Vanguard Financial Planning

[LOL!]

LOL, have you used the Vanguard financial planner?

No, because it would cost us money. That is, it is not free to us. Hint: We do not have $500,000 invested at Vanguard.

Online I am able to get a 22-page "Portfolio Watch" report which probably has most of the same info that a Vanguard investment plan has. Can anybody tell me how different that would be from a "Vanguard Financial Plan"? That is, for folks who have gotten a Vanguard Financial Plan and who have also gotten the Portfolio Watch output, what is different between them?

 

[pb4uski]

Portfolio Watch and the financial plan are different, but share some similarities.

As you know, Portfolio Watch is point in time comparison of your portfolio (including non-Vanguard accounts if you chose to include them in your holdings) against certain metrics for a defined target portfolio.

The first section (first 7 pages) of the Vanguard plan compares your portfolio to two target portfolios similar to Portfolio Watch and makes recommendations of how to get from where you are to the target. The next section is Your Retirement Outlook shows estimated portfolio balances for a best, average and worst scenario and success probabilities similar to what Firecalc does, how the success rate changes at different levels of spending, and then summarizes the information that you provided to them and that they used in developing their conclusions.

 

[Midpack]

No, because it would cost us money. That is, it is not free to us. Hint: We do not have $500,000 invested at Vanguard.

Online I am able to get a 22-page "Portfolio Watch" report which probably has most of the same info that a Vanguard investment plan has. Can anybody tell me how different that would be from a "Vanguard Financial Plan"? That is, for folks who have gotten a Vanguard Financial Plan and who have also gotten the Portfolio Watch output, what is different between them?

The VFP begins with analyzing your current portfolio (first 4 pgs of 24), not unlike Portfolio Watch. From there the next 20 pages in the VFP output include:

1. Vanguard offers you two portfolios
   • Integrated - maintains current holdings where possible
   • Consolidated - additional measures if you're willing to move more assets to improve "chances for success"
2. Detailed recommendations - shows current, integrated, consolidated by each holding
3. Your retirement outlook, how your portfolio will grow (sort of a FIRECALC lite)
   • Your spending outlook (what you can afford to withdraw in table form spending vs prob of success)
4. Information you provided (just a summary of personal info)
5. Your personal holdings (all account holders have this)
6. Recommendations listed by type of account (similar to #2 above, by account instead of holding)
7. Transactions to achieve Integrated Portfolio showing Capital Gain (Loss) for each and total
8. Transactions to achieve Consolidated Portfolio showing Capital Gain (Loss) for each and total
9. Allocation of future savings
10. Assumptions and disclosures (2 pages of undoubtedly required legalese)
11. Contact info & notes

I am NOT recommending anyone pay for the privilege unless you simply don't know how to construct a portfolio at all, then it could be money well spent indeed, way less expensive than hiring an ongoing FP/FA. However, if it's free (or close) based on portfolio size, it's not a bad second opinion - and again the follow up phone discussion is more valuable than the standard plan you receive in writing IMO.

 

[LOL!]

Thanks to both pb4uski and Midpack for the info. I appreciate it.

 

[Alan]

Thanks to both pb4uski and Midpack for the info.

+1

 

[Options]

...

I am NOT recommending anyone pay for the privilege unless you simply don't know how to construct a portfolio at all, then it could be money well spent indeed, way less expensive than hiring an ongoing FP/FA. However, if it's free (or close) based on portfolio size, it's not a bad second opinion - and again the follow up phone discussion is more valuable than the standard plan you receive in writing IMO.

Well I did pay for it but feel I got great value based on their recommendations because (a) it confirmed planned consolidating everything to VG thereby reducing my expenses by over 50%; (b) I wanted the plan to corroborate results in ORP, FC, and FIDO, which it did; and (c) given that it's just about time for the annual rebalancing act, I liked the recommendations they did make.

