Vanguard - New Active Funds for PAS

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Da5id
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Re: Vanguard - New Active Funds for PAS

Post by Da5id »

retiringwhen wrote: Fri Aug 27, 2021 7:32 am
Da5id wrote: Fri Aug 27, 2021 7:26 am
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.
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.

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...
Short answer, you aren't the target customer. To paraphrase Taylor Larimore, there are many ways to Dublin.
Sure, I'm clearly not the target.

But if I were going to have an advisor, I'd presumably want to trust them. And if they were saying "trying to beat the market after expenses is a losing game" I'd also hopefully listen? I guess that won't be the message PAS is sending?
retiringwhen
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Re: Vanguard - New Active Funds for PAS

Post by retiringwhen »

afan wrote: Fri Aug 27, 2021 7:25 am Particularly, why create more that do the same things as the existing funds?
Morningstar has an article out this morning about the funds with a dive into the managers. I believe I can see the plan here

https://www.morningstar.com/articles/10 ... tent=31251
retiringwhen
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Re: Vanguard - New Active Funds for PAS

Post by retiringwhen »

Here is another article that gets to the core business model problems that Vanguard faces today.

Vanguard Is Adapting to Stiff Competition

At the 2018 BH conference, Jack was very frank that he thought that Vanguard had some very tough decisions to make from a business perspective due to the flattening of the industry. He was talking in direct response to a question about the new Fidelity Zero funds. But, he hinted that overall the headwinds were very strong against Vanguard continuing in its current path at the time.

The Old Vanguard is about as relevant as AT&T Long Distance service these days.

BTW, I am convinced that companies like Robinhood are actually much more dangerous to Vanguard's livelihood in the same way that a 1976 Honda Civic paved the way for finishing off Detroit as it was known.
student
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Re: Vanguard - New Active Funds for PAS

Post by student »

retiringwhen wrote: Fri Aug 27, 2021 7:49 am Here is another article that gets to the core business model problems that Vanguard faces today.

Vanguard Is Adapting to Stiff Competition

At the 2018 BH conference, Jack was very frank that he thought that Vanguard had some very tough decisions to make from a business perspective due to the flattening of the industry. He was talking in direct response to a question about the new Fidelity Zero funds. But, he hinted that overall the headwinds were very strong against Vanguard continuing in its current path at the time.

The Old Vanguard is about as relevant as AT&T Long Distance service these days.

BTW, I am convinced that companies like Robinhood are actually much more dangerous to Vanguard's livelihood in the same way that a 1976 Honda Civic paved the way for finishing off Detroit as it was known.
Interesting. Vanguard still has the advantage of having a lot of loyal customers and as the poster boy of being a "good guy." Nevertheless, I see the cost-cutting measures have alienated some of them as seen buy some recent posts.
retiringwhen
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Re: Vanguard - New Active Funds for PAS

Post by retiringwhen »

Da5id wrote: Fri Aug 27, 2021 7:36 am But if I were going to have an advisor, I'd presumably want to trust them. And if they were saying "trying to beat the market after expenses is a losing game" I'd also hopefully listen? I guess that won't be the message PAS is sending?
I too am not their target, I tell my kids that they need to buy low cost index funds and keep their hands off. In fact, they are largely invested in Target Date Funds. This offering has zero chance of changing my mind for me or them.

But, my son has a crazy hyper friend who is playing on Robinhood, etc. but also sees the value in index funds (in part by reading suggested books from me). When he realizes he needs discipline, the Vanguard mostly index with some "spice" approach may appeal to him and he may be able to hand off the problem to someone who will keep him from making the inevitable behavioral mistakes.
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tj
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Re: Vanguard - New Active Funds for PAS

Post by tj »

lazydavid wrote: Fri Aug 27, 2021 6:53 am
tj wrote: Thu Aug 26, 2021 10:50 am
barnaclebob 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?
Fidelity Go Hybrid, which seems to have been renamed Fidelity® Personalized Planning & Advice


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
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%).
I think Vanguard Digital Advisor would be more cost efficient than Wealthfront ?
JackoC
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Re: Vanguard - New Active Funds for PAS

Post by JackoC »

stan1 wrote: Thu Aug 26, 2021 9:29 pm 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.
Yes in general I don't get criticizing financial firms (or really any product or service provider) for offering higher cost options, even if I judge them poorer value, as long as they are not mandatory. Sometimes the implication of criticism of Vanguard (PAS, or this) is that they *will* make it (constructively, at least) mandatory but get back to me if that happens. Also some of the criticism, I believe, is from people who have a naive view of 'not for profit' virtue: people look out for themselves basically in any organizational format and there's nothing inherently wrong with that in my view. "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest." I went with Vanguard a long time ago because their ER's were lower. I never cared why. Now their equity index fund ER's aren't always lower but fortunately a) marginally higher when so and b) I've got a lot of unrealized capital gains and none of the small % of my assets in tax deferred accounts is in Vanguard equity funds. And, their fixed income funds are not as often beaten on ER even now. Service was never that great IMO and has deteriorated in my 'anecdotal' experience but it's complicated to move a lot of accounts. And back to beginning, the reason to move them would basically be subsidy, account opening bonuses. It wouldn't virtue or that ongoing costs would be appreciably lower elsewhere. If Vanguard has more high margin business, maybe they can throw me a little something someday. :happy
Last edited by JackoC on Fri Aug 27, 2021 9:06 am, edited 1 time in total.
afan
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Re: Vanguard - New Active Funds for PAS

Post by afan »

The pitch for the active funds and the PE funds, as all active management pitches must, relies heavily on the notion that good manager performance persists. This in spite of overwhelming evidence that it does not. The lack of persistence is at the heart of why indexing is better. Active manager good performance is luck, not skill, so there is no reason to pay for it.

