Author Topic: the Vanguard that I used to know  (Read 2234 times)

MustacheAndaHalf

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the Vanguard that I used to know
« on: November 19, 2019, 01:57:51 AM »
For decades I've been a Vanguard client, and appreciated their championing of low-cost, passive index funds.  Their first fund, called "Bogle's Folly", was an S&P 500 index fund.  Costs came down, performance remained high, and assets increased.  Vanguard has done really well with low-cost index funds.

This year, Vanguard's advertising has changed.  They display their new active funds on their login screen.  For Vanguard, the idea is they can beat other active funds on cost.  Now Vanguard has a conflict of interest: when it touts index funds, it's a criticism of it's own active funds.  As active assets grow, so does the conflict.  I really preferred a Vanguard that had most of it's money in passive index funds.

And over the past few months, Vanguard hasn't even emphasized low cost.  Over email and on their website, they push Vanguard Personal Advisor Services.  These have become standard in the industry, so it's puzzling that "The annual cost is 0.30% of the assets we manage for you."  Shouldn't they offer a cheaper, automated version that beats Wealthfront and Betterment (which charge 0.25%/year)?

What I'm seeing is Vanguard dropping it's emphasis on both passive indexing and low costs.  At some point, Vanguard could find itself priced the same as Schwab and Fidelity, but with service and a website that are both inferior.  For me, it's meant I've changed from a champion of Vanguard to considering Vanguard just one of the companies that offer low cost ETFs / mutual funds.

EvenSteven

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Re: the Vanguard that I used to know
« Reply #1 on: November 19, 2019, 07:57:56 AM »
Quote
At some point, Vanguard could find itself priced the same as Schwab and Fidelity, but with service and a website that are both inferior.  For me, it's meant I've changed from a champion of Vanguard to considering Vanguard just one of the companies that offer low cost ETFs / mutual funds.

It already is. Fidelity and Schwab have substantially equivalent funds and fees to Vanguard right now.

If this came about by Vanguard raising their fees, I would be right there with you thinking this is a negative. But it has come about by low Vanguard fees pressuring the other guys to lower their fees, so instead of being sad, I do a little happy dance.

I'm also pretty comfortable just ignoring advertisements from Vanguard and other financial firms, so that part doesn't bother me so much.

thesis

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Re: the Vanguard that I used to know
« Reply #2 on: November 19, 2019, 07:59:00 AM »
It's possible they are feeling a lot of competitive pressure. After all, their super-low fee index funds are no longer the lowest in the industry - Fidelity seemed to come out of nowhere with some of their even cheaper funds. But Fidelity can do this because they have streams of revenue from other financial products and services, and they can afford to take a loss on these newer products if it means gaining customers and hoping to sell them on more expensive things. That may be Vanguard's angle, too, that if they can create other sources of revenue, they can lower the percentages on VTSAX, etc.

I personally don't care about the difference between 0.04% and 0.03%, but that doesn't mean there's aren't people switching because of it. I don't like the advertising of brokerage services, either, but if my speculations are true, I might be able to see why.
« Last Edit: November 19, 2019, 08:00:52 AM by thesis »

Ockhamist

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Re: the Vanguard that I used to know
« Reply #3 on: November 19, 2019, 09:18:28 AM »
I'm not so much troubled by the managed funds. You can make the argument that low cost index funds beat average managed funds, while still offering managed funds that are better than average.  Vanguard has always had some really great managed funds, particularly those managed by Wellington and Primecap.  Big fan of both of those.

For whatever it's worth, though, I've also found customer service from Vanguard to have slipped enormously.
I don't mean special hand-holding, I mean just simply being able to conduct basic transactions. 

Meanwhile, they keep trying to sell their personal advisor services ... trying to sell what great service they can offer after I've had to call three different numbers and wait on hold ten minutes at each one just to complete a simple transfer ... LOL.

Still a Vanguard client but have been relying more and more heavily on Fidelity.
« Last Edit: November 20, 2019, 05:23:42 AM by Ockhamist »

dandarc

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Re: the Vanguard that I used to know
« Reply #4 on: November 19, 2019, 09:53:50 AM »
It's possible they are feeling a lot of competitive pressure. After all, their super-low fee index funds are no longer the lowest in the industry - Fidelity seemed to come out of nowhere with some of their even cheaper funds. But Fidelity can do this because they have streams of revenue from other financial products and services, and they can afford to take a loss on these newer products if it means gaining customers and hoping to sell them on more expensive things. That may be Vanguard's angle, too, that if they can create other sources of revenue, they can lower the percentages on VTSAX, etc.

