Why would anyone use Vanguard?

[DeniseNJ]

I tried clearing everything and that didn't work.  I was using chrome and tried firefox and that didn't work either.  You can't email them or submit a message.  they have a hundred different websites and logins and at least that many phone numbers.  It didn't used to be this way--it was always so easy to have everything in one place, which is why I switched DH's 403b to Vanguard so it could be with all our other stuff.  This is a pain.  Now I'll have to call them and get dh on the phone to verify his info.  They only ask his birthday and address--um anybody can answer that.  I just want to check that the money coming out of dh's check is actually going into his 403b account.  It shouldn't be this hard.

[Chris Pascale]

Regarding customer service, it's one of the reasons I've been happy with Edward Jones. When I say that I like EJ, people freak out like I just said, "I enjoy punching shelter dogs," but punching shelter dogs brought me good returns.

In 2015 I put $10k into a 529. In 2021 it was $22k.

Last year my advisor called me and asked if he could adjust my Roth to be more conservative. Was it his idea, or was the company doing this universally? I can't say; I'm just glad they did.

[jim555]

I have some legacy accounts that I'm too lazy to move at Vanguard.  Horrible web site, clunky, system errors happen a lot.  VG sucks.

[Phenix]

Regarding customer service, it's one of the reasons I've been happy with Edward Jones. When I say that I like EJ, people freak out like I just said, "I enjoy punching shelter dogs," but punching shelter dogs brought me good returns.

In 2015 I put $10k into a 529. In 2021 it was $22k.

Last year my advisor called me and asked if he could adjust my Roth to be more conservative. Was it his idea, or was the company doing this universally? I can't say; I'm just glad they did.

The hardest part of timing the market is being right twice (jumping out and jumping back in). Is there an inflexion point where he will have you switch back to a more aggressive allocation?
I imagine he gets a fat front end load each time you move funds, so if he's right on his timing, you'll come out ahead, but I imagine the window for coming out ahead is pretty tight for you and a slam dunk for him getting 2 commissions.

[MDM]

In 2015 I put $10k into a 529. In 2021 it was $22k.

Based on https://dqydj.com/sp-500-return-calculator/, it would have been $26K if invested in a low fee S&P 500 fund.  Of course, one can selectively choose start and end dates to "prove" many things in this area.

[secondcor521]

I guess Vanguard must compete based on low cost, but haven't other companies caught up to them on low-cost transactions and funds?

If you look only at transaction fees and fund ERs, yes.  If you include things like tracking error, tax efficiency, and Vanguard's EFT/MF patent, I'm not sure but I think not quite.

I do have a lot more money at the other company, so maybe when I call them I get put into a VIP queue and that's why my experience is so much better. Is this a thing?

Yes, it's a thing at Vanguard and Fidelity at least, and probably all others.  When AUM is a profit driver, it makes business sense to take care of the biggest accounts the best.

So what am I missing? Why would anyone use Vanguard? Is it nostalgia-based loyalty based on some distant past when Vanguard was better on cost?

Vanguard's customer service has suffered in the past few years.  I've experienced it as well.

They still are arguably the low cost leader.  They still do a lot of things well.  As a LTBH low cost broadly diversified index investor, they meet my needs very well.  I haven't seen any of the website issues mentioned.  I'm able to do everything I want via the website 99.99% of the time, which means I generally avoid any customer service issues.

When my Mom passed away in 2016, Vanguard had a specific office or number to contact, and they were kind, compassionate, efficient, accurate, and prompt in handling everything for my family.

YMMV.

[DeniseNJ]

So I called and spoke to half a dozen ppl, getting transferred and cut off and calling back, until I eventually get to the Newport Group that manages the 403b.  (One of the first ppl told me to send a screenshot to an email address that rejected my email and when I wrote back to it without the screenshot never responded.)  The Newport person said, yes it was a problem that the button to go to the 403b page was missing and that it is a problem with Vanguard's site.  Um, OK, so are they fixing it?  Yes she said, they are aware of it.  Really? Because the half dozen ppl I spoke to were not. So what, I just wait now and check every week?

