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Vanguard has introduced another potential game changer with its advice offering, which it formally launched last weekend. Vanguard Personal Financial Planning is pretty compelling in terms of price, at 0.79% all-in.

Detractors who favour full-fat financial advice might scoff at the restricted advice service’s current limitations. The company has specifically stated that the proposition is currently not suitable in a fairly long list of circumstances. Most notably, advice is only for individuals saving for retirement – and at least five years away from it.

The circumstances that Vanguard Personal Financial Planning eschews are arguably those where advisers add the most value: complex estate planning, advising couples and families, business property relief etc. However, only around 6% of the population receive ongoing financial advice – Vanguard Personal Financial Planning would be an inappropriate choice for most of these elite clients at present. So this new service is not currently a threat to existing ‘traditional’ advice business. Advisers therefore have little to fear from Vanguard in the short-term.

Dwelling too long on the current limitations overlooks the huge potential market for Vanguard – the 94% of the population who are not receiving advice. Plenty of these have enough assets, and I’d wager that a large proportion have simple enough financial affairs to use Vanguard Personal Financial Planning in its current form.

Advisers currently have little incentive to fish outside of their natural pool of affluent investors. To date, most of the interest in closing the advice gap has come from non-advised services moving towards advice, rather than advisers offering simpler, cheaper services. Evolving guidance has been a key project for D2C services in recent years and we look at this in our latest report UK D2C: Investment Distribution, published yesterday. Progress has been made but ‘guidance’ is not enough for everyone and many want ‘advice’.

Will Vanguard succeed where so many others have failed: engaging the mass market with low-cost simplified advice? If they do, this is likely to be genuinely disruptive. A streamlined hybrid advice service from a big brand has the potential to narrow the advice gap. But – if it’s successful – it may start to attract clients with larger portfolios, creeping into the heartland of financial advisers.

We have just published our UK D2C: Investment Distribution report, looking at how investment products are distributed through the UK direct-to-consumer (D2C) channel. Download an outline of the report here.