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Vanguard Financial Plan Feedback
Old 02-27-2014, 08:32 AM   #1
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Vanguard Financial Plan Feedback

I just completed the process of obtaining my free Vanguard financial plan and phone consultation and was curious what others who may have gone through this process thought about it and what (if anything) they used it for. Below is my assessment summary and action I am taking.

1. (+) I knew my basic AA of 60/40 was OK but that my sub-asset allocations were probably out of whack. The plan contained a good summary of current asset/sub-asset allocation and recommended asset/sub-asset allocations (confirming and quantifying my suspicions).

2. (Neutral) The performance of the “Integrated Portfolio” (which as they state minimizes changes to current portfolio) , and the “Consolidated Portfolio” (a significant rework in closing a lot of funds and opening some new ones - basically looked similar to a Bogle 4 fund mix). Plus there was lower average ER of about .05) was insignificant. However there was only a 1% difference (97% vs. 98%) in success rate when I cranked up my needed yearly income to the point where success rate dropped below 100%.

3. (-) Perhaps just a comfort level issue on my part. The Consolidated Portfolio had total elimination of my Wellington and Wellesley funds. I mentioned during my consultation that I had no plans to do this (tweaks were OK), and the Planner I was talking with mentioned that was a common response from many clients. So between this and my comment #2 above….I saw no reason to even consider the Consolidated Portfolio.

4. (+) Overall well worth the time and money (free). Gave me a good sanity check on what I get when I use Firecalc or other independent online retirement calculators. The only negative is that I wish the Retirement Outlook area displayed information on current portfolio in addition to the Integrated and Consolidated portfolio’s they supply. Also it would have been nice to have more (actually they don't have any of significance) knobs and buttons to change things like when I take SS. But I guess if they put too many knobs and buttons in, the Vanguard Financial Planning Services would have less business.

5. Actions on my part based on Plan - I am Ignoring the Consolidated Portfolio. I plan on making a couple of tweaks based on the Integrated Portfolio (one completed last night), but not fully implementing it.
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Old 02-27-2014, 08:56 AM   #2
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I received the Vanguard financial plan a couple of years ago. I made some changes in my allocation, but some of their suggestions would have cost me too much in cg taxes. I did a variation on both allocations that they provided. I thought it was a good exercise. I am very pleased with the firm and the online information. I will be tuning in to their retirement phone call next week.
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Old 02-27-2014, 09:34 AM   #3
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..... I made some changes in my allocation, but some of their suggestions would have cost me too much in cg taxes. ...... I will be tuning in to their retirement phone call next week.
Good point on the CG taxes. Actually in my case the way they did both portfolios the CG impact was minimal (a small amount of my current carry-over) probably because the biggest the changes were in my IRA where ~70% of my Vanguard $$'s are.

Kudo's to you, I have never had the motivation to tune into one one their webcasts (or whatever/however they do it). I see the emails for them all the time.
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Old 02-27-2014, 09:47 AM   #4
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I came to the same conclusion pretty much. However I do enjoy talking with the CFP once a year just to bounce ideas off and see if I'm missing anything. And, you can't beat FREE.

The plan Vanguard comes up with does not factor in CG taxes adequately. I have some actively managed Fidelity funds that I've owned for 20 years. While the expense ratios are high, it's not worth it to me to pay the taxes just to move the money into index funds.

The other factor I don't care for with their planning is how they look at CDs. I have 40% in fixed income and 60% in equities. Of the 40% FI, half is in CDs earning 3% or greater. They look at this as money that is out of the market and try to find a way to invest it for you. Or if you exclude it, they take it out of your total net worth and then your remaining AA gets out of whack. In my mind, a CD paying 3% is a good substitute for a bond fund like Total Bond Market given how low the yields are and the likelihood of interest rate risk. But their software does not have the ability to analyze it that way. The CFP did agree with me though on my thought process. All in all a worthy annual exercise in my opinion.
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Old 02-27-2014, 10:10 AM   #5
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I just met with my vanguard financial planner last month. One of the main benefits was to have someone else independently confirm to my DW that we have enough, and then some for a decent retirement.

Another benefit was to help increase my financial knowledge by being able to ask this guy questions, about the straight Bogle-ish portfolio he recommends. There's no doubt he has a lot more experience and knowledge than I have.

We have 30% of our total portfolio in CDs, T-Bills, and money market funds, some inside IRAs, and some outside. The vanguard plan recommended moving all the outside IRAs to an intermediate tax exampt fund (muni bonds), and the inside IRAs to the total bond market and total international bond market funds. The intermediate tax exempt fund gives much better effective pre-tax interest rates with our current 33% marginal tax rate than 1% CDs, .02% money market funds, or 0.15% T-Bills. The total international bond fun diversifies the portfolio, and smoothes out some of the ups and downs. I learned a lot by asking him questions,and then starting to read Bond Book by Thau, and Buying Bonds for Dummies.

My main concern was that he seemed to ignore, or gloss over our short term cash flow requirements for the next 3 years. He basically said the stock dividents and bond interests would cover it. Maybe so, but I think I'll ignore that part and keep a good chunk of change near cash.