Note: one recommendation they made which I didn't like/not going with are 10% in int'l bonds. New VG product since 5/13 and not getting the best press. Also, too new for my taste and don't like test-driving new industry products. Interestingly, VG was most optimistic/generous portfolio scenario, followed by ORP, FC, then FIDO. Next year, I'll do one final corroboration with ESPlanner because I like the detail it provides. Paying for VG FP now gave me confidence to make certain decisions at this time in preparation of FIRE in 12/14. Post PF consolidation, all future VG FP's are free.

 

[Midpack]

I am NOT recommending anyone pay for the privilege unless you simply don't know how to construct a portfolio at all, then it could be money well spent indeed, way less expensive than hiring an ongoing FP/FA. However, if it's free (or close) based on portfolio size, it's not a bad second opinion - and again the follow up phone discussion is more valuable than the standard plan you receive in writing IMO.

Well I did pay for it but feel I got great value based on their recommendations because (a) it confirmed planned consolidating everything to VG thereby reducing my expenses by over 50%; (b) I wanted the plan to corroborate results in ORP, FC, and FIDO, which it did; and (c) given that it's just about time for the annual rebalancing act, I liked the recommendations they did make.

I worded my remark a little too defensively. Like many here, I'm leery of others who might interpret comments as recommendations, when they're not. I do think the VFP has value worth paying for in some cases, but that's a personal decision for each of us to make on our own. Sorry...

 

[pb4uski]

.....Note: one recommendation they made which I didn't like/not going with are 10% in int'l bonds. New VG product since 5/13 and not getting the best press. Also, too new for my taste and don't like test-driving new industry products. ....

I've been pleased with my VG international bond fund so far. I bought it in early June and the annualized return since then has been +1.22% compared with -3.61% for the same period for the VG Intermediate Term Investment Grade fund that it replaced in my portfolio. Though i concede it is way too early to tell.

 

[jerome len]

Vanguard financial planning is very basic......evaluating what you have and recommending changes. The challenge is they are very limited in their advice and most would not call it a financial plan. I have a friend that had a trust over 1million and they wanted to invest him/her in 3 basic index funds.......total stock......total bond and total International......that was their investment plan and they wanted 20+ basis points to manage it.

On the other hand most financial firms want to sell you management at 1% a year or more, mututal funds far most expensive than index funds and high profit other products like variable annuities.....none of which I need or want.

The answer for many? Find a fee only financial planner, buy a few hours time for under a thousand dollars and have them evaluate what you have, explain what you need to do and where you should accomplish it........then get your self educated.....lots of good books and magazines will help. $40,000 is a nice start but most on this blog need/want a vision how they can get to 1m before ER.......good luck.......you'll get a lot of good advice on this blog.....a lot of very bright middle income, sort of average, but very smart participants.

 

[JoeWras]

I have a friend who works for a different company than those mentioned here. He is not a CFP.

He plugs in the numbers into his company's tools and out pops the report. It absolutely includes insurance.

Why? Because he gets really unbelievable commissions on the insurance and annuity products he sells.

Love him as a friend, but would never trust my plan to him.

---

"Friends don't let friends sell annuities."

 

[Options]

I worded my remark a little too defensively. Like many here, I'm leery of others who might interpret comments as recommendations, when they're not. I do think the VFP has value worth paying for in some cases, but that's a personal decision for each of us to make on our own. Sorry...

Thank you, but no offense taken, Midpack. I like your nuggets of wisdom .

I posted because I've been meaning to share my experience with the whole VG FP experience. I dealt with 3 FP's total (probably uncommon, but I had some variables to include). I decided to consolidate all investments to VG as I've been meaning to anyway. First FP did recommend VG admiral shares funds (which have lower fees vs. investor shares based on your investment minum), but failed to do so for one of them. I thought that was either careless of him or he didn't put that much effort into it. Second FP, did some extra work/research for me, which I appreciated. Third FP assisted with consolidating all funds to VG, and is doing (process not complete yet) an exceptional job.

