Vanguard - New Active Funds for PAS
Vanguard - New Active Funds for PAS
I guess the 30 bps isn't generating enough revenue.
https://investornews.vanguard/vanguard- ... ity-funds/
https://investornews.vanguard/vanguard- ... ity-funds/
- typical.investor
- Posts: 5263
- Joined: Mon Jun 11, 2018 3:17 am
Re: Vanguard - New Active Funds for PAS
Likely true but the other angle is to increase the number of PAS clients by offering exclusivity!!!tj wrote: ↑Thu Aug 26, 2021 10:28 am I guess the 30 bps isn't generating enough revenue.
https://investornews.vanguard/vanguard- ... ity-funds/
Per your link only for PAS.
The funds are expected to launch in the fourth quarter of 2021 and will be available exclusively to clients of Personal Advisor Services (PAS)
Re: Vanguard - New Active Funds for PAS
Wow. ERs over 0.4% too. Bogle is probably spinning in his grave . His vision has certainly been lost at Vanguardtj wrote: ↑Thu Aug 26, 2021 10:28 am I guess the 30 bps isn't generating enough revenue.
https://investornews.vanguard/vanguard- ... ity-funds/
-
- Posts: 5588
- Joined: Thu Aug 09, 2012 10:54 am
Re: Vanguard - New Active Funds for PAS
I guess I might not be recommending PAS anymore to people who want truly hands off and are considering edward jones and the like..
What is fidelity's cheapest managed option?
What is fidelity's cheapest managed option?
Re: Vanguard - New Active Funds for PAS
Fidelity Go Hybrid, which seems to have been renamed Fidelity® Personalized Planning & Advicebarnaclebob wrote: ↑Thu Aug 26, 2021 10:41 am I guess I might not be recommending PAS anymore to people who want truly hands off and are considering edward jones and the like..
What is fidelity's cheapest managed option?
0.50 bps AUM, but the funds are all Zero ER funds ( that cannot be invested in outside of Fidelity Go or the 50bps managed option) unless they have changed it.
https://www.fidelity.com/digital-invest ... ing-advice
- retired@50
- Posts: 12835
- Joined: Tue Oct 01, 2019 2:36 pm
- Location: Living in the U.S.A.
Re: Vanguard - New Active Funds for PAS
I'm reading it a bit differently.
It could be that PAS clients are tired of the all-index approach, so this creates options for clients who seek some exposure to actively managed stock funds.
It could be that PAS clients are tired of the all-index approach, so this creates options for clients who seek some exposure to actively managed stock funds.
Vanguard wrote: The active equity offer will primarily serve as a complementary allocation to PAS clients’ broadly diversified and low-cost index fund core portfolio holdings....PAS advisors will assess suitability and ensure the funds are prudently incorporated into their clients’ portfolios.
Regards,PAS portfolios currently utilize both active and passive fixed income and equity products to meet client preferences and needs.
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Re: Vanguard - New Active Funds for PAS
I mean... these funds will need assets under management to operate...and will only be available in PAS. I'd be shocked if they aren't generally included in default proposals to gather assets.retired@50 wrote: ↑Thu Aug 26, 2021 10:58 am I'm reading it a bit differently.
It could be that PAS clients are tired of the all-index approach, so this creates options for clients who seek some exposure to actively managed stock funds.
Vanguard wrote: The active equity offer will primarily serve as a complementary allocation to PAS clients’ broadly diversified and low-cost index fund core portfolio holdings....PAS advisors will assess suitability and ensure the funds are prudently incorporated into their clients’ portfolios.Regards,PAS portfolios currently utilize both active and passive fixed income and equity products to meet client preferences and needs.
- retired@50
- Posts: 12835
- Joined: Tue Oct 01, 2019 2:36 pm
- Location: Living in the U.S.A.
Re: Vanguard - New Active Funds for PAS
Well, that wouldn't smell right, would it.tj wrote: ↑Thu Aug 26, 2021 11:00 amI mean... these funds will need assets under management to operate...and will only be available in PAS. I'd be shocked if they aren't generally included in default proposals to gather assets.retired@50 wrote: ↑Thu Aug 26, 2021 10:58 am I'm reading it a bit differently.
It could be that PAS clients are tired of the all-index approach, so this creates options for clients who seek some exposure to actively managed stock funds.
Vanguard wrote: The active equity offer will primarily serve as a complementary allocation to PAS clients’ broadly diversified and low-cost index fund core portfolio holdings....PAS advisors will assess suitability and ensure the funds are prudently incorporated into their clients’ portfolios.Regards,PAS portfolios currently utilize both active and passive fixed income and equity products to meet client preferences and needs.
If VPAS is acting as a fiduciary, then forcing clients into actively managed funds could certainly be called into question. I would begin by taking them at their word when they say they will "assess suitability" etc.
We'll see if reports to the contrary surface from PAS clients who post on the board.
Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Re: Vanguard - New Active Funds for PAS
Vanguard PAS is not a fiduciary. Otherwise, they wouldn't place clients exclusively into Vanguard funds.retired@50 wrote: ↑Thu Aug 26, 2021 11:09 amWell, that wouldn't smell right, would it.tj wrote: ↑Thu Aug 26, 2021 11:00 amI mean... these funds will need assets under management to operate...and will only be available in PAS. I'd be shocked if they aren't generally included in default proposals to gather assets.retired@50 wrote: ↑Thu Aug 26, 2021 10:58 am I'm reading it a bit differently.
It could be that PAS clients are tired of the all-index approach, so this creates options for clients who seek some exposure to actively managed stock funds.