Even in PE, where there is some evidence of persistence, the predictability is on the low end. Poorly performing managers are more likely than the rest to perform poorly going forward. Meanwhile the future performance of average and high performance managers is the same. Paying to play is gambling on getting lucky and investing with a manager who will get lucky in the future. Same as active management for stocks.

A waste of money, chasing a pipe dream.
I understand there is a market and Vanguard is selling what some customers want, whether their desire is rational or not. But it is scary to think the Vanguard would place PAS client money in these pipe dreams when the customers have not specifically requested it.
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
retiringwhen
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Re: Vanguard - New Active Funds for PAS

Post by retiringwhen »

afan wrote: Fri Aug 27, 2021 9:04 am But it is scary to think the Vanguard would place PAS client money in these pipe dreams when the customers have not specifically requested it.
That is a pretty long jump to even assume they might do such a thing! Seriously, what makes you think this will be a default or even pushed set of funds within PAS?
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tj
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Re: Vanguard - New Active Funds for PAS

Post by tj »

retiringwhen wrote: Fri Aug 27, 2021 9:08 am
afan wrote: Fri Aug 27, 2021 9:04 am But it is scary to think the Vanguard would place PAS client money in these pipe dreams when the customers have not specifically requested it.
That is a pretty long jump to even assume they might do such a thing! Seriously, what makes you think this will be a default or even pushed set of funds within PAS?
Why would you create brand new custom funds (based on existing funds that would function the same) if you didn't have plans to widely distribute them?
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Re: Vanguard - New Active Funds for PAS

Post by retiringwhen »

tj wrote: Fri Aug 27, 2021 9:11 am Why would you create brand new custom funds (based on existing funds that would function the same) if you didn't have plans to widely distribute them?
Vanguard already has a whole set of Russell Index ETFs and boutique S&P index ETFs and Factor ETFs all designed for specific market segments through advisors that are NOT marketed to their core customer base, that is why. Most of them have less then $100M AUM each.

Vanguard is an extremely large (gigantic, mega, whatever) fund complex that has to continue to scour the dark corners of the fund marketplace to get a few more $ AUM, that is why.

Also, if you read the morningstar article, it appears it is a model for creating exclusivity in the retail advisor space.

Additionally, and this is just a conjecture on my part, active funds all have problems when they get too big. By creating more and more slices of small funds for each of the managers to play with, they may (I emphasis MAY) have a better shot at reaping some alpha with small concentrated bets.
Last edited by retiringwhen on Fri Aug 27, 2021 9:19 am, edited 1 time in total.
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tj
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Re: Vanguard - New Active Funds for PAS

Post by tj »

retiringwhen wrote: Fri Aug 27, 2021 9:15 am
tj wrote: Fri Aug 27, 2021 9:11 am
retiringwhen wrote: Fri Aug 27, 2021 9:08 am
afan wrote: Fri Aug 27, 2021 9:04 am But it is scary to think the Vanguard would place PAS client money in these pipe dreams when the customers have not specifically requested it.
That is a pretty long jump to even assume they might do such a thing! Seriously, what makes you think this will be a default or even pushed set of funds within PAS?
Why would you create brand new custom funds (based on existing funds that would function the same) if you didn't have plans to widely distribute them?
Vanguard already has a whole set of Russell Index ETFs and boutique S&P index ETFs and Factor ETFs all designed for specific market segments through advisors that are NOT marketed to their core customer base, that is why. Most of them have less then $100M AUM each.

Vanguard is an extremely large (gigantic, mega, whatever) fund complex that has to continue to scour the dark corners of the fund marketplace to get a few more $ AUM, that is why.
But those were created for a different segment, like you mentioned, through advisors. I don't see how the new PAS funds could have been created for anything other than PAS.
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Re: Vanguard - New Active Funds for PAS

Post by Jack FFR1846 »

PAS is evolving.

First, they would recommend the exact funds that made up a target date account. I'm sure more than a few customers looked and thought "why am I paying 0.3% for some clown to put me in a target date fund?".

Then they expanded each fund. So the total US market got split large, medium, small cap. And the more observant PAS customers looked ad said "why am I paying some clown 0.3% to give me Total Stock Market broken down and the rest of a target date fund?".

Now, they're saying "Hey...DFA does this thing where you can't get into a fund unless you pay us to get to it. Sort of an exclusive thing, like being chosen to be able to buy a new Ford GT. Not just anyone can do it. You have to be special. You do want to be special....don't you?".