Vanguard financial planning is very basic......evaluating what you have and recommending changes. The challenge is they are very limited in their advice and most would not call it a financial plan. I have a friend that had a trust over 1million and they wanted to invest him/her in 3 basic index funds.......total stock......total bond and total International......that was their investment plan and they wanted 20+ basis points to manage it.

On the other hand most financial firms want to sell you management at 1% a year or more, mututal funds far most expensive than index funds and high profit other products like variable annuities.....none of which I need or want.

The answer for many? Find a fee only financial planner, buy a few hours time for under a thousand dollars and have them evaluate what you have, explain what you need to do and where you should accomplish it........then get your self educated.....lots of good books and magazines will help. $40,000 is a nice start but most on this blog need/want a vision how they can get to 1m before ER.......good luck.......you'll get a lot of good advice on this blog.....a lot of very bright middle income, sort of average, but very smart participants.

Agreed, it's not a true FP, but for me it was enough. I've already read/am reading/will continue to read enough books, websites, etc. I was looking for (a) additional confirmation that I'm on track for FIRE 12/14), and (b) an "extra pair of eyes" reviewing my current plan. Other than the int'l bonds fund (which I don't particularly fault them for), I'm pleased with the feedback I got. My new basis points after consolidation will amount to a mere .1275%, and I'm okay with that.

 

[ETFs_Rule]

Hi,

I thought I read that Vanguard offers free retirement planning if you have an account with them? I have about $40K in a mutual fund with them.

Can anyone confirm this and have any other details?

Thanks,
Trooper

Beware of anyone who offers "free" financial planning advice. Free = non-fiduciary. Non-fiduciary means that they don't legally work for you. They are acting in the capacity of salesmen. You want fiduciary advice.

Hopefully that's a PASSIVELY managed mutual fund! AKA an "index fund", AKA an ETF.

 

[Huston55]

I have a friend who works for a different company than those mentioned here. He is not a CFP.

He plugs in the numbers into his company's tools and out pops the report. It absolutely includes insurance.

Why? Because he gets really unbelievable commissions on the insurance and annuity products he sells.

Love him as a friend, but would never trust my plan to him.

---

"Friends don't let friends sell annuities."

Although I like the services, tools, and responsiveness that Fido provides, my experience with them is that most roads lead to annuities of some kind in some quantity. That's what their website 'retirement income' tools do, and that's what the FP I met with did. Frankly, it's a little disappointing. But, that's why it's called 'advice', I don't have to take it.

 

[panacea]

I don't see any false advertising whatsoever among your quotes. They don't meet your definition of a financial plan (comprehensive to be sure), but you're certainly entitled to your POV. Of course there is no accepted definition of what a financial plan should include, so like so much in financial services, (very deliberately) subject to interpretation.

Below is the CFP Board's definition of what the planning process should include, in terms of content. The Board requires that CFPs follow a defined procedure if they are performing financial planning work. However, if a CFP is working with a client on a single specific issue (insurance or college planning for example) if doesn't necessarily meet the definition of financial planning. Unfortunately, there is a lack of continuity in the industry right now where anyone can call themselves a financial planner or say they do financial planning. And unfortunately, this often results in advisors with no fiduciary responsibility not following any kind of defined procedure and/or selling products to their clients.


“Financial planning subject areas” denotes the basic subject fields covered in the financial planning process which typically include, but are not limited to:

• Financial statement preparation and analysis (including cash flow analysis/planning and budgeting)
• Insurance planning and risk management
• Employee benefits planning
• Investment planning
• Income tax planning
• Retirement planning
• Estate planning

- See more at: Financial Planning FAQ - CFP Board

 

[pb4uski]

Hi,

I thought I read that Vanguard offers free retirement planning if you have an account with them? I have about $40K in a mutual fund with them.

Can anyone confirm this and have any other details?

