’s the difference?

When comparing Fidelity and Vanguard, you’re looking at two major players in asset management, each offering a range of products for investors.

Vanguard is best known for its low-cost, passive index funds, which target long-term investors who value simplicity and low fees.

Fidelity offers passive products but a more comprehensive range, including actively managed funds and personalised services.

Fidelity caters to a broader range of investors, from beginners to those seeking more tailored advice and active management, while Vanguard focuses primarily on cost-efficient, long-term investing.

What are Vanguard and Fidelity’s specific investment strategies?

Vanguard’s investment strategy focuses on passive management, offering low-cost index funds and exchange-traded funds (ETFs) designed to mirror market indices.

You can choose from over 85 Vanguard funds or a ready-made portfolio.

One example of a Vanguard fund is the LifeStrategy 60% Equity Fund, with 60% invested in shares and 40% in bonds. It has an ongoing charge of 0.22%.

A passive strategy is ideal for beginners and long-term investors who prefer a hands-off approach. A financial adviser can help investors seeking personalised advice on structuring their portfolios.

Fidelity offers passive and active management options. Its actively managed funds aim to outperform the market, making them riskier but potentially more rewarding.

Through Fidelity, you can access more than 2,500 funds, so you have plenty of choices.

Fidelity’s broad range of investment products makes it suitable for more experienced investors or those who want hands-on management. Working with a financial adviser can help investors navigate these more complex options.

What fees can I expect from Vanguard and Fidelity?

Vanguard fees are renowned for their low-cost structure and are among the lowest in the industry as they typically charge expense ratios as low as 0.05%, compared to the industry average of 0.18%.

Typically, Vanguard charges 0.15% of your investments, which is capped at £375 annually for accounts over £250,000.

This makes Vanguard particularly appealing for long-term, cost-conscious investors. It also avoids performance fees and does not charge for trading its ETFs or mutual funds on its platform.

According to the Fidelity website, their fees include a service fee typically set at 0.35%, but this can drop to as low as 0.2% depending on how much money is held in personal accounts. No service fee is charged on investments over £1 million.

Fidelity fees for trading include a £7.50 charge for online share deals and £30 for phone transactions. Fidelity also does not charge for buying, selling, or switching funds.

Is Vanguard or Fidelity better?

When comparing Vanguard and Fidelity, the two cater to different types of investors, offering distinct benefits.

The pros of Fidelity

• It offers a broad range of products, including actively managed funds, which could be ideal for investors looking for a hands-off approach.
• Excellent customer service and financial advisory support are offered, so you can get help when needed.
• Suitable for both passive and active investors, with plenty of choices depending on your individual risk appetite and strategy.

The cons of Fidelity

• There are higher fees on actively managed funds, which can eat away at your investment returns over a long period.
• The range of products can be overwhelming for beginners. It's also a good idea to consider expert financial advice before investing.

The pros of Vanguard

• Extremely low fees, particularly on passive funds. Fees are capped at £375 for accounts of over £250,000, so you know what to expect.
• Ideal for long-term investors focused on cost-effective, passive strategies and are happy with a hands-off approach.
• Vanguard is simple to use with easy-to-understand investment choices.

The cons of Vanguard

• Limited customer service options, which can be an issue if you have any urgent queries.
• It's less suitable for active traders and investors needing in-depth research tools or those hoping to take more control of their portfolios.

Vanguard or Fidelity: which should I choose?

Your choice between Vanguard and Fidelity depends on your personal investing needs. 

Vanguard is likely the better option if you’re a long-term, passive investor seeking low fees. Its focus on cost-effective, passive investing makes it ideal for those with a hands-off approach. 

Fidelity is more versatile, offering both passive and actively managed products. If you need personalised support or want access to active management, Fidelity could be the better fit.

As well as fees, investment strategy, and various pros and cons, here are some other questions you should ask yourself when choosing between Vanguard and Fidelity.

How do Vanguard and Fidelity remain competitive and adapt to changing market conditions?

Vanguard ensures the firm stays competitive by continually driving down fees and expanding its index fund offerings.

Fidelity adapts through technological advancements and by expanding its research and advisory services. Both companies continually adjust their services to meet market demands and investor needs.

Which platform is better for passive or long-term investing?

Vanguard is worth considering for passive, long-term investing due to its low-cost index funds and ETFs.

Fidelity also offers competitive passive options but excels in providing more comprehensive services, making it more appealing to those who want a mix of passive and active investments.

Can you have an account with both Vanguard and Fidelity?

Yes, you can hold accounts with both companies and benefit from Vanguard’s low-cost passive options and Fidelity’s more diverse offerings.

However, managing multiple accounts may lead to tax complexities, so consulting a financial adviser may be beneficial.

Can I access my Vanguard and Fidelity accounts through their websites and mobile apps?

Both Vanguard and Fidelity offer comprehensive online and mobile access.

Fidelity's app allows you to research and track investment performance and buy and sell investments.

Its platform is often seen as more advanced, with better research tools and features, while Vanguard’s platform emphasises simplicity and ease of use, tailored for long-term, passive investors.

Get expert financial advice

Comparing Vanguard and Fidelity isn’t easy, as both firms offer compelling options for different types of investors.

Vanguard’s low fees and passive strategies make it ideal for long-term, hands-off investing, while Fidelity’s combination of active and passive funds cater to a broader range of investor needs. 

Ultimately, the best choice will depend on your investment style, goals, and the level of support you require.

Unbiased will match you with a professional financial adviser from a firm that aligns with your investments with your financial goals.