What's next? "Guided Solutions by Vanguard"?
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lazydavid
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Re: Vanguard - New Active Funds for PAS

Post by lazydavid »

tj wrote: Fri Aug 27, 2021 8:40 am
lazydavid wrote: Fri Aug 27, 2021 6:53 am
tj wrote: Thu Aug 26, 2021 10:50 am
barnaclebob 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?
Fidelity Go Hybrid, which seems to have been renamed Fidelity® Personalized Planning & Advice


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
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%).
I think Vanguard Digital Advisor would be more cost efficient than Wealthfront ?
Unlikely. According to their page, I would save 5bp, as they charge 0.20% AUM vs. the 0.25% I'm paying now. The majority of my Wealthfront account is in Vanguard ETFs, so the ER is unlikely to be vastly different for a similar AA.

And since Digital Advisor doesn't do Tax Loss Harvesting, it's actually dramatically less efficient. Last year my Wealthfront portfolio provided both a 15.2% actual return AND a 6.5% taxable loss, saving me ~$1,000/year on my taxes for the next several years.
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starboi
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Re: Vanguard - New Active Funds for PAS

Post by starboi »

At .75 (0.45 + 0.3) management fee, that's breakeven with ARKK's 0.75 fee.

ARKK gets bashed all the time on Bogleheads, so I'm sure we'll see the same outrage directed at PAS. Right?
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goingup
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Re: Vanguard - New Active Funds for PAS

Post by goingup »

tj wrote: Fri Aug 27, 2021 9:11 am
retiringwhen wrote: Fri Aug 27, 2021 9:08 am
afan wrote: Fri Aug 27, 2021 9:04 am But it is scary to think the Vanguard would place PAS client money in these pipe dreams when the customers have not specifically requested it.
That is a pretty long jump to even assume they might do such a thing! Seriously, what makes you think this will be a default or even pushed set of funds within PAS?
Why would you create brand new custom funds (based on existing funds that would function the same) if you didn't have plans to widely distribute them?
I agree. I anticipate new PAS portfolios will contain at least one new actively managed fund. These funds will be pushed to build up assets, generate profit, and keep PAS customers tethered to the advisory relationship.

It will be interesting to see what the new PAS proposed portfolios contain. I'd also love to hear what Rick Ferri thinks about these funds as part of a PAS portfolio.
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Re: Vanguard - New Active Funds for PAS

Post by afan »

retiringwhen wrote: Fri Aug 27, 2021 9:08 am
afan wrote: Fri Aug 27, 2021 9:04 am But it is scary to think the Vanguard would place PAS client money in these pipe dreams when the customers have not specifically requested it.
That is a pretty long jump to even assume they might do such a thing! Seriously, what makes you think this will be a default or even pushed set of funds within PAS?
I am extrapolating from the complaints that PAS insisted on international bonds, even for people who did not want them. Or had customers simultaneously holding short, intermediate and long term bond funds. If customers get stuck with those, with no choice, then cramdown high cost active funds don't seem far behind.

If Vanguard thought that even less diversified active funds were worthwhile, when managed by "good" people, then why create a set of funds open only to PAS customers? Why not open to everyone? Since they are new funds with no record, it cannot be to attract money from people who will join PAS just to get in. There are funds galore in these spaces, many with Vanguard.

At least with PE, one might avoid getting sucked in by claiming not to be an accredited investor. This might be tricky if you actually wanted to use their financial planning service, since that would require discussing your overall circumstances.

This also makes me worry about what one would get by choosing Vanguard as trustee.
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
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Re: Vanguard - New Active Funds for PAS

Post by afan »

retiringwhen wrote: Fri Aug 27, 2021 9:15 am By creating more and more slices of small funds for each of the managers to play with, they may (I emphasis MAY) have a better shot at reaping some alpha with small concentrated bets.
By creating more and more funds, they definitely increase the chances that at any given time some will be ahead on the indexes. This was Fidelity's strategy for years. Have many highly undiversified active funds and expect that there would always be at least a few that were doing well over the short term. Advertise and drive performance chasers into those funds. Charge high fees for the privilege of getting in with the hot managers. It is based on exploiting those who do not knw better but it sells funds.
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
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Re: Vanguard - New Active Funds for PAS

Post by afan »

starboi wrote: Fri Aug 27, 2021 9:57 am At .75 (0.45 + 0.3) management fee, that's breakeven with ARKK's 0.75 fee.

ARKK gets bashed all the time on Bogleheads, so I'm sure we'll see the same outrage directed at PAS. Right?
You are already seeing it, right in this thread. For exactly the same reasons.
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
Da5id
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Re: Vanguard - New Active Funds for PAS

Post by Da5id »

afan wrote: Fri Aug 27, 2021 11:07 am
starboi wrote: Fri Aug 27, 2021 9:57 am At .75 (0.45 + 0.3) management fee, that's breakeven with ARKK's 0.75 fee.