ETA: Called back, disconnected again, called back, and now some guy said he'd submit some kind of ticket to look into it.  I'm beyond annoyed.

[ender]

My impression is that Vanguard went through the following:

• First low cost index funds on a large scale
• tons of new joiners! Great customer service
• Other companies such as Fidelity started low cost funds
• Vanguard lost their competitive advantage
• Vanguard cut costs such as customer service

I don't know if Vanguard needs to exist now, compared to previously. They shook up the industry for sure but their distinctiveness now is gone and they are forced to compete against tons of other companies with better preexisting infra/support.

[jinga nation]

My impression is that Vanguard went through the following:

• First low cost index funds on a large scale
• tons of new joiners! Great customer service
• Other companies such as Fidelity started low cost funds
• Vanguard lost their competitive advantage
• Vanguard cut costs such as customer service

I don't know if Vanguard needs to exist now, compared to previously. They shook up the industry for sure but their distinctiveness now is gone and they are forced to compete against tons of other companies with better preexisting infra/support.

Vanguard is also offering more actively managed funds to prevent investors fleeing the ship to competitors. Also, they've been moving a lot more of their IT infrastructure to cloud (see their past AWS ReInvent talks), and more automation. At some future time, unless you're a Flagship client, you'll be dealing with bots instead of humans, and the minimum for Flagship may rise to USD 5M (because inflation LOL).

I'm only with them because my current and past employers used VG, and I've rolled everything into there. Moving several accounts out from there is a heck of a ton of effort. But then, what I do rarely require human intervention at VG. I used them to wire funds for a cash purchase of real estate in late 2021; zero issues whatsoever.

[dandarc]

Just got off the phone again trying to get an organizational account transitioned to brokerage platform so we can re-allocate to certain ETFs that have no mutual-fund equivalents at Vanguard. ESG funds being the goal - "organization" is a church so "that's really just a symbolic gesture that accomplishes little" doesn't have quite the impact. Plus should be easy - they have ESG options that exactly meet what we want, but we still can't buy them.

I think the first paper form was mailed in February or March trying to get this thing done that Vanguard actually forced me to do on personal accounts a few years back. Today is 7 business days since the person I spoke to then said they have everything they need now after I forwarded a certificate of status and form would be processed in 5-7 business days. And yet the change still has not happened. Getting to where the hassle of transferring everything to somewhere else is starting to look worth it.

This has been much different than any time I've needed any support for personal accounts - always gotten great service from Vanguard the rare times I've had something I couldn't do online.

[Chris Pascale]

In 2015 I put $10k into a 529. In 2021 it was $22k.

Based on https://dqydj.com/sp-500-return-calculator/, it would have been $26K if invested in a low fee S&P 500 fund.  Of course, one can selectively choose start and end dates to "prove" many things in this area.

Agreed on dates. Wasn't $10k on 1/1/2015, but more like $1k a month from February. Started making withdrawals in 2020.

Also, I'm not sure the exact end amount but think it was $22k.

[MustacheAndaHalf]

Vanguard had been my only brokerage account for decades, but for the first time this year, I shifted most of my brokerage assets to Schwab.  Admittedly, I flipped from passive to active investor on Mar 9 2020, so my complaints may not apply to most people.

For years I assumed Vanguard remained the leader in low costs, but in retrospect I think that was driven from the top by the late Jack Bogle.  Vanguard, Schwab and Fidellity all charge $0/trade for stocks or ETFs.  The shock for me came when I realized Vanguard lagged it's competitors in adopting $0/trade - they weren't first.  Most here don't buy or sell options, but the price/contract is $0.65 at everywhere (Schwab, Fidelity, IBKR)... except Vanguard, who charges $1.00 each.  It's odd to see the low cost leader of years ago become the laggard.