Thanks,
Trooper

Beware of anyone who offers "free" financial planning advice. Free = non-fiduciary. Non-fiduciary means that they don't legally work for you. They are acting in the capacity of salesmen. You want fiduciary advice.

Hopefully that's a PASSIVELY managed mutual fund! AKA an "index fund", AKA an ETF.

ETFs Rule,

While I would in most cases agree with your caution on "free" financial planning, Vanguard is a bit different from the rest IMO in that they are not shareholder owned - they are owned by their fund shareholders similar to a mutual bank or cooperative. In my experience their recommendation are sensible and are not as "sales" oriented as those of a for-profit commercial funds. In fact, in my 3 planning sessions over the years, I can't recall the word annuity being mentioned once even though I know Vanguard offers annuities through relationships with certain insurers.

 

[ETFs_Rule]

ETFs Rule,

While I would in most cases agree with your caution on "free" financial planning, Vanguard is a bit different from the rest IMO in that they are not shareholder owned - they are owned by their fund shareholders similar to a mutual bank or cooperative. In my experience their recommendation are sensible and are not as "sales" oriented as those of a for-profit commercial funds. In fact, in my 3 planning sessions over the years, I can't recall the word annuity being mentioned once even though I know Vanguard offers annuities through relationships with certain insurers.

I love Vanguard ETF's and Vanguard annuities (for the purpose of doing a 1035 exchange from another annuity). My understanding is that Vanguard also sells "actively managed" mutual funds. Are they recommending those to clients? That is a conflict of interest right there. Never lose sight of the fact that a non-fiduciary does not legally work for you.

 

[Midpack]

I love Vanguard ETF's and Vanguard annuities (for the purpose of doing a 1035 exchange from another annuity). My understanding is that Vanguard also sells "actively managed" mutual funds. Are they recommending those to clients? That is a conflict of interest right there. Never lose sight of the fact that a non-fiduciary does not legally work for you.

It might be more meaningful to provide actual/specific examples/evidence where Vanguard/VFP has not put the interests of an account holder first (fiduciary responsibility) instead of posting open ended (false IME) speculation and generic answers. I'd certainly be interested in whatever specific actual concerns you're aware of. Otherwise you're just telling us we could get killed crossing the street...

 

[pb4uski]

I love Vanguard ETF's and Vanguard annuities (for the purpose of doing a 1035 exchange from another annuity). My understanding is that Vanguard also sells "actively managed" mutual funds. Are they recommending those to clients? That is a conflict of interest right there. Never lose sight of the fact that a non-fiduciary does not legally work for you.

You seem to be suggesting that if Vanguard recommends any of their actively managed funds in their financial planning that it is a conflict of interest? Silly.

To the best of my recollection, the funds they have recommended to me were mostly index funds. But the reality is that even their actively managed funds are solid and fees are low in the spectrum of actively managed funds. You obviously have some sort of axe to grind. If your criticism was based on some actual experience you could relay, your criticisms might carry some validity.

 

[ETFs_Rule]

It might be more meaningful to provide actual/specific examples/evidence where Vanguard/VFP has not put the interests of an account holder first (fiduciary responsibility) instead of posting open ended (false IME) speculation and generic answers. I'd certainly be interested in whatever specific actual concerns you're aware of. Otherwise you're just telling us we could get killed crossing the street...

Google fiduciary duty VS suitability standard. There is a clear difference.

If your criticism was based on some actual experience you could relay, your criticisms might carry some validity.

Index funds CONSISTENTLY beat actively managed mutual funds.

Another study

5 Lies About Index Funds - Forbes

 

[Midpack]

It might be more meaningful to provide actual/specific examples/evidence where Vanguard/VFP has not put the interests of an account holder first (fiduciary responsibility) instead of posting open ended (false IME) speculation and generic answers. I'd certainly be interested in whatever specific actual concerns you're aware of. Otherwise you're just telling us we could get killed crossing the street...

Google fiduciary duty VS suitability standard. There is a clear difference.