ARKK gets bashed all the time on Bogleheads, so I'm sure we'll see the same outrage directed at PAS. Right?
You are already seeing it, right in this thread. For exactly the same reasons.
I know, right? I'm certainly not seeing lots of people defending PAS + new funds here.
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Re: Vanguard - New Active Funds for PAS

Post by Wrench »

Da5id wrote: Fri Aug 27, 2021 11:13 am
afan wrote: Fri Aug 27, 2021 11:07 am
starboi wrote: Fri Aug 27, 2021 9:57 am At .75 (0.45 + 0.3) management fee, that's breakeven with ARKK's 0.75 fee.

ARKK gets bashed all the time on Bogleheads, so I'm sure we'll see the same outrage directed at PAS. Right?
You are already seeing it, right in this thread. For exactly the same reasons.
I know, right? I'm certainly not seeing lots of people defending PAS + new funds here.
I am constantly amazed by the Vanguard bashing that occurs on BHs. To me, it is a major negative aspect in this forum.
<BEGIN RANT>
If you don't like PAS, don't use it. If you don't want active funds, don't buy them, and if PAS eventually decides that you have to, then go somewhere else. Why shouldn't Vanguard offer new funds to some clients if they may want them? Every business has to adapt or it may shrink and die. No one is forcing any individual BH to buy them. It is somewhat analogous to bashing GM for selling Corvettes while also selling Chevy Sparks. Both cars can get you from point A to point B. So why would anyone spend so much more on the Corvette? Because some believe the extra cost confers additional benefits worth the extra cost. Same is true here. Whether it does or not in either case is a matter of personal opinion and/or personal preference.
<END RANT>

Wrench
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Re: Vanguard - New Active Funds for PAS

Post by tibbitts »

Da5id wrote: Fri Aug 27, 2021 7:26 am
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.
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.

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...
I don't have a link but it seems like a few years ago someone published data showing that in fact beating benchmarks with specifically Vanguard funds was in fact not a losing game. Of course there can always be arguments over appropriate benchmarks, level of risk, etc. and the difference wasn't huge. Realistically I've always felt the objective of using active funds was to try for another fractional percentage return - like maybe .2%. Anyway it wouldn't surprise me if Vanguard had data that we could all argue over showing their active funds outperformed in one respect or another.

I would have agreed about the in-person advisor point before the pandemic era. Masks and social distancing have changed my opinion of that. Good-quality maskless video makes the remote experience about as valuable for me as socially-distanced masked in-person meetings. Maybe decades from now people will go back to meeting in-person without pandemic restrictions, but by then people and technology may have evolved to where I'm not sure that will be generally regarded as an improvement.
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Re: Vanguard - New Active Funds for PAS

Post by Da5id »

tibbitts wrote: Fri Aug 27, 2021 11:47 am Good-quality maskless video makes the remote experience about as valuable for me as socially-distanced masked in-person meetings.
I guess this is a personal preference. Before I retired I found I cared about and related much better to co-workers abroad who I had met personally at least once compared to those I'd only interacted with over the phone/teleconferences. And I've found Zoom interactions to be better than nothing, but not nearly as good as in-person for social activities. Others have adjusted to it better than me I guess.
Last edited by Da5id on Fri Aug 27, 2021 12:31 pm, edited 1 time in total.
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Re: Vanguard - New Active Funds for PAS

Post by AZAttorney11 »

Lots of folks over the years have felt Vanguard was "safer" than Fidelity or Schwab because Vanguard wasn't some greedy, for-profit company and that its advisors would use low-cost index funds and try not to take advantage of their ill-informed spouse because Vanguard is "owned" by its shareholders.

I've got to tell you, someone in PAS who holds some of these new active funds is looking at an expense ratio of 75 basis points! Vanguard is certainly leading the way to higher fees for some of their customers by taking this approach.

It's quite obvious to anyone who is willing to take off the Vanguard rose-colored glasses that this isn't Bogle's Vanguard anymore and hasn't been for years and years.
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Re: Vanguard - New Active Funds for PAS

Post by nisiprius »

retiringwhen wrote: Fri Aug 27, 2021 7:49 am Here is another article that gets to the core business model problems that Vanguard faces today.

Vanguard Is Adapting to Stiff Competition

At the 2018 BH conference, Jack was very frank that he thought that Vanguard had some very tough decisions to make from a business perspective due to the flattening of the industry. He was talking in direct response to a question about the new Fidelity Zero funds. But, he hinted that overall the headwinds were very strong against Vanguard continuing in its current path at the time.

The Old Vanguard is about as relevant as AT&T Long Distance service these days.

BTW, I am convinced that companies like Robinhood are actually much more dangerous to Vanguard's livelihood in the same way that a 1976 Honda Civic paved the way for finishing off Detroit as it was known.
Agreed.

One of my sour-grapes rationale for staying at Vanguard until and unless they do something that causes a major problem for me personally, is the things Vanguard is doing might be like baggage fees at airlines. That is, they're all doing it or going to do it soon. Vanguard may be participating in some kind of race to the bottom, even if, possibly, if they are doing it clumsily or with less grace.

Getting indignant and changing brokerages on The Principle Of The Thing might be jumping out of the frying pan into another frying pan.