Another surprise for me was responsiveness on the phone.  Vanguard and Schwab are getting the exact same $0/trade from me, but Schwab often picks up immediately (compared to 20 min wait for Vanguard).  Another poster mentioned higher levels of service - called "Flagship" for those with over $1M net worth at Vanguard.  Despite that, it takes Vanguard a week to respond to a message I send them.

Using two factor authentication on Vanguard, I started getting warnings that support would go away for those (Vanguard) using an obsolete version.  I alerted them and the usual week later was told it will be fixed by the deadline.  It came down to weeks before, which did not leave a good impression.

Unlike others, because I invest in options, I get a monetary benefit from staying with Vanguard.  Some number of transactions are entirely free, regardless of the number of contracts.  Instead of $1/contract x 100 contracts, that $100 transaction fee is free.  That's the incentive that I gave up in shifting most of my assets elsewhere - they pay me to stay, and it still didn't work.  Most of my brokerage account assets are now with Schwab.

[secondcor521]

Vanguard had been my only brokerage account for decades, but for the first time this year, I shifted most of my brokerage assets to Schwab.  Admittedly, I flipped from passive to active investor on Mar 9 2020, so my complaints may not apply to most people.

Vanguard behaves in a way to fire customers who are active investors.  This is intentional on their part.  In their view, active trading drives up costs and they view this as a Bad Thing.

As an active investor, you presumably view these trading costs as worth the tradeoff.  And companies like Schwab are happy to serve your market segment because they believe they can profit off the trading behavior.  Perhaps not on the initial trade itself, and perhaps not for diehard DIY investors, but I think they think that those traders will eventually buy other Schwab products and services where Schwab is profitable.  They made $18.4B in the last 12 months from somewhere.

[stoaX]

Why do I use Vanguard?  Because about 20 years ago my then my employer used them for the employee retirement plan.  Their fees were low, especially back then.  Since then I have used them for 2 inherited IRAs, RMDs and moving funds back and forth between bank accounts and taxable and non-taxable accounts.  Never had a problem with their customer service so no reason to switch. 

[BlueMR2]

I think the first paper form was mailed in February or March trying to get this thing done that Vanguard actually forced me to do on personal accounts a few years back. Today is 7 business days since the person I spoke to then said they have everything they need now after I forwarded a certificate of status and form would be processed in 5-7 business days. And yet the change still has not happened. Getting to where the hassle of transferring everything to somewhere else is starting to look worth it.

I think that's everyone right now.  I'm 3 months into trying to do a simple Roth IRA transfer (I got sold from one company to another that I don't want to do business with and am trying to transfer to a third).  I'm also 6 weeks into trying to rollover my 401K from my ex-employer to a traditional IRA.  All different (not Vanguard) companies.  It's just really hard to get anyone to answer a phone call and documents just seem be ignored.  Sigh.

[dandarc]

I think the first paper form was mailed in February or March trying to get this thing done that Vanguard actually forced me to do on personal accounts a few years back. Today is 7 business days since the person I spoke to then said they have everything they need now after I forwarded a certificate of status and form would be processed in 5-7 business days. And yet the change still has not happened. Getting to where the hassle of transferring everything to somewhere else is starting to look worth it.

I think that's everyone right now.  I'm 3 months into trying to do a simple Roth IRA transfer (I got sold from one company to another that I don't want to do business with and am trying to transfer to a third).  I'm also 6 weeks into trying to rollover my 401K from my ex-employer to a traditional IRA.  All different (not Vanguard) companies.  It's just really hard to get anyone to answer a phone call and documents just seem be ignored.  Sigh.

Funny thing - our account was upgraded to brokerage Friday. Apparently two people calling collectively 3 or 4 times in the last week was squeaky enough for us.

Best of luck to you - I know those 401k to IRA transfers in particular suck with vanguard because it far too often had to be liquidate and mail a check.

[MustacheAndaHalf]

Vanguard had been my only brokerage account for decades, but for the first time this year, I shifted most of my brokerage assets to Schwab.  Admittedly, I flipped from passive to active investor on Mar 9 2020, so my complaints may not apply to most people.