Vanguard wrote: The active equity offer will primarily serve as a complementary allocation to PAS clients’ broadly diversified and low-cost index fund core portfolio holdings....PAS advisors will assess suitability and ensure the funds are prudently incorporated into their clients’ portfolios.Regards,PAS portfolios currently utilize both active and passive fixed income and equity products to meet client preferences and needs.
If VPAS is acting as a fiduciary, then forcing clients into actively managed funds could certainly be called into question. I would begin by taking them at their word when they say they will "assess suitability" etc.
We'll see if reports to the contrary surface from PAS clients who post on the board.
Regards,
- retired@50
- Posts: 12835
- Joined: Tue Oct 01, 2019 2:36 pm
- Location: Living in the U.S.A.
Re: Vanguard - New Active Funds for PAS
Their website states they are...
Source: https://investor.vanguard.com/advice/financial-advisor/
Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
-
- Posts: 5588
- Joined: Thu Aug 09, 2012 10:54 am
Re: Vanguard - New Active Funds for PAS
Since the PAS system already attracts those that are cost conscious I'm wondering if a lot of people have vanguard PAS setup the portfolio then cancel the service once they realize nothing much happens after that. Having these "exclusive" funds will lock more people into the service.
Will they force you to sell them and take the gains hit if you leave PAS?
Will they force you to sell them and take the gains hit if you leave PAS?
Re: Vanguard - New Active Funds for PAS
That's a good question. It makes PAS a lot less appealing to me. I think the PAS advisors do have some flexibility though, because when I did the free plan, the advisor said we could dump international bonds if I wanted to, and I did not have an overly large account.barnaclebob wrote: ↑Thu Aug 26, 2021 11:46 am Since the PAS system already attracts those that are cost conscious I'm wondering if a lot of people have vanguard PAS setup the portfolio then cancel the service once they realize nothing much happens after that. Having these "exclusive" funds will lock more people into the service.
Will they force you to sell them and take the gains hit if you leave PAS?
Re: Vanguard - New Active Funds for PAS
I do not equate "being held to fiduciary standards under applicable regulations" the same as being a true fiduciary.retired@50 wrote: ↑Thu Aug 26, 2021 11:23 amTheir website states they are...
Source: https://investor.vanguard.com/advice/financial-advisor/
Regards,
For example, does Vanguard PAS evaluate the risks, rewards and costs of all reasonable investment vehicles for each investor to determine which is in the best interest of the investor? Has there been a single reported instance where Vanguard PAS has done so and, as a result of this analysis, has recommended anything other than a Vanguard fund? Does Vanguard PAS always put the interests of the client first?
No, because the Vanguard PAS service agreement expressly provides that investments will be exclusively in Vanguard funds, which benefits Vanguard, the broker-dealer. https://personal.vanguard.com/pdf/vpasag.pdf
This "conversation starter" sheet from Vanguard also describes the conflict of interests: https://www.vanguard.com/pdf/paswebFAQ.pdf
In fact, Rick Ferri has observed
While the legalistic language used by Vanguard when it states "being held to fiduciary standards under applicable regulations" and disclosure of the conflicts of interest sound as though Vanguard is acting in the investor's best interest, the true test is whether, in a circumstance where a non-Vanguard ETF or mutual fund would be a better investment vehicle for a particular investor, does Vanguard recommend that fund and/or use that fund in the investor's portfolio? The clear answer to that question is no.Here is a major flaw in the Vanguard advice model. RIA's are fiduciaries. As a fiduciary, Vanguard PAS advisers should recommend the best funds in each category regardless of the fund sponsor. Currently, PAS advisers only recommend Vanguard funds. That's a conflict of interest.
I'm not suggesting that Vanguard PAS is doing anything wrong or malicious, just that there is no real practical difference between what they are doing now and the possibility that they may move investors into these new active PAS only funds if Vanguard's "research" suggests those yet unproven funds will be well-suited for the investor.
IMO, investors who want advice would be well-served to find a fee-only advisor who has no conflicts of interest and is not bound as a term of their employment to only sell their employer's funds.
Re: Vanguard - New Active Funds for PAS
Well there you go... RIP
|
Rob |
Its a dangerous business going out your front door. - J.R.R.Tolkien
Re: Vanguard - New Active Funds for PAS
From the press release:
I know Vanguard mutual funds start with a higher-than-usual ER but will likely drop over time (as has usually been the case) as assets grow and they achieve economies of scale. But 0.45% versus 0.26% doesn't seem worth it for a "more concentrated version of the strategy" -- which is just more risk for potential more reward.
I don't use Vanguard PAS or other advisor. The new fund offerings aren't something that would induce me to use PAS. But I know many investors continue to be lured by the prospect of active investing, so this seems like Vanguard responding to a market need and/or responding to competitive pressure in the managed/advisory arena.
Emphasis above is mine. The Vanguard Dividend Growth Fund VDIGX is currently at 0.26%. It's also managed by Wellington.Vanguard Advice Select Dividend Growth Fund will seek to outperform the broader U.S. market, focusing on financially sound, large-cap companies across a diverse range of sectors that have prospects for long-term total returns, as a result of their ability to grow earnings and their willingness to increase dividends over time. A more concentrated version of the strategy used in Vanguard Dividend Growth Fund, the fund will be managed by Wellington Management Company LLP and will have an estimated expense ratio of 0.45%, compared with the average expense ratio for large-cap core funds of 0.90%.3
I know Vanguard mutual funds start with a higher-than-usual ER but will likely drop over time (as has usually been the case) as assets grow and they achieve economies of scale. But 0.45% versus 0.26% doesn't seem worth it for a "more concentrated version of the strategy" -- which is just more risk for potential more reward.