Many here are well aware of the definitions, and all are capable of Googling same, but thanks. Again, what specific concerns and evidence do you have re: VFP or Vanguard in general?

Index funds CONSISTENTLY beat actively managed mutual funds.

Another study

5 Lies About Index Funds - Forbes

Are we still talking about Vanguard? Your links couldn't be more in their wheelhouse...

 

[pb4uski]

Many here are well aware of the definitions, and all are capable of Googling same, but thanks. Again, what specific concerns and evidence do you have re: VFP or Vanguard in general?.......

+1 Time for him to put up or shut up.

 

[ETFs_Rule]

Are we still talking about Vanguard?

I'm talking about anything actively managed VS passively managed, Vanguard or otherwise. I like Vanguard but I will always go with index funds. The statistical evidence is clear that ETF's consistently beat actively managed.

 

[pb4uski]

While I agree that index funds tend to outperform managed funds - and that is why the vast majority of my equity portfolio is in indexed funds - to jump from that fact to then assert that any adviser recommending any managed funds to a client is violating their fiduciary duty to the client is just totally stupid.

Vanguard's flagship actively managed equity index funds (Windsor and Windsor II) growth of $10,000 for 1, 3, 5 and 10 year periods are very competitive with the Total Stock Market Index fund (all Admiral shares). In fact, Windsor outperformed Total Stock for the 1, 3 and 5 year periods ended 10/31/2013 and Windsor II bested Total Stock for the 10 year period. But please, don't let facts get in the way of your arguments....

 

[ETFs_Rule]

While I agree that index funds tend to outperform managed funds - and that is why the vast majority of my equity portfolio is in indexed funds - to jump from that fact to then assert that any adviser recommending any managed funds to a client is violating their fiduciary duty to the client is just totally stupid.

Vanguard's flagship actively managed equity index funds (Windsor and Windsor II) growth of $10,000 for 1, 3, 5 and 10 year periods are very competitive with the Total Stock Market Index fund (all Admiral shares). In fact, Windsor outperformed Total Stock for the 1, 3 and 5 year periods ended 10/31/2013 and Windsor II bested Total Stock for the 10 year period. But please, don't let facts get in the way of your arguments....

You're wrong. You're not doing an apples to apples comparison. VWNFX takes more risk than the total stock market and so the total stock market index is not it's comparable benchmark. If you want more risk and you want to do better than the total stock market index then simply pick a mid-cap ETF and/ or small cap ETF to supplement your VOO ETF. Simple.

I researched
Vanguard Windsor II Inv (VWNFX)

The fund invests mainly in large and mid-capitalization companies whose stocks are considered by an advisor to be undervalued. So it's benchmark is probably a mix of large cap value and mid-cap value, although Yahoo lists this fund as being mainly a large cap fund.

As I expected, since the peak of the market in 2007 VTV (large cap value) has OUTPERFORMED VWNFX.
VOE (mid cap value) has easily outperformed VWNFX.

any adviser recommending any managed funds to a client is violating their fiduciary duty to the client is just totally stupid.

You might be a broker trying to justify your job. Anyone who is a non-fiduciary does not legally work for their client. Personalized advice is not free. Brokers make commissions when they sell actively managed mutual funds. Investors make less over time when they invest in actively managed mutual funds. The only way to totally eliminate conflict of interest is to work with a fee-only RIA. Personally I do it myself. Investing is easy.

 

[pb4uski]

The notion that a large cap, value fund is riskier than a total stock fund is an interesting angle that I guess we'll just need to agree to disagree on.


I would agree that VTV is a good comparison since both VTV and Windsor II are large cap value focused, but VTV does not outperform Windsor II as you suggest. The growth of $10,000 for Windsor II was higher then VTV for the 3, 5 and 10 year periods ended 10/31/13 and actually substantially higher for the 10 year period ($22,100 vs $18,900) and for the 1 year period VTV eked out a win.

And I'm not a broker, I'm a CPA.