All in all, it was a helpful and educational experience, and brought me new questions I want to find answers to. I plan on doing it again next year.
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Old 02-27-2014, 10:28 AM   #6
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3. (-) Perhaps just a comfort level issue on my part. The Consolidated Portfolio had total elimination of my Wellington and Wellesley funds. I mentioned during my consultation that I had no plans to do this (tweaks were OK), and the Planner I was talking with mentioned that was a common response from many clients. So between this and my comment #2 above….I saw no reason to even consider the Consolidated Portfolio.
Just curious, but did he give you a reason why he recommended eliminating the two funds?
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Old 02-27-2014, 10:41 AM   #7
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Keeping in mind it was "free" and understanding going in that Vanguard has an overarching and well known investing philosophy, I thought it was worthwhile. Instead of repeating myself, my thoughts here PSA: Plug for (free) Vanguard Financial Plan, apologies if you've have seen the thread already.
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Old 02-27-2014, 10:42 AM   #8
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I'm gonna say the reason to get rid of the actively-managed funds was just the fiduciary hat the CFP was wearing. They need to cover their behinds and stick to just index funds since studies show that index funds are really the bee's knees.

And clearly, it doesn't matter if the actively-managed funds are Vanguard funds.
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Old 02-27-2014, 10:44 AM   #9
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Just curious, but did he give you a reason why he recommended eliminating the two funds?
He sort of dodged the question when I asked "why eliminate two of premier and proven (W&W) funds. I let him off the hook after 30 seconds or so by "asking" if it was due to the lower fees (0.1) on the three funds (total bond, total stock, total international stock...whatever they were) that essentially replaced them. He did comment/reciprocate ,as I mentioned in my OP, that many other clients had the same "resistence" to eliminating W&W from their portfolios.
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Old 02-27-2014, 10:46 AM   #10
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I came to the same conclusion pretty much. However I do enjoy talking with the CFP once a year just to bounce ideas off and see if I'm missing anything. And, you can't beat FREE.

The plan Vanguard comes up with does not factor in CG taxes adequately. I have some actively managed Fidelity funds that I've owned for 20 years. While the expense ratios are high, it's not worth it to me to pay the taxes just to move the money into index funds.

The other factor I don't care for with their planning is how they look at CDs. I have 40% in fixed income and 60% in equities. Of the 40% FI, half is in CDs earning 3% or greater. They look at this as money that is out of the market and try to find a way to invest it for you. Or if you exclude it, they take it out of your total net worth and then your remaining AA gets out of whack. In my mind, a CD paying 3% is a good substitute for a bond fund like Total Bond Market given how low the yields are and the likelihood of interest rate risk. But their software does not have the ability to analyze it that way. The CFP did agree with me though on my thought process. All in all a worthy annual exercise in my opinion.

This is my experience - they take a very black and white approach. For instance if an actively managed fund has foreign components they do not count that as they want you in their international fund. Their tracking model and testing solution has the same view. That said I really like having the review each year to bounce idea's off.
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investment vs retirement advice
Old 02-27-2014, 04:08 PM   #11
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investment vs retirement advice

Does Vanguard offer true retirement advice over multiple areas or just investment/AA advice? Big difference in my opinion.
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Old 02-27-2014, 06:02 PM   #12
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Does Vanguard offer true retirement advice over multiple areas or just investment/AA advice? Big difference in my opinion.
Our financial planner covered two things :

1. What our maximum safe withdrawal rate would be with our pensions, social security, and assets.

2. Given our chosen asset allocation of 40/60 stocks/bonds, where to put the various investments. And the investments he chose were Vanguard Funds within out Vanguard account, and often within our Fidelity account also. The plan was pretty generic, without a lot of detail. However, it was free.

He talked to us for 45 minutes. He did not cover things like when to take social security, whether and when to convert TIRAs to ROTH IRAs, how much difference an annuity would make, reserve mortgages, or planning year to year spending and withdrawals. We will have to do that ourselves, or hire a fee only planner.
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Old 02-27-2014, 06:13 PM   #13
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Does Vanguard offer true retirement advice over multiple areas or just investment/AA advice? Big difference in my opinion.
Just the latter in to my recollection.
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Old 02-27-2014, 06:16 PM   #14
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Just the latter in to my recollection.
+1

And they clearly label it a "financial plan", not "retirement plan".

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A Vanguard Financial Plan for long-range planning by a Certified Financial Planner™ (CFP) professional from Vanguard who analyzes your investments and saving strategy.
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Old 02-28-2014, 07:00 AM   #15
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I am a VG Admiral customer and contacted my advisor a couple of months ago after reading about their free "plan" here. My advisor sounded like he didn't know what this offering is. He put me in touch with one of their financial planners who asked me to send him some basic info and set up a teleconference for the following week. I sent him a list of holdings (goes well beyond VG), income streams, expected SWR, AA with self described risk profile, etc.

When we talked, the advisor basically said that he couldn't offer me anything more than what I had already done. He said that, based on my self described risk profile and plans, my AA was consistent with what they would advise and that my plans looked excellent. That was it. I was expecting some sort of written "plan" with cute charts and stuff but nothing like that was offered.
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Old 02-28-2014, 07:58 AM   #16
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We are talking about a FREE plan for most investors here...
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