I don't use Vanguard PAS or other advisor. The new fund offerings aren't something that would induce me to use PAS. But I know many investors continue to be lured by the prospect of active investing, so this seems like Vanguard responding to a market need and/or responding to competitive pressure in the managed/advisory arena.
- retired@50
- Posts: 12835
- Joined: Tue Oct 01, 2019 2:36 pm
- Location: Living in the U.S.A.
Re: Vanguard - New Active Funds for PAS
No offense (since I presume you're a lawyer), but is it any wonder people hate "legalese" in documents.
This seems like someone is trying to thread an awfully tiny hole in the smallest of needles.
Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Re: Vanguard - New Active Funds for PAS
This is hilarious. The VG defenders accuse Fidelity Zero funds as being designed to trap people into Fido. At least those have 0% ER!barnaclebob wrote: ↑Thu Aug 26, 2021 11:46 am Since the PAS system already attracts those that are cost conscious I'm wondering if a lot of people have vanguard PAS setup the portfolio then cancel the service once they realize nothing much happens after that. Having these "exclusive" funds will lock more people into the service.
Will they force you to sell them and take the gains hit if you leave PAS?
Re: Vanguard - New Active Funds for PAS
Perhaps they will only sell them in tax advantaged accounts. This would be reasonable so the capital gains from active trading will not be taxed each year.starboi wrote: ↑Thu Aug 26, 2021 12:47 pmThis is hilarious. The VG defenders accuse Fidelity Zero funds as being designed to trap people into Fido. At least those have 0% ER!barnaclebob wrote: ↑Thu Aug 26, 2021 11:46 am Since the PAS system already attracts those that are cost conscious I'm wondering if a lot of people have vanguard PAS setup the portfolio then cancel the service once they realize nothing much happens after that. Having these "exclusive" funds will lock more people into the service.
Will they force you to sell them and take the gains hit if you leave PAS?
I thought PAS only used ETFs. These are mutual funds
Re: Vanguard - New Active Funds for PAS
PAS has never only used ETF's. They shifted mutual funds to ETF's when there was a cheaper share class available.prd1982 wrote: ↑Thu Aug 26, 2021 12:53 pmPerhaps they will only sell them in tax advantaged accounts. This would be reasonable so the capital gains from active trading will not be taxed each year.starboi wrote: ↑Thu Aug 26, 2021 12:47 pmThis is hilarious. The VG defenders accuse Fidelity Zero funds as being designed to trap people into Fido. At least those have 0% ER!barnaclebob wrote: ↑Thu Aug 26, 2021 11:46 am Since the PAS system already attracts those that are cost conscious I'm wondering if a lot of people have vanguard PAS setup the portfolio then cancel the service once they realize nothing much happens after that. Having these "exclusive" funds will lock more people into the service.
Will they force you to sell them and take the gains hit if you leave PAS?
I thought PAS only used ETFs. These are mutual funds
Re: Vanguard - New Active Funds for PAS
The funds could lock you into PAS, and also prevent you from transferring them to another brokerage. Talk about sticky.barnaclebob wrote: ↑Thu Aug 26, 2021 11:46 am Since the PAS system already attracts those that are cost conscious I'm wondering if a lot of people have vanguard PAS setup the portfolio then cancel the service once they realize nothing much happens after that. Having these "exclusive" funds will lock more people into the service.
Will they force you to sell them and take the gains hit if you leave PAS?
-
- Posts: 1936
- Joined: Sun Jul 26, 2020 2:29 pm
Re: Vanguard - New Active Funds for PAS
Very likely some Vanguard Crew would like to tell Mortimer "Tim" Buckley: 'I knew Jack Bogle, I worked with Jack Bogle. Mr. Buckely, you're no Jack Bogle.'Da5id wrote: ↑Thu Aug 26, 2021 10:36 amWow. ERs over 0.4% too. Bogle is probably spinning in his grave . His vision has certainly been lost at Vanguardtj wrote: ↑Thu Aug 26, 2021 10:28 am I guess the 30 bps isn't generating enough revenue.
https://investornews.vanguard/vanguard- ... ity-funds/
Retirement is best when you have a lot to live on, and a lot to live for. * None of what I post is investment advice.* |
FIRE'd July 2023
-
- Posts: 6011
- Joined: Wed Dec 02, 2020 12:18 pm
Re: Vanguard - New Active Funds for PAS
I prefer to do things myself; it is cheaper. Why should I ever get into potentially >0.7% ER for not much of anything?
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
- nisiprius
- Advisory Board
- Posts: 52219
- Joined: Thu Jul 26, 2007 9:33 am
- Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry
Re: Vanguard - New Active Funds for PAS
Years ago, Vanguard had a list of nine "core funds" that included exactly four index funds, four active funds, and a money market mutual fund. The list included both Total Stock Market Index Fund and the actively-managed Vanguard Diversified Equity Fund, VDEQX, and forum posters reported that Vanguard advisors seemed to push for including the latter. It currently has an expense ratio of 0.35%.
Vanguard even seemed to be promoting the idea that a mixture of active and passive funds could create an advantage through diversification. Gus Sauter had a paper--which I can no longer find online--entitled "A framework for developing the appropriate mix of indexing and active management." It actually showed an efficient frontier chart and argued for percentage allocations between active and passive.
For years Vanguard Diversified Equity, VDEQX, slightly underperformed Total Stock, but I see it has basically caught up and even edged past it. It has thus had a microscopically higher return; however it has done so at the cost of microscopically higher volatility; and thus microscopically lower risk-adjusted return as measured by the Sharpe and Sortino ratios. What can you say but "meh?"
