Why is Vanguard so Intent on Selling Advisory Services?

[Spanky]

Like another other business, Vanguard wants to maximize their profits. I only receive a few emails from them regarding the advisory services. The number of emails, however, from all other business establishments has grown so much to the point of madness -- . - almost 100 emails a day. Trying to unsubscribe or tagging them as spam has not resolved this issue. Luckily, I have multiple email accounts - one for friends and family, one for business, and another for everything else (which has the most spams).

 

[mickeyd]

I have noticed a few VG emails on this subject also. One that I recall indicated that the sender @ VG was replacing my current Flagship rep. This was not true of course and I reread the post and it only implied that the sender (a registered rep not a CFP) was my new point of contact @ VG. I spoke with my Flagship rep yesterday and there was no change.

I think that this was only a marketing effort aimed @ current clients. I ignored all of it. Pay 30 bps for what?

 

[travelover]

Vanguard primarily offered the advisory service for a small fee because so often, the DH would die and the DW had no idea on how to manage their investments.....so, here comes FIDO charging over 1% and placing her in expensive managed funds.......other financial firms can even charge more......now Vanguard can manage money......they told me of their service, I told my DW......and, she will call them if something happens to me. I'm glad they offer this service.

+1. I think this is reasonable. I'd hate to see DW thrown to the wolves after I croak, though I've left instructions to stick it all in Wellesley and just withdraw 4% until RMD time.

 

[cooch96]

Of all the folks on the board, do your partners have any involvement in the investment, or do you just do the bulk of it?

I do mine solo and I hold DW's hand but make sure she's the one clicking away on her phone for her accounts. She considers this something between bitter medicine and mild harassment. To be clear, she could do it entirely on her own; I kinda put her in charge of filing our taxes, since she's much more thorough and organized than me, and she does that without complaint. But she would literally hang out with the dentist than think or learn about car or finance maintenance.

So what happens if I get hit by the proverbial bus? Not sure, this topic is verboten for DW. I'm optimistic she'll consolidate all accounts into her vanguard 2050 Roth account and take her car into the mechanic to stop any idiot lights and inevitable funny grinding noise. Fingers crossed!

 

[ejman]

+1. I think this is reasonable. I'd hate to see DW thrown to the wolves after I croak, though I've left instructions to stick it all in Wellesley and just withdraw 4% until RMD time.

Yes, this sounds reasonable ( and in fact I've suggested same to my DW) but what if Wellesley is not the answer going 20-40 years forward? Just looking at the YTD in Van Retirement income vs Wellesley gives me some room for thought - maybe the index boys at Vanguard really do know something?

 

[LOL!]

We have been hit up with Vanguard PAS advertising: E-mails, Real hardcopy mail, pop-up ads. We have some money at Vanguard, but below Voyager Select status.

I see this as a way of making their CFPs happier and retaining good employees. I also see it as a way of not losing market share to other robo-advisors.

However, it seems that PAS is just for an investing plan and not really a financial plan. Or can one get questions answered like
"When to collect Social Security?"
"How to save for college? How much?"
"How to sequence withdrawals from my nest egg in retirement?"
"What is the best mortgage for me? And for my vacation home?"
"How much life insurance should I have?"
and a host of many more financial planning questions. Has anybody had such questions answered by Vanguard people?

Did anyone else notice that VPAS is run by Goliath, Inc.?

 

[JoeWras]

I've used the Flagship Advisor in the past and they provided a written plan.
I have so recieved emails regarding the Advisory Service and yesterday a letter from Vanguard. It doesn't mention costs.

There's not cost for having an "representative" at Flagship status. At least that is what they call my guy, a "representative". He's fine, but pretty much directs me elsewhere in the company for stuff, including to the CFP at personal adviser services to get my advice.

Maybe something changed, or maybe I didn't ask for the right thing.

 

[swakyaby]

I too think things have changed recently at Vanguard. I recently requested transferring a SEP-IRA from T.RowePrice to Vanguard, an amount of $200K. The Vanguard rep transferred me to someone named Ed from "concierge services," not sure what that means. After confirming that I wanted to simply transfer in kind to Vanguard, he requested a copy of my most recent statement. He called me back after receiving it and informed me that I needed to do the following:

Fill out Vanguard's application form for a new account with a Medallion signature guarantee from my bank, get on the phone with T.RowePrice and Ed simultaneously, liquidate my old SEP-IRA account, and pay an $8 fee to Vanguard for the transaction and possible other fees from T.RowePrice. Regarding the $8, I said I have not experienced a mutual fund company charging a fee for receiving an IRA. Ed said it was not a fee, it was the cost of the transaction to its shareholders. (Huh?) He said it was also because we were dealing with a SEP-IRA instead of a Traditional IRA. (Never saw anywhere in Vanguard's materials that it made a difference.) So he mailed the account application and I received it yesterday.

