Interactive Investor vs Vanguard: what's the difference?

Interactive Investor (ii) and Vanguard are two of the biggest investment platforms in the UK.

But what exactly are the differences between them, and which one is better for your investing needs?

This guide examines the key distinctions between Interactive Investor and Vanguard to help you decide which platform to choose.

What is the difference between Interactive Investor and Vanguard? 

Interactive Investor (ii) is one of the UK's leading flat-fee investment platforms, offering investors access to a vast range of shares, investment funds, trusts, bonds, and ETFs from various providers.

Founded in 1995, Interactive Investor is known for its flexibility, transparency, and suitability for those managing larger portfolios. 

Vanguard, meanwhile, is renowned globally for its cost-effective, passive investment approach, specialising primarily in its own funds and ETFs.

Established in 1975 in the US and launched in the UK in 2009, Vanguard prioritises low-cost, long-term investing, making it ideal for passive investors seeking simplicity and efficiency.

Interactive Investor and Vanguard: how do the fees compare? 

One of the most critical factors investors consider is the cost involved. 

Interactive Investor fees: 

• Charges a flat monthly fee, typically starting from £4.99 for the Investor Essentials plan, rising to £9.99 per month for the Investor plan (with no limits).

• Trades are charged at £3.99, £5.99 or £9.99 depending on your plan. The platform is ideal for larger portfolios where percentage-based fees could become expensive. 

Vanguard fees: 

• Charges a percentage-based fee, capped at 0.15% annually (up to a maximum of £375 per year) across all your investments.

• Fund management fees typically range from 0.06% to 0.78%, depending on the fund selected.

• Vanguard does not charge transaction fees on most funds, but ETF trades may incur minor transaction costs depending on trading methods and account type.  

In essence, if your portfolio is relatively small, Vanguard's percentage-based fee structure may be more economical.

However, for larger portfolios, Interactive Investor’s flat-fee approach often proves more cost-effective. 

Is Interactive Investor or Vanguard better?

Let's evaluate based on three critical factors: 

Range of investments 

Interactive Investor offers a broad range of investment opportunities, including shares, funds, ETFs, bonds, investment trusts, and even more sophisticated instruments like commodities and forex. 

Vanguard primarily offers their own index funds and ETFs, focusing on a narrower but highly efficient range of low-cost options. 

Research and guidance 

Interactive Investor provides comprehensive market research, tools, expert insights, investment ideas, regular webinars, and detailed analytical content tailored towards active and knowledgeable investors. 

Vanguard emphasises educational content focused on passive investing principles, clear investment guides, simplicity, and long-term investing strategies. 

Brand reputation 

Interactive Investor is highly respected for transparency and the independence afforded by its flat-fee model and is well-regarded by seasoned investors and industry experts alike. 

Vanguard are globally recognised has built a stellar reputation around its investor-first philosophy, cost-effectiveness, and reliability, especially among passive investors. 

Can you open accounts with both Interactive Investor and Vanguard? 

Absolutely. Many UK investors choose to open accounts with both platforms, taking advantage of Interactive Investor’s wider investment offerings while also benefiting from Vanguard’s low-cost passive investment options.

It can provide you with a balanced approach, allowing you to diversify your investments effectively. 

Which is better for passive, long-term investing? 

For passive, long-term investing, Vanguard typically edges ahead.

Its straightforward and low-cost index tracking funds and ETFs align closely with long-term, buy-and-hold investment strategies.

Vanguard’s low fees also significantly enhance long-term returns through compounding. 

Interactive Investor can also support passive strategies, but its strength lies in flexibility and active trading opportunities.

If your passive portfolio becomes substantial, Interactive Investor’s flat-fee model could become more attractive due to cost efficiency.

How do their investment philosophies differ? 

Interactive Investor adopts a flexible investment philosophy, supporting both active and passive approaches. It empowers investors through extensive research, offering the freedom and tools needed for a self-directed investing experience. 

Vanguard, however, is staunchly focused on passive investing principles, advocating low-cost, long-term investing through broad market index funds and ETFs. Vanguard's philosophy centres around simplicity, patience, and discipline, aiming to maximise returns by minimising costs and market timing. 

Get expert financial advice 

Choosing between Interactive Investor and Vanguard depends significantly on your individual investment objectives, portfolio size, and personal preferences.

Interactive Investor suits investors seeking flexibility, diverse investment options, and extensive resources, while Vanguard caters primarily to those favouring straightforward, low-cost, passive investing. 

To make the most informed decision tailored to your specific financial circumstances, consulting a financial adviser can be invaluable.

They can help you navigate complex choices, optimise your investment strategy, and ensure you achieve your long-term financial goals confidently and securely.