Source
I'm prepared to view the "active funds for PAS" with alarm. But for the record, this wouldn't be the first time Vanguard advisors have pushed eh-not-too-bad lackluster actively managed funds.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: Vanguard - New Active Funds for PAS
I wonder whether PAS customers will be able to refuse any and all active funds.
In the past, people have reported that Vanguard determined the investments and customers could ask for explanations but not give instructions.
Paying 0.3% to be put in 0.45% funds is an outrage.
In the past, people have reported that Vanguard determined the investments and customers could ask for explanations but not give instructions.
Paying 0.3% to be put in 0.45% funds is an outrage.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either |
--Swedroe |
We assume that markets are efficient, that prices are right |
--Fama
-
- Posts: 4743
- Joined: Sat Jul 08, 2017 10:09 am
- Location: New Jersey, USA
Re: Vanguard - New Active Funds for PAS
Nisi,
Jack's first book, "Bogle on Mutual Funds" advocated I believe a 50/50 or may 60/40 (i am working from memory, I gave the book away years ago, sigh) split between active and passive funds. He made a strong case for most bond funds being active back then. What is old is ever new again.
Jack's first book, "Bogle on Mutual Funds" advocated I believe a 50/50 or may 60/40 (i am working from memory, I gave the book away years ago, sigh) split between active and passive funds. He made a strong case for most bond funds being active back then. What is old is ever new again.
- nisiprius
- Advisory Board
- Posts: 52219
- Joined: Thu Jul 26, 2007 9:33 am
- Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry
Re: Vanguard - New Active Funds for PAS
From the article:
Even more interesting, the successor to the "core fund" list is the list of 21 Vanguard Select Funds:
I wonder what internal politicking takes place in the Vanguard passageways of power, as to which funds get chosen for the "Select Funds" list or the PAS fund choices?
Interesting that the once-touted "core" fund, Vanguard Diversified Equity, is not among those now being used by Personal Advisory Services.Vanguard Advice Select Dividend Growth Fund, Vanguard Advice Select Global Value Fund, and Vanguard Advice Select International Growth Fund... The funds will be made available for PAS clients investing through their advised portfolios as part of a five-fund active equity offer, along with two existing products—Vanguard International Core Fund and Vanguard Capital Opportunity Fund.
Even more interesting, the successor to the "core fund" list is the list of 21 Vanguard Select Funds:
But neither the Vanguard International Core Fund nor the Vanguard Capital Opportunity Fund is among the "select funds."Build your portfolio with a few of our well-established, broadly diversified, low-cost funds selected by our Portfolio Review Department.
I wonder what internal politicking takes place in the Vanguard passageways of power, as to which funds get chosen for the "Select Funds" list or the PAS fund choices?
Interesting.retiringwhen wrote: ↑Thu Aug 26, 2021 3:25 pm Nisi,
Jack's first book, "Bogle on Mutual Funds" advocated I believe a 50/50 or may 60/40 (i am working from memory, I gave the book away years ago, sigh) split between active and passive funds. He made a strong case for most bond funds being active back then. What is old is ever new again.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
- nisiprius
- Advisory Board
- Posts: 52219
- Joined: Thu Jul 26, 2007 9:33 am
- Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry
Re: Vanguard - New Active Funds for PAS
In 2014 I made a feeble effort to get an answer to what seemed like a simple question: are Vanguard advisors bound to a fiduciary standard, and, more generally, How to tell who is bound to a fiduciary standard? Basically, after struggling for a while, I... just... gave up. Not important since I don't use an advisor.
What makes it particularly confusing if I understand correctly, it is possible for a firm to be a registered investment advisor and bound to a fiduciary standard of care, but that does not mean that the person you are dealing with in the firm is a fiduciary.
The thread more or less petered out with no answer, and also branched into a discussion of what it actually means as a practical matter for your advisor to be a fiduciary and... it's pretty vague.
I did, and do, get the impression that Vanguard uses a lot of blarney about "putting your interests first" as a way to sound as if they might be fiduciaries while not actually using the word "fiduciary."
What makes it particularly confusing if I understand correctly, it is possible for a firm to be a registered investment advisor and bound to a fiduciary standard of care, but that does not mean that the person you are dealing with in the firm is a fiduciary.
The thread more or less petered out with no answer, and also branched into a discussion of what it actually means as a practical matter for your advisor to be a fiduciary and... it's pretty vague.
I did, and do, get the impression that Vanguard uses a lot of blarney about "putting your interests first" as a way to sound as if they might be fiduciaries while not actually using the word "fiduciary."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: Vanguard - New Active Funds for PAS
"HOW IT WORKS
First, we talk
We get to know you, your goals, and your dreams. We know there’s no one-size fits-all approach to financial planning, so our small questions help us see your bigger financial picture and craft a plan that’s truly unique to you, not the market.
Did you know? Our advisors have no financial incentives to recommend certain products. They are fiduciaries, driven to help you make informed decisions for you and your family."
Copied and pasted from this link, if it matters (emphasis mine): https://investor.vanguard.com/advice/fi ... r-services
First, we talk
We get to know you, your goals, and your dreams. We know there’s no one-size fits-all approach to financial planning, so our small questions help us see your bigger financial picture and craft a plan that’s truly unique to you, not the market.
Did you know? Our advisors have no financial incentives to recommend certain products. They are fiduciaries, driven to help you make informed decisions for you and your family."
Copied and pasted from this link, if it matters (emphasis mine): https://investor.vanguard.com/advice/fi ... r-services
- retired@50
- Posts: 12835
- Joined: Tue Oct 01, 2019 2:36 pm
- Location: Living in the U.S.A.