(I like to eat an 8-ounce portion of yogurt. 8 ounces is about the right amount. Perhaps ten or fifteen years ago, yogurt companies began to shrink their container sizes, and I kept "voting with my dollars" and continuing to buy whatever brand was still using 8 ounce containers... but all I did was make myself miserable while achieving nothing).

There is a very fuzzy line between "pushing" something and "offering" it, and, based on past stories about Vanguard advisors, I wonder if Vanguard has always struggled with there not being much money in index funds. I am projecting and fantasizing, of course, but I am able to imagine that John C. Bogle might have said "we, as a company, ought to be willing to make less money than our competitors" and get it to stick... but not any more.
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Re: Vanguard - New Active Funds for PAS

Post by Gort »

Wrench wrote: Fri Aug 27, 2021 11:40 am
Da5id wrote: Fri Aug 27, 2021 11:13 am
afan wrote: Fri Aug 27, 2021 11:07 am
starboi wrote: Fri Aug 27, 2021 9:57 am At .75 (0.45 + 0.3) management fee, that's breakeven with ARKK's 0.75 fee.

ARKK gets bashed all the time on Bogleheads, so I'm sure we'll see the same outrage directed at PAS. Right?
You are already seeing it, right in this thread. For exactly the same reasons.
I know, right? I'm certainly not seeing lots of people defending PAS + new funds here.
I am constantly amazed by the Vanguard bashing that occurs on BHs. To me, it is a major negative aspect in this forum.
<BEGIN RANT>
If you don't like PAS, don't use it. If you don't want active funds, don't buy them, and if PAS eventually decides that you have to, then go somewhere else. Why shouldn't Vanguard offer new funds to some clients if they may want them? Every business has to adapt or it may shrink and die. No one is forcing any individual BH to buy them. It is somewhat analogous to bashing GM for selling Corvettes while also selling Chevy Sparks. Both cars can get you from point A to point B. So why would anyone spend so much more on the Corvette? Because some believe the extra cost confers additional benefits worth the extra cost. Same is true here. Whether it does or not in either case is a matter of personal opinion and/or personal preference.
<END RANT>

Wrench
^^^This^^^
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Re: Vanguard - New Active Funds for PAS

Post by tibbitts »

Da5id wrote: Fri Aug 27, 2021 12:01 pm
tibbitts wrote: Fri Aug 27, 2021 11:47 am Good-quality maskless video makes the remote experience about as valuable for me as socially-distanced masked in-person meetings.
I guess this is a personal preference. Before I retired I found I cared about and related much better to co-workers abroad who I had met personally at least once compared to those I'd only interacted with over the phone/teleconferences. And I've found Zoom interactions to be better than nothing, but not nearly as good as in-person for social activities. Others have adjusted to it better than me I guess.
I think it comes down to whether being 6ft away from someone wearing a mask blocking most of their face is effectively "in person" for you. I thought it would be for me until I experienced it with people I hadn't known before. It might matter whether the person is someone you had experience in-person contact with before the pandemic.
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Re: Vanguard - New Active Funds for PAS

Post by sport »

Wrench wrote: Fri Aug 27, 2021 11:40 am I am constantly amazed by the Vanguard bashing that occurs on BHs. To me, it is a major negative aspect in this forum.
<BEGIN RANT>
If you don't like PAS, don't use it. If you don't want active funds, don't buy them, and if PAS eventually decides that you have to, then go somewhere else. Why shouldn't Vanguard offer new funds to some clients if they may want them? Every business has to adapt or it may shrink and die. No one is forcing any individual BH to buy them. It is somewhat analogous to bashing GM for selling Corvettes while also selling Chevy Sparks. Both cars can get you from point A to point B. So why would anyone spend so much more on the Corvette? Because some believe the extra cost confers additional benefits worth the extra cost. Same is true here. Whether it does or not in either case is a matter of personal opinion and/or personal preference.
<END RANT>
I find it amazing as well. There seems to be a small group of posters who gleefully leap at any opportunity to bash Vanguard. It doesn't make much sense. As you say, if they don't like Vanguard, they should take their business elsewhere. If they do not have Vanguard accounts, why do they care to go to so much effort to say how terrible Vanguard is? I am sure than everyone on Bogleheads has companies they do not want to do business with for a variety of reasons. Nevertheless, they do not jump to criticize those companies at every opportunity.
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Re: Vanguard - New Active Funds for PAS

Post by LadyGeek »

The discussion is getting derailed on Vanguard bashing. Please stay on-topic, which are the investing aspects.
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Re: Vanguard - New Active Funds for PAS

Post by Rick Ferri »

I can say firsthand that many PAS clients ultimately decide to self-manage. It’s a simple four-fund portfolio, exactly the same as LifeStrategy funds. Many people I speak with question paying 0.3% for this, and many quite PAS.

I can also say firsthand that “Complexity is job security” in the advisory business. If an adviser makes portfolio management complicated, clients are more apt to stick with the adviser because they become bewildered by the jargon and “leave it up to the experts”.

I’m not saying this is the reason Vanguard is adding active management to PAS, but from where I sit, it sure looks that way.

