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That giant sucking sound is Vanguard
Old 12-02-2015, 06:12 PM   #1
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That giant sucking sound is Vanguard

Someone has noticed that Vanguard is impacting the pocketbooks of the financial services companies on Wall Street. It's an entertaining article, if a little light on facts (it is Gawker, after all). The Company That's a Bigger Threat to Wall Street Than Occupy


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Vanguard’s assets now stand at $3.1 trillion, which effectively means that this year alone it will have removed more than $16 billion from the financial industry just through fees. That figure is based on the average asset-weighted fee of a Vanguard fund of 0.13 percent, compared with the 0.66 percent average asset-weighted fee of an active mutual fund...

Until now, the asset numbers probably weren’t big enough to trouble Wall Street, but as Vanguard is now on pace to add a cool $1 trillion in assets every few years, it is effectively becoming a massive wealth transfer machine funneling money out of the financial industry and into individual investors’ accounts.
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Old 12-02-2015, 06:32 PM   #2
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Someone has noticed that Vanguard is impacting the pocketbooks of the financial services companies on Wall Street. It's an entertaining article, if a little light on facts (it is Gawker, after all). The Company That's a Bigger Threat to Wall Street Than Occupy
It shouldn't surprise the fat cats of Wall Street. People are getting smarter about their $$$ and are figuring out that paying exorbitant "management fees" is pretty damn stupid.

Here's something interesting. I shared this article with a "friend" on Facebook who is an "advisor" for Edward Jones. Not 30 seconds later, he apparently un-friended me. I didn't really care for the guy, anyway.
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Old 12-02-2015, 06:36 PM   #3
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The money is going into individual investors' accounts, and most of it is being invested back into the corporations. If I've got $10K to invest, I'm going to invest $10K, but through lower fees I've got another ~$50 invested rather than being skimmed off. Good for every, except the Wall Street firms.
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Old 12-02-2015, 06:42 PM   #4
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Bogle's revenge. heh, heh, heh
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Old 12-02-2015, 07:51 PM   #5
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I w*rked around the fund industry, it's still a good old boy club. Small and everybody knows each other. I'm sure Jack was not a popular person among his peers.
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Old 12-02-2015, 07:53 PM   #6
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You would think that with all the butt kicking that they are doing that they could give us guys that made them successful a free copy of Turbo Tax.
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Old 12-02-2015, 08:21 PM   #7
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I also saw that article this morning and can just imagine all the fat cats complaining about what vanguard is doing to them.
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Old 12-02-2015, 08:47 PM   #8
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If you add in the effect that Vanguard has had on other places like Fidelity, who have had to lower fees to compete, then it is more than just the assets at Vanguard that are sucking fees out of the system.

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Old 12-02-2015, 08:50 PM   #9
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Right as I retired, I rolled over my 401K to Vanguard. I knew it was stupid to continue to pay the fees to the FA who handled the 401K. While I was w*rking, I had to use the FA because it was my management's choice. The 401K had a limited selection of (managed) investment options.

Right before I rolled it over, I ran a performance comparison of my similarly allocated non-401K portfolio vs. the 401K: My index funds had outperformed the FA by >2% for 1, 3 and 5 years. (10 year data was not available.)

The amount of money I will save (in fees alone) should pay for my health insurance for the rest of my life, with enough money left over to fund a short additional vacation each year.

Yet my former FA still manages billions, blithely collecting its fees from other chumps customers. Thank heavens for Bogle and Vanguard. I hope the "sucking" sound continues....
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Old 12-02-2015, 10:33 PM   #10
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They got one thing wrong, though.

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Vanguard, simply by offering less greedy prices for its services, is in effect accomplishing the same thing that a tax on Wall Street that was then refunded to investors as a tax credit would accomplish.
Actually, it's more like they taxed Wall Street and then gave the proceeds to Vanguard investors. Even better (for me).
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Old 12-02-2015, 11:01 PM   #11
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Originally Posted by ERD50 View Post
If you add in the effect that Vanguard has had on other places like Fidelity, who have had to lower fees to compete, then it is more than just the assets at Vanguard that are sucking fees out of the system.