Re: Vanguard - New Active Funds for PAS
I agree, but galawdawg doesn't. See our exchange above.McDougal wrote: ↑Thu Aug 26, 2021 4:18 pm "HOW IT WORKS
First, we talk
We get to know you, your goals, and your dreams. We know there’s no one-size fits-all approach to financial planning, so our small questions help us see your bigger financial picture and craft a plan that’s truly unique to you, not the market.
Did you know? Our advisors have no financial incentives to recommend certain products. They are fiduciaries, driven to help you make informed decisions for you and your family."
Copied and pasted from this link, if it matters (emphasis mine): https://investor.vanguard.com/advice/fi ... r-services
Even more emphatically, from my post above a Vanguard website quote "Meaning our advisors are required to act in your best interest at all times".
In my book, this doesn't leave much (or anything) to the imagination.
Regards,
Last edited by retired@50 on Thu Aug 26, 2021 4:28 pm, edited 1 time in total.
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
-
- Posts: 4743
- Joined: Sat Jul 08, 2017 10:09 am
- Location: New Jersey, USA
Re: Vanguard - New Active Funds for PAS
And when the customer is coming from EJ or Fidelity with 100% of their funds in Active investments and they have been trained to believe in Active, the PAS advisor and help wean them off that 1.5% AUM to only 0.4% without requiring a full mind-set change that may keep them away from a low-cost advisor! Sounds like a Fiduciary (read: in the investors best interests) action to me, and a potentially retirement changing improvement for the investor.McDougal wrote: ↑Thu Aug 26, 2021 4:18 pm "HOW IT WORKS
First, we talk
We get to know you, your goals, and your dreams. We know there’s no one-size fits-all approach to financial planning, so our small questions help us see your bigger financial picture and craft a plan that’s truly unique to you, not the market.
Did you know? Our advisors have no financial incentives to recommend certain products. They are fiduciaries, driven to help you make informed decisions for you and your family."
Copied and pasted from this link, if it matters (emphasis mine): https://investor.vanguard.com/advice/fi ... r-services
I believe this absolutely a brilliant move from a pure marketing perspective to put one more arrow in the quiver again EJ, Fidelity and the myriad of active-fund based advisors. Will it get them more AUM? Probably a small amount.
3-funders and pure indexers are still the minority, and definitely do not represent the knowledge base of the target investors here.
- retired@50
- Posts: 12835
- Joined: Tue Oct 01, 2019 2:36 pm
- Location: Living in the U.S.A.
Re: Vanguard - New Active Funds for PAS
According to an article by Jason Zweig, there is no such thing as a "conflict free" adviser.
See link: https://jasonzweig.com/why-your-financi ... lict-free/
Regards,Jason Zweig wrote: All financial advisers — like all people who perform a service for anyone else, including journalists — have conflicts of interest. That’s true regardless of whether they work for someone else or for themselves, whether they earn fees or commissions, or whether they call themselves “fiduciaries” who put clients’ interests ahead of their own.
...
I read some of the “conflict-free” wording on advisers’ websites aloud to Brian Hamburger, president of MarketCounsel, a firm in Englewood, N.J., that helps advisers comply with investment regulations. “It pains me to hear you read these,” he said, “like nails on a chalkboard.”
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
- nisiprius
- Advisory Board
- Posts: 52219
- Joined: Thu Jul 26, 2007 9:33 am
- Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry
Re: Vanguard - New Active Funds for PAS
Good. I was not able to find anything like that in 2014.McDougal wrote: ↑Thu Aug 26, 2021 4:18 pm...Our advisors have no financial incentives to recommend certain products. They are fiduciaries, driven to help you make informed decisions for you and your family."
Copied and pasted from this link, if it matters (emphasis mine): https://investor.vanguard.com/advice/fi ... r-services
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: Vanguard - New Active Funds for PAS
Wow.tj wrote: ↑Thu Aug 26, 2021 10:28 am I guess the 30 bps isn't generating enough revenue.
https://investornews.vanguard/vanguard- ... ity-funds/
And here I thought it was those greedy "for-profit" firms that were going to try to sell you expensive products so they could afford to provide better customer service.
Maybe, if they can make enough money from this, they will hire (and train) some more people to answer the phone outside of business hours?
Once in a while you get shown the light, in the strangest of places if you look at it right.
Re: Vanguard - New Active Funds for PAS
This seems really bad if you have a taxable account?goingup wrote: ↑Thu Aug 26, 2021 1:13 pmThe funds could lock you into PAS, and also prevent you from transferring them to another brokerage. Talk about sticky.barnaclebob wrote: ↑Thu Aug 26, 2021 11:46 am Since the PAS system already attracts those that are cost conscious I'm wondering if a lot of people have vanguard PAS setup the portfolio then cancel the service once they realize nothing much happens after that. Having these "exclusive" funds will lock more people into the service.
Will they force you to sell them and take the gains hit if you leave PAS?
Used to be, if after a while, you decided you didn't want to pay for PAS, you could just go it alone.
But, if you get put into these funds, and they are only supported at Vanguard, or even only within PAS, you could be facing big tax implications when exiting.
At least Fidelity's proprietary, non-portable funds, that lock you in (if in taxable accounts), have zero fees.
Last edited by marcopolo on Thu Aug 26, 2021 6:03 pm, edited 1 time in total.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Re: Vanguard - New Active Funds for PAS
Marketing fluff. They ONLY recommend and sell products offered by their employing brokerage, Vanguard.
Ask any Vanguard PAS advisor to utilize ONLY Blackrock or State Street or Schwab or Fidelity or T. Rowe Price funds in your PAS portfolio and see what they tell you. In fact, they have every financial incentive to recommend certain products....those being Vanguard products. The financial incentive? Their paycheck.