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Re: Vanguard - New Active Funds for PAS

Post by 000 »

It's strange that two of these funds have a similar name and strategy and same manager as existing funds.

Will this result in the new fund being favored over its parent? There certainly seems to be some "conflict" here regarding which of the funds - using the same strategy and manager - gets the best of the "secret sauce" when Vanguard makes more money from one than the other.
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Re: Vanguard - New Active Funds for PAS

Post by tj »

000 wrote: Fri Aug 27, 2021 9:26 pm It's strange that two of these funds have a similar name and strategy and same manager as existing funds.

Will this result in the new fund being favored over its parent? There certainly seems to be some "conflict" here regarding which of the funds - using the same strategy and manager - gets the best of the "secret sauce" when Vanguard makes more money from one than the other.
Right? As a shareholder of Vanguard Dividend Growth, how is this going to effect that fund?
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Re: Vanguard - New Active Funds for PAS

Post by 000 »

tj wrote: Fri Aug 27, 2021 9:59 pm Right? As a shareholder of Vanguard Dividend Growth, how is this going to effect that fund?
It also creates the potential for embarrassing situations where the "Advisor Select" versions of Dividend Growth and International Growth do worse than the original versions.

And the names are a bit dull. No one on the golf course is going to be bragging about being in the Vanguard Advice Select Dividend Growth Fund like people did for Magellan or PRIMECAP.

All in all it doesn't make a lot of sense. Makes me wonder if the emperor may have no clothes at Vanguard.
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Re: Vanguard - New Active Funds for PAS

Post by marcopolo »

000 wrote: Fri Aug 27, 2021 9:26 pm It's strange that two of these funds have a similar name and strategy and same manager as existing funds.

Will this result in the new fund being favored over its parent? There certainly seems to be some "conflict" here regarding which of the funds - using the same strategy and manager - gets the best of the "secret sauce" when Vanguard makes more money from one than the other.
You think Vanguard has "secret sauce"?!?!
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: Vanguard - New Active Funds for PAS

Post by 000 »

marcopolo wrote: Fri Aug 27, 2021 10:26 pm You think Vanguard has "secret sauce"?!?!
Maybe. But either way the same malincentive problem exists or appears to exist.
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Re: Vanguard - New Active Funds for PAS

Post by Nate79 »

AZAttorney11 wrote: Fri Aug 27, 2021 12:28 pm Lots of folks over the years have felt Vanguard was "safer" than Fidelity or Schwab because Vanguard wasn't some greedy, for-profit company and that its advisors would use low-cost index funds and try not to take advantage of their ill-informed spouse because Vanguard is "owned" by its shareholders.

I've got to tell you, someone in PAS who holds some of these new active funds is looking at an expense ratio of 75 basis points! Vanguard is certainly leading the way to higher fees for some of their customers by taking this approach.

It's quite obvious to anyone who is willing to take off the Vanguard rose-colored glasses that this isn't Bogle's Vanguard anymore and hasn't been for years and years.
Well stated. Go over to the thread on the removal by Vanguard of secure messaging and there were seriously some posters saying what a great idea it was..... Yet when Fidelity introduced their Zero funds (you know, reducing costs like this forum is all about) there was so much Fidelity bashing it was embarrassing.
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Re: Vanguard - New Active Funds for PAS

Post by goingup »

Rick Ferri wrote: Fri Aug 27, 2021 9:17 pm I can say firsthand that many PAS clients ultimately decide to self-manage. It’s a simple four-fund portfolio, exactly the same as LifeStrategy funds. Many people I speak with question paying 0.3% for this, and many quite PAS.

I can also say firsthand that “Complexity is job security” in the advisory business. If an adviser makes portfolio management complicated, clients are more apt to stick with the adviser because they become bewildered by the jargon and “leave it up to the experts”.

I’m not saying this is the reason Vanguard is adding active management to PAS, but from where I sit, it sure looks that way.

Rick Ferri
I was hoping you'd weigh in on this, Rick. :D

It's hard to see how the more expensive PAS-exclusive active funds will benefit a PAS client. I really hope these funds aren't pushed into a taxable portfolio. A large holding of one these funds in a taxable account, after a few years of appreciation, would make it darn hard to break up with PAS.
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Re: Vanguard - New Active Funds for PAS

Post by LadyGeek »

Here's an example of the jargon Rick Ferri mentions. From: Vanguard PAS to Introduce 3 Active Equity Funds
The active equity offer will primarily serve as a complementary allocation to PAS clients’ broadly diversified and low-cost index fund core portfolio holdings. Vanguard believes the funds’ concentrated, higher-alpha strategies are an ideal fit for PAS clients with sufficient risk tolerance and patience for active exposure as they can materially impact portfolio performance even at a relatively small allocation. PAS advisors will assess suitability and ensure the funds are prudently incorporated into their clients’ portfolios.
My take:

"Complementary" means to fill in the gap. A low-cost diversified portfolio has no gaps to fill. There is nothing to do here.

They are not complementing your portfolio, but adding a totally different investment strategy on top of what you already have. No matter how you slice it, this is portfolio tilt, which intentionally deviates from the total market approach.