The package said "Here are the materials you have requested." It contained a BROKERAGE application for a brokerage IRA, a description of fees and commissions, and a prospectus for a fund we had not discussed. Ed never mentioned the word "brokerage" in our entire phone conversation. Is this really the only option for transferring a SEP-IRA to Vanguard? I don't think I'm getting full disclosure from this Vanguard employee.

 

[John Galt III]

I've been getting emails and now phone calls about signing up for Vanguards advisory service which I guess from the literature provides asset allocation and periodic rebalancing services for .3% on assets under management. This is certainly a reasonable rate compared to the more usual 1%+ charge. However, given Vanguards ownership structure why this big push? I did a quick calculation and this .3% gets to be real money real quick. What do I get for that?

I guess there could be some value if advise covers such things as tax planning, inheritance issues and such but I suspect it does not.

Not from Vanguard, but from Fidelity, I've been getting snail mail urging me to sign up with some similar advisory service, *Financial Engines* (Fidelity 401K). Same fee: 0.3 % of assets, per year. I declined. What a crock......

 

[prudent_one]

I'm glad Vanguard is offering this. It's something I can recommend to people who ask for advice on handling their investments and don't want to put in the time to learn how to do it themselves.

 

[MooreBonds]

The package said "Here are the materials you have requested." It contained a BROKERAGE application for a brokerage IRA, a description of fees and commissions, and a prospectus for a fund we had not discussed. Ed never mentioned the word "brokerage" in our entire phone conversation. Is this really the only option for transferring a SEP-IRA to Vanguard? I don't think I'm getting full disclosure from this Vanguard employee.

No biggie on a "brokerage account" - every other firm would do that, unless you were buying their own in-house funds. But even then, many would still hold it in the brokerage account. Vanguard used to have separate mutual fund accounts, but they recently started transitioning to putting everything ina brokerage account when they dumped Pershing and formed their own clearing agent.

However, it is a bit of an annoyance factor to be dinged the $8. Technically, he's correct - since Vanguard is a non-profit, quasi 'credit union' (in the sense that it's not run to make a profit, but rather serve the customers), any costs they charge account holders are, in fact, "reimbursements" to the other customers. HOWEVER....I've never heard a firm charging you to open a decently sized SEP IRA. A SEP IRA isn't anything special.

And a bit of a PIA that you have to call TRP and get Vanguard on the phone at the same time, etc. Really ludicrious since you also have to get a medallion guarantee! I'm sure a Medallion Guarantee trumps any voice recording of some anonymous person saying "Yes, I'm Jane Doe at TRP and this person is closing their account".

Of course, I had my own PIA factor in opening up my solo 401k with TD AMeritrade. So there are annoyance factors everywhere you go.

 

[swakyaby]

No biggie on a "brokerage account" - every other firm would do that, unless you were buying their own in-house funds. But even then, many would still hold it in the brokerage account. Vanguard used to have separate mutual fund accounts, but they recently started transitioning to putting everything ina brokerage account when they dumped Pershing and formed their own clearing agent.

However, it is a bit of an annoyance factor to be dinged the $8. Technically, he's correct - since Vanguard is a non-profit, quasi 'credit union' (in the sense that it's not run to make a profit, but rather serve the customers), any costs they charge account holders are, in fact, "reimbursements" to the other customers. HOWEVER....I've never heard a firm charging you to open a decently sized SEP IRA. A SEP IRA isn't anything special.

And a bit of a PIA that you have to call TRP and get Vanguard on the phone at the same time, etc. Really ludicrious since you also have to get a medallion guarantee! I'm sure a Medallion Guarantee trumps any voice recording of some anonymous person saying "Yes, I'm Jane Doe at TRP and this person is closing their account".

Of course, I had my own PIA factor in opening up my solo 401k with TD AMeritrade. So there are annoyance factors everywhere you go.

Thank you for commenting. But I'm still wondering about a brokerage IRA at Vanguard. I have several existing non-brokerage SEP-IRAs at Vanguard, and it entails no transaction fees or commissions whenever I want to move the money around. I'm almost certain there will be transaction fees if I do the same inside a brokerage IRA. Or am I wrong about this?

 

[JoeWras]

I transferred E*Trade to Vanguard brokerage. For starters, I had a Vanguard brokerage account already opened, so no need to open anything.

My flagship rep transferred me to Concierge services. He asked about all my holdings. Apparently some holdings require more hoops to jump through. In any case, mine didn't, so no medallion signature was required.

HE called E*Trade while I was on the phone. No need for me to do it. We then had a mutual conversation with my approvals.

it went well. Everything transferred without error and also included all the cost basis info back to 1998. I didn't get any fee on Vanguard's side -- maybe because I'm flagship? E*Trade charged me their standard share transfer fee.

 

[swakyaby]

I transferred E*Trade to Vanguard brokerage. For starters, I had a Vanguard brokerage account already opened, so no need to open anything.

My flagship rep transferred me to Concierge services. He asked about all my holdings. Apparently some holdings require more hoops to jump through. In any case, mine didn't, so no medallion signature was required.