Re: Vanguard - New Active Funds for PAS
The funds will be made available [exclusively] for PAS clients investing through their advised portfolios as part of a five-fund active equity offer
- Vanguard International Core Fund
- Vanguard Capital Opportunity Fund
- Vanguard Advice Select Dividend Growth Fund
- Vanguard Advice Select Global Value Fund
- Vanguard Advice Select International Growth Fund
Vanguard's strategy appears to be to create exclusive products to lock in investors and monetize them with ongoing fees, while outsourcing* their staff and infrastructure.
* https://www.inquirer.com/news/vanguard- ... 00729.html
Tilterati
- bertilak
- Posts: 10726
- Joined: Tue Aug 02, 2011 5:23 pm
- Location: East of the Pecos, West of the Mississippi
Re: Vanguard - New Active Funds for PAS
One thing bothers me about how the plans are presented.
For example at https://investor.vanguard.com/advice/fi ... r-services they present a sample breakdown of a personalized stock allocation:
So how personally targeted is that? A few of years ago, when VG would give you a free analysis and plan, They presented something similar to me. It turned out that the mix they recommended was exactly the same as VTSAX (Vanguard's Total Stock Market). They presented it as if that was a carefully thought out mix, just for me, not an artefact of using VTSAX.
What if their personalized analysis resulted in 34/10 instead of 30/14? Would they then use something other than VTSAX? I felt they were over-selling how much the plan was made specifically for ME.
My guess is they are doing the same thing here.
I don't think they are coming up with BAD plans, just that they are implying their personalization is more "personal" than their plans actually are.
For example at https://investor.vanguard.com/advice/fi ... r-services they present a sample breakdown of a personalized stock allocation:
- 30% US Large
14% US Small/Mid
...
So how personally targeted is that? A few of years ago, when VG would give you a free analysis and plan, They presented something similar to me. It turned out that the mix they recommended was exactly the same as VTSAX (Vanguard's Total Stock Market). They presented it as if that was a carefully thought out mix, just for me, not an artefact of using VTSAX.
What if their personalized analysis resulted in 34/10 instead of 30/14? Would they then use something other than VTSAX? I felt they were over-selling how much the plan was made specifically for ME.
My guess is they are doing the same thing here.
I don't think they are coming up with BAD plans, just that they are implying their personalization is more "personal" than their plans actually are.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
Re: Vanguard - New Active Funds for PAS
I'm paying less for a DFA fund.Da5id wrote: ↑Thu Aug 26, 2021 10:36 amWow. ERs over 0.4% too. Bogle is probably spinning in his grave . His vision has certainly been lost at Vanguardtj wrote: ↑Thu Aug 26, 2021 10:28 am I guess the 30 bps isn't generating enough revenue.
https://investornews.vanguard/vanguard- ... ity-funds/
- anon_investor
- Posts: 15122
- Joined: Mon Jun 03, 2019 1:43 pm
Re: Vanguard - New Active Funds for PAS
This is crazy, they actually say the Vanguard Advice Select Dividend Growth Fund is:sycamore wrote: ↑Thu Aug 26, 2021 12:15 pm From the press release:
Emphasis above is mine. The Vanguard Dividend Growth Fund VDIGX is currently at 0.26%. It's also managed by Wellington.Vanguard Advice Select Dividend Growth Fund will seek to outperform the broader U.S. market, focusing on financially sound, large-cap companies across a diverse range of sectors that have prospects for long-term total returns, as a result of their ability to grow earnings and their willingness to increase dividends over time. A more concentrated version of the strategy used in Vanguard Dividend Growth Fund, the fund will be managed by Wellington Management Company LLP and will have an estimated expense ratio of 0.45%, compared with the average expense ratio for large-cap core funds of 0.90%.3
I know Vanguard mutual funds start with a higher-than-usual ER but will likely drop over time (as has usually been the case) as assets grow and they achieve economies of scale. But 0.45% versus 0.26% doesn't seem worth it for a "more concentrated version of the strategy" -- which is just more risk for potential more reward.
I don't use Vanguard PAS or other advisor. The new fund offerings aren't something that would induce me to use PAS. But I know many investors continue to be lured by the prospect of active investing, so this seems like Vanguard responding to a market need and/or responding to competitive pressure in the managed/advisory arena.
The Vanguard Dividend Growth Fund (VDIGX) is already pretty concentraited with only 41 stocks...A more concentrated version of the strategy used in Vanguard Dividend Growth Fund
Re: Vanguard - New Active Funds for PAS
I’m pretty sure that being a fiduciary doesn’t necessarily mean they have zero conflicts of interest, ever, for all time. I know at least that the CFA code of ethics describes the types of disclosures required for any conflicts of interests, which include the sources of compensation received by the advisor. Said differently, the existence of a conflict of interest doesn’t automatically disqualify you from being a fiduciary and “held to those standards.”galawdawg wrote: ↑Thu Aug 26, 2021 6:02 pmMarketing fluff. They ONLY recommend and sell products offered by their employing brokerage, Vanguard.
Ask any Vanguard PAS advisor to utilize ONLY Blackrock or State Street or Schwab or Fidelity or T. Rowe Price funds in your PAS portfolio and see what they tell you. In fact, they have every financial incentive to recommend certain products....those being Vanguard products. The financial incentive? Their paycheck.
If their “paycheck” was truly linked to how much of their client’s assets they put into VG funds, they would have to disclose that, and it would be an obvious contradiction to their public facing disclosure on their website, linked above, and perhaps a violation of securities laws. Are you seriously suggesting they are outright lying to the public about that?
Tangentially, public accountants issuing audit opinions over company financial statements are required to be “independent” of their audit clients. And yet, who do you think pays their bills?