"Higher alpha" means higher expected returns over the market. See: Alpha Vs. Beta: What's the Difference?

Remember that you treat your portfolio in its entirety. Adding focused funds at higher costs is doing this in a way which raises costs with higher risk.

If you have a high Risk tolerance, then simply adjust your low-cost diversified asset allocation (percentage of stocks / bonds). The statistics show you'll win in the long run. It's one of the key principles of "Investing Advice Inspired by Jack Bogle".

Discussed in another thread somewhere (but I couldn't find it). The press release also discloses Vanguards total Assets Under Management.
PAS advises $243 billion, as of June 30, 2021.
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Re: Vanguard - New Active Funds for PAS

Post by nisiprius »

An obvious thing to look at... the existing PAS active funds.

The Vanguard Capital Opportunity Fund is a US stock fund with a large blend style. Oddly, Morningstar only gives it a two-star rating.

Source

Image

It's outperformed an S&P 500 index fund, but it's taken more risk. Overall the risk-adjusted return has been higher.

Vanguard International Core Stock Fund has been out for less than two years and so far has performed almost identically to Total Internatinoal.
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Re: Vanguard - New Active Funds for PAS

Post by NoRoboGuy »

Passive vs. active need not be 'mutually exclusive' when focus is on keeping costs low:

Wellesley Admiral Shares (VWIAX): 0.16% is one active fund in the Vanguard family that has low expenses.
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Re: Vanguard - New Active Funds for PAS

Post by bertilak »

Rick Ferri wrote: Fri Aug 27, 2021 9:17 pm I can say firsthand that many PAS clients ultimately decide to self-manage. It’s a simple four-fund portfolio, exactly the same as LifeStrategy funds. Many people I speak with question paying 0.3% for this, and many quite PAS.

I can also say firsthand that “Complexity is job security” in the advisory business. If an adviser makes portfolio management complicated, clients are more apt to stick with the adviser because they become bewildered by the jargon and “leave it up to the experts”.

I’m not saying this is the reason Vanguard is adding active management to PAS, but from where I sit, it sure looks that way.

Rick Ferri
Hi Rick.

What would you suggest as an alternative to PAS? My instructions to my wife say PAS is the simplest way to go as opposed to dealing with and/or understanding all the following...
  1. Multiple accounts (taxable, IRA)
  2. Multiple funds (three-fund) spread across those accounts
  3. Gifting
  4. Taxes
  5. Paying expenses
  6. RMDs
  7. TLH (optional)
  8. KISS investing principles like low cost, three-fund portfolio, stay-the-course, etc.
  9. Not getting taken by someone pushing complexity and/or beat-the market schemes
I explain how to deal with all the above but despair it might not be understood or may be thought of as too difficult (despite the elegance of my presentation!) It is a long list. It was after writing up the whole thing I changed its emphasis to PAS.
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Re: Vanguard - New Active Funds for PAS

Post by Rick Ferri »

I agree that PAS is still one of the best alternatives for a non-financial spouse that you will find.

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Re: Vanguard - New Active Funds for PAS

Post by bertilak »

Rick Ferri wrote: Sat Aug 28, 2021 1:40 pm I agree that PAS is still one of the best alternatives for a non-financial spouse that you will find.

Rick Ferri
Thanks! And I should have added AA and rebalancing (or balance maintenance as I look at it) to my list.
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Re: Vanguard - New Active Funds for PAS

Post by Elysium »

These are the funds that Daniel P. Weiner has used in his newsletter portfolios, according to some credible private messages in the past. That's a either an interesting co-incidence or validating the approach of Mr. Weiner. Although, their readers wouldn't have access to the more concentrated "select" funds, I guess the newsletter costs way less than 30bps in AUM. Could it be possible they were onto to something for years, before finally Vanguard themselves jumped on the bandwagon of creating portfolios with these funds. Did Vanguard folks follow Weiner's model portfolios and decided to copy. That would make up for some juicy story.
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Re: Vanguard - New Active Funds for PAS

Post by mikeyzito22 »

galawdawg wrote: Thu Aug 26, 2021 11:15 am
retired@50 wrote: Thu Aug 26, 2021 11:09 am
tj wrote: Thu Aug 26, 2021 11:00 am
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.
PAS portfolios currently utilize both active and passive fixed income and equity products to meet client preferences and needs.
Regards,
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.
Well, that wouldn't smell right, would it.