-ERD50
+1

I'm not sure I want to invest the time in researching it, but I'll bet that in addition to the 3.1T at Vanguard, there's also a huge amount in low cost, no load funds at Fidelity, Schwab, etc. Then add in low cost ETF's offered by other companies. A chunk-o-change I'm sure.

I give a lot of credit to Bogle for pushing the whole philosophy. It spread rapidly. I first heard of investing in no load, low cost funds from Bob Brinker many years ago on his weekly show.
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Old 12-03-2015, 05:52 AM   #12
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i still remember the days most fidelity funds had loads .
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Old 12-03-2015, 06:54 AM   #13
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A lot of 401Ks are catching up. DW's firm now has a bunch of Vanguard funds in their offerings plus some popular managed funds. It is a law firm so I assume the managing partner listened to other partners in choosing the fund administrator.
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Old 12-03-2015, 08:15 AM   #14
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According to ICI the average fee for an equity fund was .99 in 2000 and .70 in 2014. Not a bad decrease for the consumer.

In the same time period, index fund assets have gone from 384 billion to 2.1 trillion in AUM. This is across all fund families.
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Old 12-03-2015, 09:48 AM   #15
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We've had a VG account since the 1970's. I hope they don't get too successful. Competition is a good thing for the consumer.

Also I think the VG web site could improve. Bigger isn't better after the first few hundred billion.
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Old 12-03-2015, 02:40 PM   #16
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Vanguard, Amazon and Walmart are all low cost disrupters, and more power to them. I wish one of them would get into healthcare and higher education.


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Old 12-03-2015, 02:46 PM   #17
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I think Walmart is getting into healthcare. Health Care For $4: Are You Ready For Walmart To Be Your Doctor?
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Old 12-03-2015, 03:06 PM   #18
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Originally Posted by donheff View Post
A lot of 401Ks are catching up. DW's firm now has a bunch of Vanguard funds in their offerings plus some popular managed funds. It is a law firm so I assume the managing partner listened to other partners in choosing the fund administrator.
Yep. My MegaCorp 401k offers only 9 fund choices, all index based, and with ER's actually lower than Vanguard's Admiral Shares. Despite being away from MegaCorp for almost a decade now, I still haven't moved the funds to a rollover IRA.

Money Market
Short Bond
Intermediate Bond
Large Cap Equity
Medium Cap Equity
Small Cap Equity
International Equity
Conservative Blend
Moderately Aggressive Blend

My wife's 403b was horrible. She was offered a selection of 403b providers, mostly insurance company based, and all featured high cost managed funds. It was a struggle for me to help her find a decent path to follow, although in the end I estimated she did a bit better than if she had invested the money post tax over the 30+ yrs she contributed. As with all the 403b plans I've heard of, there was zero match. High fees and no match, ugh! When she retired, she moved the money to a rollover IRA pronto!
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Old 12-03-2015, 03:17 PM   #19
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My wife's 403b was horrible. She was offered a selection of 403b providers, mostly insurance company based, and all featured high cost managed funds.
403(b)s offered by school districts are notoriously bad. Very high fees with often shady operators. Many in my family (and DW's family) are teachers and they all seem to have awful options. I've helped a few of them roll into Vanguard after they retire. Many of the funds they owned had 5% front end loads! Criminal!

One family member in administration is convinced that their district treasurer is getting some sort of kickbacks, because he just won't change the plan they have from a high fee company.

My observation (around here at least) is that the financial folks most districts can attract are fairly clueless. If they were better, they get a much better paying job elsewhere. (Sadly, also true for school tech people - I was helping our local district with some stuff and any one who was competent was quickly snapped up by local business that paid much better).
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Old 12-03-2015, 03:20 PM   #20
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I think Walmart is getting into healthcare. Health Care For $4: Are You Ready For Walmart To Be Your Doctor?
Although a standard visit will be $40, not $4.

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Walmart’s stressed that their clinics will be a low-cost alternative to traditional options: Walk-in visits will cost just $40.
Sounds a bit similar to the mini-clinics CVS offers. Nurse practitioner, takes insurance and Medicare, good for getting vaccinations, school physicals, etc. I've used 'em and it was OK.
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