Re: Vanguard - New Active Funds for PAS
Those Bogleheads who expect high quality brokerage services from Vanguard while paying low expense ratios should welcome this development as a way for Vanguard to generate more revenue to cover customer service expenses. Just like Fidelity and Schwab do.
What really surprised me was to see Capital Opportunity in the list of active funds. Maybe its a marketing strategy to be able to say "this is the only way for you to get into our most treasured fund that has been closed to new investors for most of the last 20 years"
What really surprised me was to see Capital Opportunity in the list of active funds. Maybe its a marketing strategy to be able to say "this is the only way for you to get into our most treasured fund that has been closed to new investors for most of the last 20 years"
-
- Posts: 1212
- Joined: Wed Nov 07, 2007 5:51 pm
Re: Vanguard - New Active Funds for PAS
I opened a ChaseYouInvest account, which is now called J P Morgan Self-directed, when it was offered because it offered free trades and was easy to access via the Chase website. They offer a program similar to Vanguard’s PAS at a slightly higher ER - 0.35% as I recall. The description of the program states that J P Morgan ETFs will be used even if a cheaper ETF is available. I was impressed that they were so straightforward. I have retirement accounts at Vanguard and taxable at J P Morgan. I don’t use an advisor at either firm. I think that Vanguard Marketing Corporation is establishing a platform similar to those operated by their competitors. They are able to capitalize on the ownership structure of the mutual funds offered by the Vanguard Group to keep the expense ratios of the active mutual funds low.
DMW
DMW
Re: Vanguard - New Active Funds for PAS
I know not a lot of folks on here are fans of roboadvisors, but my Wealthfront account looks pretty good by comparison now. AUM is 0.25%, and the most expensive core fund they have me in is 0.10%. Most expensive overall is the TLH trading partner for the municipal bond fund, which is 0.23% and only makes up 1% of the portfolio (primary in that category is 0.06%).tj wrote: ↑Thu Aug 26, 2021 10:50 amFidelity Go Hybrid, which seems to have been renamed Fidelity® Personalized Planning & Advicebarnaclebob wrote: ↑Thu Aug 26, 2021 10:41 am I guess I might not be recommending PAS anymore to people who want truly hands off and are considering edward jones and the like..
What is fidelity's cheapest managed option?
0.50 bps AUM, but the funds are all Zero ER funds ( that cannot be invested in outside of Fidelity Go or the 50bps managed option) unless they have changed it.
https://www.fidelity.com/digital-invest ... ing-advice
Re: Vanguard - New Active Funds for PAS
While that is fair, at least part of what keeps money flowing towards Vanguard is its reputation as an aggressive cost cutting leader. If it loses that, what does it actually have that is *better* than other brokerages? Vanguards recent trend has been towards less customer service, such as the loss of messaging for most customers. So where is this revenue going? Other places certainly now have roughly equivalent index funds/ETFs, and you can hold VTI and VXUS at any brokerage.
I used to think PAS was perfectly reasonable for those who feel the need to have an advisor, and would even suggest it in the forums for those not willing to go it alone. Now if PAS means PAS fees (0.3% AUM) + non-index fund ERs (0.4% AUM) it is starting to add up to meaningful amounts of drag. These fees are still not very high for the industry mind you, but they are a step in the wrong direction for Vanguard IMO. My most expensive funds personally are VXUS (0.08%) and VAIPX (0.1%). Hard to see a reason to go higher for some active funds, particularly brand new ones. Even if I were into active funds, hard to imagine picking ones without a long track record...
-
- Posts: 4743
- Joined: Sat Jul 08, 2017 10:09 am
- Location: New Jersey, USA
Re: Vanguard - New Active Funds for PAS
I am a broken record, but I am sure that these funds will not end up in 8M investors PAS portfolios, they are going to end up in the group of PAS customers that desire active funds. This fills a hole in Vanguard's offering for PAS customers that is happily provided by Fidelity, Schwab, DFA, etc. at usually an average ER well over 0.7%. This offering continues in the long-tradition of Vanguard under-cutting the competition. Heck, Fidelity has those active Target Date Funds with average ER of 0.75%, see FFFX - Fidelity Freedom 2040 Fund. Even under PAS, this is a better deal, I also expect that Vanguard will normally only hold a portion of the investor's accounts in active funds, so the realized ER will be much lower.Da5id wrote: ↑Fri Aug 27, 2021 6:54 amWhile that is fair, at least part of what keeps money flowing towards Vanguard is its reputation as an aggressive cost cutting leader. If it loses that, what does it actually have that is *better* than other brokerages? Vanguards recent trend has been towards less customer service, such as the loss of messaging for most customers. So where is this revenue going? Other places certainly now have roughly equivalent index funds/ETFs, and you can hold VTI and VXUS at any brokerage.
I used to think PAS was perfectly reasonable for those who feel the need to have an advisor, and would even suggest it in the forums for those not willing to go it alone. Now if PAS means PAS fees (0.3% AUM) + non-index fund ERs (0.4% AUM) it is starting to add up to meaningful amounts of drag. These fees are still not very high for the industry mind you, but they are a step in the wrong direction for Vanguard IMO. My most expensive funds personally are VXUS (0.08%) and VAIPX (0.1%). Hard to see a reason to go higher for some active funds, particularly brand new ones. Even if I were into active funds, hard to imagine picking ones without a long track record...
Vanguard is continuing to put real pressure on their competition for costs. The truth is that index funds are all essentially free these days, with no room to go lower. So, Vanguard is moving BACK to cost cutting on active funds. I am old enough to remember that the primary cost competition with the industry was with active funds, we are just back to that arena again.