Vanguard behaves in a way to fire customers who are active investors.  This is intentional on their part.  In their view, active trading drives up costs and they view this as a Bad Thing.

As an active investor, you presumably view these trading costs as worth the tradeoff.  And companies like Schwab are happy to serve your market segment because they believe they can profit off the trading behavior.  Perhaps not on the initial trade itself, and perhaps not for diehard DIY investors, but I think they think that those traders will eventually buy other Schwab products and services where Schwab is profitable.  They made $18.4B in the last 12 months from somewhere.

I think you're lumping active investors in with day traders.  I'm not a day trader.  I have bought individual stocks, but if Vanguard dislikes that, why did they lower the commission to $0/trade?

For years I assumed Vanguard was all about passive investing and low costs.  In case that's your perspective, try explaining this active fund (founded 1998):
"Vanguard Market Neutral Fund Investor Shares"
minimum: $50,000    expense ratio 1.31%
https://investor.vanguard.com/investment-products/mutual-funds/profile/vmnfx


---

Unlike others, because I invest in options, I get a monetary benefit from staying with Vanguard.  Some number of transactions are entirely free, regardless of the number of contracts.  Instead of $1/contract x 100 contracts, that $100 transaction fee is free.  That's the incentive that I gave up in shifting most of my assets elsewhere - they pay me to stay, and it still didn't work.  Most of my brokerage account assets are now with Schwab.

To clarify, most of my options activity was in 2020, when I held for about a year.  And if Vanguard wants to discourage using options, it has a funny way of showing it.  This is from the commissions & fees page, under "Options" tab:

"$0 for first 25 trades;*
$0 + $1-per-contract fee thereafter"
https://investor.vanguard.com/client-benefits/brokerage-fees-commissions#modal-commission

Vanguard gives higher NW clients free options trades.  This benefit isn't avaiable at Schwab or IBKR - this is the biggest incentive to buy options at any of the brokerages.  And yet despite this, Vanguard has a terrible "options chain" interface, where you have to select individual entries, they're out of date... really awful.

My IBKR Pro account charges 3% for margin loans up to $100k.  At Vanguard, the first $20k of margin loan is... 10% !  And they won't negotiate, so your only choice is to move assets elsewhere and take out a margin loan.  I've negotiated with Schwab for a lower rate, and they brought it down significantly (higher than IBKR, but close enough that I'd still use it).

I guess my question would be: if Vanguard doesn't like stock trades, options trades or margin loans... why offer them?  Why charge $0/trade for stocks and free credits for option trades if they don't want those activities to occur?

[MustacheAndaHalf]

Mr Money Mustache mentions VTSAX, suggesting he has a Vanguard account.  Yet when it came time for a margin loan, he opened an account at Interactive Brokers (IBKR) and moved some assets there:

"For comparison, Robinhood offers margin loans at 2.5% and Etrade is something silly like 7.95% and up as I write this. Even the low-fee standard Vanguard is in the 7% range. So, Interactive Brokers is truly unique for now – which is why I created my account."
https://www.mrmoneymustache.com/2021/01/29/margin-loan-ibkr-review/

From the comments, another poster provided some additional information:
"As an aside, Vanguard margin rates are high, because as they told me when i asked them to match IKBR, they try to discourage margin."
(in that same thread, search for "vanguard margin", which only appears in this post)

[jim555]

One more quirk of Vanguard.  Last I checked they try to impose frequent trading restrictions on ETF trades and they refuse 3x levered ETFs outright.  I can understand frequent trading restrictions on a conventional mutual fund since that requires a fund to redeem or buy shares and may upset the fund's management.  However ETF trades have no impact at all on the underlying fund.  Only when prices diverge from NAV to trading price do large institutions add or subtract Creation Units to capture the price difference and keep prices honest. 
Restricting levered ETFs is outright BS, they have no place in dictating how investors can invest in a purely self-directed account. 