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,
Vanguard PAS is not a fiduciary. Otherwise, they wouldn't place clients exclusively into Vanguard funds.
So, does this original post relate to you? Do you use PAS? Are you advocating that people shouldn't use PAS? Are you here to simply point out that PAS is wrong at all times? I'm simply asking whether or not you are guiding people away or are just making comments? Is there anything actionable from your posts? For example, what are steps you would take (not regarding the above) that you would take? Thank you.
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Re: Vanguard - New Active Funds for PAS

Post by galawdawg »

mikeyzito22 wrote: Sat Aug 28, 2021 4:10 pm Is there anything actionable from your posts? For example, what are steps you would take (not regarding the above) that you would take? Thank you.
You apparently missed my post about four below the one you quoted....
galawdawg wrote: Thu Aug 26, 2021 12:05 pm IMO, investors who want advice would be well-served to find a fee-only advisor...
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Re: Vanguard - New Active Funds for PAS

Post by JackoC »

bertilak wrote: Sat Aug 28, 2021 11:46 am My instructions to my wife say PAS is the simplest way to go as opposed to dealing with and/or understanding all the following...
  1. Multiple accounts (taxable, IRA)
  2. Multiple funds (three-fund) spread across those accounts
  3. Gifting
  4. Taxes
  5. Paying expenses
  6. RMDs
  7. TLH (optional)
  8. KISS investing principles like low cost, three-fund portfolio, stay-the-course, etc.
  9. Not getting taken by someone pushing complexity and/or beat-the market schemes
I explain how to deal with all the above but despair it might not be understood or may be thought of as too difficult (despite the elegance of my presentation!) It is a long list. It was after writing up the whole thing I changed its emphasis to PAS.
PAS is an option I won't choose as long as I'm around and (think I am) capable. But, there is the issue of how to simplify things if I'm not around. One option is as you say detailed instructions for streamlining, jettisoning or letting lapse things I don't expect wife (even with help of grown kids) to keep doing (like partly hedging equity position with futures and options to have more upside and defer cg taxes, so just sell down the position to what works with no hedges, giving up any upside or tax deferral advantage, which might anyway change due to basis step up). Then either the portfolio would run on virtual autopilot under simple instructions where to withdraw spending money and do legally required things like RMD's and tax returns generally, and slightly clever but slightly complicated stuff like charitable and family gift transfers of appreciated assets and TLH could fall by the wayside also. Or, I could recommend getting an advisor, like PAS.

Reviews of PAS I've seen say a downside is no TLH, not sure that's accurate, optional anyway you say and I also don't view it as a core function. But it is somewhat of a negative for me if PAS will offer products other than very basic funds. I would not assume Vanguard will put people in crazy stuff, but there would be no reason to add bells and whistles to our portfolio at that stage of the game, even if a good argument could be made for it in theory*. Another aspect I've read in reviews (couldn't find on Vanguard's site) is they 'strongly encourage' all brokerage assets to be at Vanguard under PAS. I understand that from POV of the futility of structuring half a portfolio without knowing the other half. And in a post-me situation fewer brokerages to deal with would be better. OTOH some diversification of unknown/unknown institutional risks could be good. But I assume this doesn't apply to having a nice cushion in bank accounts/CD's which my instructions would recommend. The Vanguard agreement for PAS I saw is also long and complicated, if you seek to fully read and understand everything you sign even from a trusted provider. I'm undecided whether a set of instructions to streamline then KISS, even if not optimal, might still be better. My wife is 'non financial', actively dislikes dealing with financial institutions, but is strong on common sense so prior to severe cognitive decline (and my own cognitive decline could make me derail things while I'm still here) I don't worry about a good sale pitch making her do stupid stuff seeking high returns.

*I guess one of Vanguard's arguments might be that *relatively low cost* active funds have a much better track record generally than high cost active funds, pointing to the centrality of 'costs matter' among BH principals as opposed to absolute strict adherence to 'invest in the whole market' which few BH's strictly adhere to in every case anyway. For example 'whole market among US stocks, no non-US for me, thanks' might be correct or not, let's not debate it for the 10,000th time, but it's simply not the whole investable market.
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Re: Vanguard - New Active Funds for PAS

Post by galawdawg »

Since there have been a few posts about directing their spouse to use VPAS, I thought I would provide a link to my post in a recent "Financial Planning for Surviving Spouse' thread that may provide some food for thought; viewtopic.php?p=6174838#p6174838

In summary, while one can "instruct" (I prefer the terms suggest or recommend) their spouse to enroll in VPAS upon the passing of the Boglehead in the family, there are risks in that approach since VPAS is a telephone/online only advisory service that is only available M-F 8am-8pm ET. While we Bogleheads are all about low-cost investing options, our investment philosophy is not universal (and may not even be important to most investors). I know quite a few non-Boglehead investors who don't care at all about the fees they pay as long as there is an investment office they can go to with an advisor that they can meet with in person, reach in the evenings or on weekends, and who is generally more "accessible" than a VPAS advisor. Spoiler alert: Edward Jones loves widows and widows love Edward Jones!
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Re: Vanguard - New Active Funds for PAS

Post by retired@50 »

galawdawg wrote: Sat Aug 28, 2021 4:23 pm ...You apparently missed my post...
I'm still waiting for your response to hornet96 in this post: viewtopic.php?p=6195127#p6195127

And to my post about Jason Zweig's article discussing conflicts of interest: viewtopic.php?p=6194802#p6194802

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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Re: Vanguard - New Active Funds for PAS

Post by afan »

Da5id wrote: Fri Aug 27, 2021 7:26 am
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...
Interesting. If I had the choice, I would rather have all financial interactions via email. Other forms of pure text might be acceptable but it is easy to pull up old emails to review what they said. I find the in person "communication" to be distracting and at best beside the point.
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