Vanguard is doing what it always does, it finds weaknesses in its competition and tries to exploit it by finding a lower cost alternative.
Also, most people on BH conveniently forget that Vanguard has long had a very very large active fund offering, at times the largest AUM in the industry. This is nothing new under the sun.
-
- Posts: 4743
- Joined: Sat Jul 08, 2017 10:09 am
- Location: New Jersey, USA
Re: Vanguard - New Active Funds for PAS
One other thought, when one looks at the construction of these funds as a part of an entire portfolio offering, they look like asset allocation funds that allow for investors to participate in some tactical market timing executed by active managers. I don't like that myself, but again, there may be feedback that Vanguard is getting about how to get more customer AUM that says they need such an offering within PAS.
The fact that they are offered only under an advisor tells me that they think they need to be handled carefully too.
All this tells me that these offerings are about as niche as the factor ETFs that they don't push much but feel they must have in the arsenal to provide a complete offering set.
The fact that they are offered only under an advisor tells me that they think they need to be handled carefully too.
All this tells me that these offerings are about as niche as the factor ETFs that they don't push much but feel they must have in the arsenal to provide a complete offering set.
Re: Vanguard - New Active Funds for PAS
That is a hopeful attitude. However, that does not explain a need for new active funds. Vanguard already has plenty of active funds. Why create more? Particularly, why create more that do the same things as the existing funds?retiringwhen wrote: ↑Fri Aug 27, 2021 7:15 am
I am a broken record, but I am sure that these funds will not end up in 8M investors PAS portfolios, they are going to end up in the group of PAS customers that desire active funds. This fills a hole in Vanguard's offering for PAS customers that is happily provided by Fidelity, Schwab, DFA, etc. at usually an average ER well over 0.7%. This offering continues in the long-tradition of Vanguard under-cutting the competition. Heck, Fidelity has those active Target Date Funds with average ER of 0.75%, see FFFX - Fidelity Freedom 2040 Fund. Even under PAS, this is a better deal, I also expect that Vanguard will normally only hold a portion of the investor's accounts in active funds, so the realized ER will be much lower.
Vanguard is continuing to put real pressure on their competition for costs. The truth is that index funds are all essentially free these days, with no room to go lower. So, Vanguard is moving BACK to cost cutting on active funds. I am old enough to remember that the primary cost competition with the industry was with active funds, we are just back to that arena again.
Vanguard is doing what it always does, it finds weaknesses in its competition and tries to exploit it by finding a lower cost alternative.
Also, most people on BH conveniently forget that Vanguard has long had a very very large active fund offering, at times the largest AUM in the industry. This is nothing new under the sun.
My biggest concern remains that, by allowing Vanguard to make transactions on one's behalf, customers create the possibility of being shunted into these overpriced funds without their knowledge or ability to block it. Unless Vanguard allows PAS subscribers to specify "no active funds", this would be a major risk.
PAS is already too expensive for something that, once set up, does almost nothing at all. Paying 0.3% for almost nothing is hard to justify. Paying 0.75% for almost nothing is crazy.
I will have to stop recommending PAS to people who want some help with investing.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either |
--Swedroe |
We assume that markets are efficient, that prices are right |
--Fama
Re: Vanguard - New Active Funds for PAS
If Vanguard PAS advisors can't persuade customers that beating the market with active funds is a losing game long term, why have advisors? But sure, the active funds are much cheaper than the industry average for what that's worth.retiringwhen wrote: ↑Fri Aug 27, 2021 7:15 am I am a broken record, but I am sure that these funds will not end up in 8M investors PAS portfolios, they are going to end up in the group of PAS customers that desire active funds. This fills a hole in Vanguard's offering for PAS customers that is happily provided by Fidelity, Schwab, DFA, etc. at usually an average ER well over 0.7%. This offering continues in the long-tradition of Vanguard under-cutting the competition.
Separately from that, I've never wanted an advisor. However If I felt I needed one I'd probably want the nice warm confident feeling that personal meetings with the advisor can bring. I connect much better with people in person than over the phone or via zoom, at least for an initial meeting. I expect this is common, and wonder if Vanguard's next step will be brick and mortar facilities for normal retail customers in order to compete with Schwab, Fidelity, Edward Jones (ugh) etc. I'd not be surprised...
-
- Posts: 4743
- Joined: Sat Jul 08, 2017 10:09 am
- Location: New Jersey, USA
Re: Vanguard - New Active Funds for PAS
Short answer, you aren't the target customer. To paraphrase Taylor Larimore, there are many ways to Dublin.Da5id wrote: ↑Fri Aug 27, 2021 7:26 amIf Vanguard PAS advisors can't persuade customers that beating the market with active funds is a losing game long term, why have advisors? But sure, the active funds are much cheaper than the industry average for what that's worth.retiringwhen wrote: ↑Fri Aug 27, 2021 7:15 am I am a broken record, but I am sure that these funds will not end up in 8M investors PAS portfolios, they are going to end up in the group of PAS customers that desire active funds. This fills a hole in Vanguard's offering for PAS customers that is happily provided by Fidelity, Schwab, DFA, etc. at usually an average ER well over 0.7%. This offering continues in the long-tradition of Vanguard under-cutting the competition.
Separately from that, I've never wanted an advisor. However If I felt I needed one I'd probably want the nice warm confident feeling that personal meetings with the advisor can bring. I connect much better with people in person than over the phone or via zoom, at least for an initial meeting. I expect this is common, and wonder if Vanguard's next step will be brick and mortar facilities for normal retail customers in order to compete with Schwab, Fidelity, Edward Jones (ugh) etc. I'd not be surprised...