I personally don't care about the difference between 0.04% and 0.03%, but that doesn't mean there's aren't people switching because of it. I don't like the advertising of brokerage services, either, but if my speculations are true, I might be able to see why.
May not be the lowest ER, but they actually have out performed slightly. Under .05% fees, things like transaction costs become more important than another hundredth of a percent or two in expense ratio.

Buffaloski Boris

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Re: the Vanguard that I used to know
« Reply #5 on: November 19, 2019, 02:35:10 PM »
I don’t see what Vanguard is doing to be a problem. They’re offering competent advisor services much cheaper than their competitors. While getting paid advisor services isn’t to the taste of many/most here, there are definitely people who should pay an advisor.  In retrospect, I probably would have benefited from it.

There is a whole lot of hubris amongst the FI in their investment choices and philosophy. As if we had a working crystal ball.

trollwithamustache

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Re: the Vanguard that I used to know
« Reply #6 on: November 19, 2019, 03:51:04 PM »
Vanguard has to figure out their next act. It used to be easy to be the low cost leader... and they got a lot of business. But the market eventually reacted and fees are lower everywhere.

VTSAX is still taking more money from me, so I am satisfied.

harvestbook

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Re: the Vanguard that I used to know
« Reply #7 on: November 20, 2019, 04:26:10 PM »
The more people use active funds, the better off my index funds will be, so it's all good. If a little advertising is the cost of keeping my index fund ERs in the single digits, then fine. I'd go even further and say the more people leave Vanguard (to an extent), the better my own service will be.

MustacheAndaHalf

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Re: the Vanguard that I used to know
« Reply #8 on: November 21, 2019, 02:16:51 AM »
I don’t see what Vanguard is doing to be a problem. They’re offering competent advisor services much cheaper than their competitors.
That would help lift my opinion of Vanguard slightly if it's true.  Other than Wealthfront and Betterment (each charging 0.25%) that I mentioned, which of Vanguard's competitors have higher fees for advisor services?
« Last Edit: November 21, 2019, 02:28:07 AM by MustacheAndaHalf »

MustacheAndaHalf

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Re: the Vanguard that I used to know
« Reply #9 on: November 21, 2019, 02:26:07 AM »
... Fidelity seemed to come out of nowhere with some of their even cheaper funds. But Fidelity can do this because they have streams of revenue from other financial products and services, and they can afford to take a loss on these newer products if it means gaining customers and hoping to sell them on more expensive things.
My understanding is that Fidelity is not taking a loss on the Fidelity Zero funds.  Some institutions wish to sell massive blocks of stock, but don't want to pay "market impact costs", so they would offer Fidelity an incentive to buy the entire block from them.  Since costs are already so low (0.03% for several total market ETFs), maybe they can break even or profit off it.

Buffaloski Boris

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Re: the Vanguard that I used to know
« Reply #10 on: November 22, 2019, 03:11:10 AM »
I don’t see what Vanguard is doing to be a problem. They’re offering competent advisor services much cheaper than their competitors.
That would help lift my opinion of Vanguard slightly if it's true.  Other than Wealthfront and Betterment (each charging 0.25%) that I mentioned, which of Vanguard's competitors have higher fees for advisor services?

Depends on what services you're getting.  I was curious about this Wealthfront and Betterment so I poked around their websites a bit.  It's an apples to oranges comparison.  Wealthfront and Betterment are primarily robo-advisors.  What Vanguard is offering is actual advisor services with a human being at the other end of the line (with what looks to be robo-advisor enhancement on the back end), and they're doing it for .3%.  From what I can tell, Wealthfront doesn't offer the human being at all and Betterment does, but as a premium option for .4%.  So it looks to me like there's a spectrum of services available here.  If you want a more or less pure robocalls-advisor, Wealthfront or Betterment will be happy to provide for .25%.  Vanguard offers a person via phone for .3%, while Betterment offers what appears to be a similar premium service for .4%. 

To me it looks like Vanguard is offering a service at a reasonable fee that it's customers are free to choose or not.  They've offered active investment options for as long as I can remember, so it's nothing really new.  I like the fact that it's been more or less in the background.  All in all, I'm not seeing what the problem is.
   

frugal_c

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Re: the Vanguard that I used to know
« Reply #11 on: November 23, 2019, 06:57:27 AM »
The positive to this is that maybe active funds will come back a bit in popularity.  I don't like how popular index funds have become. It makes me nervous that it will somehow affect the market.