[schoopsthecat]

I will echo the experiences of others with regard to Vanguard's crap customer service.  About a year ago we finally did proper estate planning and created a revocable living trust.  Our lawyers filled out the Vanguard paperwork for us to retitle our Vanguard accounts.  A few months after submitting it, we got an email from Vanguard asking us to call them because the paperwork that was used was an old form (even though it was the one available from Vanguard).  After spending over 8 hours on hold, I spoke to someone who walked me through filling out the correct paperwork, which took about 30 minutes.  We submitted that paperwork.  A month later, we got an email stating that our request to open a new account in the trust name and transfer our accounts was rejected, and we needed to fill it out again.  Once again, someone on the phone walked me through filling the information out...then went to get the form notarized...learned from the notary that we didn't have all the correct information...back to the notary...submitted the forms...rejected again by Vanguard.

Finally, we gave up and opened an account with Fidelity (where we already had HSA accounts) in the name of our trust and transferred the money.  I had a question and called Fidelity, and they were super helpful and the whole thing was done in about 10 minutes.  I have subsequently moved all of our retirement accounts out of Vanguard and to Fidelity, and I couldn't be happier never to have to deal with Vanguard customer service again.

[Sandi_k]

One more reasons to use Fidelity:

FYI, the Boglehead forum is all aflutter with electronic theft - it turns out that neither Schwab nor Vanguard have a "lockdown" mode to freeze outbound transfers. Someone just lost $150k from his Fidelity account - because even though they DO have a lockdown feature, the account holder had not enabled it.

https://www.bogleheads.org/forum/viewtopic.php?t=381060

https://digital.fidelity.com/prgw/di.../lockdown/info

Some are speculating that the investor will be made "whole" - but no posting says that that has - as yet - been done.

For those on the fence about which brokerage to use, for me, this is one more reason to use Fidelity. I have two-factor authentication set for my account, as well as a voiceprint for security.

Today, I'll be using the additional ability to lock down outbound transfers, since we have no reason to access any funds for years to come.

[Psychstache]

I guess my question would be: if Vanguard doesn't like stock trades, options trades or margin loans... why offer them?  Why charge $0/trade for stocks and free credits for option trades if they don't want those activities to occur?

I remember several years ago I was listening to the radio on the morning drive show and they were talking about a list of celebrity appearance fees that hit the internet. Most of the name available of current popular "celebrities" had fees in the $1000-2000 range. There were a couple of big names in there at around $10kish. Then, the top of the list included mega celebrities....and Chris Tucker at $20,000. All the radio personalities (and myself) found this extremely weird, since Mr. Tucker wasn't exactly tearing up the box office or all over social media or anything. Out of curiosity, I did some digging around after that and the info I found basically boiled down to he thought it was stupid and didn't really want to do it, but his agent and he worked out a ridiculous number that would justify him getting out of bed for it.

So what I am saying is...Vanguard is the Chris Tucker of Margin Loans. Thank you for coming to my TED Talk.

[Unionville]

I've been an investor with them for 20 years and am now leaving because of terrible customer service.  I used to be able to send a private message to my representative and call 24/7 and  I got a free advisor session once a year. Now it's only business hours and no freebies. The last 3 times I called they put me on hold for over half hour and the person who answered didn't really help me.  They also cashed out a fund I had, and I didn't know it (fund was closed). They said they sent me an email (can't find it - should have at least sent a letter).  Thank God it wasn't in a taxable account. It's like someone took over Vanguard and decided to run it like my city Parking pass Division.

[Catbert]

I've been an investor with them for 20 years and am now leaving because of terrible customer service.  I used to be able to send a private message to my representative and call 24/7 and  I got a free advisor session once a year. Now it's only business hours and no freebies. The last 3 times I called they put me on hold for over half hour and the person who answered didn't really help me.  They also cashed out a fund I had, and I didn't know it (fund was closed). They said they sent me an email (can't find it - should have at least sent a letter).  Thank God it wasn't in a taxable account. It's like someone took over Vanguard and decided to run it like my city Parking pass Division.

Somehow I read "run it like...Parking Pass Division" as "run it like...Pete Davidson".  That works too although it doesn't say much for my reading comprehension.