HE called E*Trade while I was on the phone. No need for me to do it. We then had a mutual conversation with my approvals.

it went well. Everything transferred without error and also included all the cost basis info back to 1998. I didn't get any fee on Vanguard's side -- maybe because I'm flagship? E*Trade charged me their standard share transfer fee.

Thanks, Joe. I have Flagship service level as well, but was still told there was a charge to open a SEP-IRA account at Vanguard and transfer the $200K. He did not ask about any of my other accounts (which include several Vanguard non-brokerage SEP-IRAs). It was a Flagship rep who transferred me to him after they held a brief conversation about what I wished to accomplish. I thought the whole experience was somewhat odd, and a push to open an account with expenses attached, when it seemed I had other options which Ed did not disclose.

 

[JoeWras]

Thanks, Joe. I have Flagship service level as well, but was still told there was a charge to open a SEP-IRA account at Vanguard and transfer the $200K. He did not ask about any of my other accounts (which include several Vanguard non-brokerage SEP-IRAs). It was a Flagship rep who transferred me to him after they held a brief conversation about what I wished to accomplish. I thought the whole experience was somewhat odd, and a push to open an account with expenses attached, when it seemed I had other options which Ed did not disclose.

I think the one common thing between your experiences and mine is that we are finding services at Vanguard to be inconsistent. As I explained, I asked for my "free plan" but got something else compared to what others have described.

One wonders if perhaps Vanguard has grown too fast.

 

[churchill]

I'll say that recently I had the same or better service of pleasant straightforwardness transferring my parents accounts to Vanguard that I had when I opened my first Vanguard account eight years ago and my wife's three years ago.

With my parents it was a fair amount of paperwork because of opening the individual IRAs and also a joint investment account (has to be on paper), medallion signatures, and Pershing being somewhat of a pain in the ass, but otherwise it was as smooth a process as I would except for moving large sums of money around. I executed the trades once the assets in kind were at Vanguard in the brokerage accounts. The trades cost me (my parents, really) $25 until the assets were then managed by Vanguard. There are now brokerage accounts with nothing in them, and the accounts with only Vanguard funds.

Was the undiscussed prospectus for a Money Market account? You've got to have one of those for every account to handle your sweep.

 

[LOL!]

[…] Ed never mentioned the word "brokerage" in our entire phone conversation. Is this really the only option for transferring a SEP-IRA to Vanguard? I don't think I'm getting full disclosure from this Vanguard employee.

Folks need to know that at Vanguard historically there have been two completely separate companies or divisions: the Vanguard-only mutual fund side and the other side for everything else such as stocks, CDs, individual bonds, non-Vanguard mutual funds, and ETFs (both Vanguard and non-Vanguard ETFs).

The second side has always been a brokerage. So if one is going to transfer in or use ANY non-Vanguard mutual fund investment, then one will need a brokerage account at Vanguard.

This is different from the way Fidelity, Schwab, and others have set up their businesses with only the brokerage account thing although some other places are in-house funds only like the first Vanguard site.

Vanguard appears to be in the process of changing this so that clients get everything done at the brokerage including Vanguard mutual funds. This is probably a way of simplifying things at a cost of confusion during the transition period. Posts at bogleheads.org have detailed the birthing pains and the loss of some features and the addition of new ones.

 

[rbmrtn]

Thank you for commenting. But I'm still wondering about a brokerage IRA at Vanguard. I have several existing non-brokerage SEP-IRAs at Vanguard, and it entails no transaction fees or commissions whenever I want to move the money around. I'm almost certain there will be transaction fees if I do the same inside a brokerage IRA. Or am I wrong about this?

It might that you requested a "transfer in kind" from Trowe. The exact funds have to be transferred so the trowe funds probably aren't available at vanguard without a brokerage account.

They have the transfer form online, https://personal.vanguard.com/us/ElfPDFStreamPublic?ts=1434025864181

The form indicates only vanguard funds can be transferred in kind.

 

[karen1972]

I too think things have changed recently at Vanguard. I recently requested transferring a SEP-IRA from T.RowePrice to Vanguard, an amount of $200K. The Vanguard rep transferred me to someone named Ed from "concierge services," not sure what that means. After confirming that I wanted to simply transfer in kind to Vanguard, he requested a copy of my most recent statement. He called me back after receiving it and informed me that I needed to do the following:

Fill out Vanguard's application form for a new account with a Medallion signature guarantee from my bank, get on the phone with T.RowePrice and Ed simultaneously, liquidate my old SEP-IRA account, and pay an $8 fee to Vanguard for the transaction and possible other fees from T.RowePrice. Regarding the $8, I said I have not experienced a mutual fund company charging a fee for receiving an IRA. Ed said it was not a fee, it was the cost of the transaction to its shareholders. (Huh?) He said it was also because we were dealing with a SEP-IRA instead of a Traditional IRA. (Never saw anywhere in Vanguard's materials that it made a difference.) So he mailed the account application and I received it yesterday.

The package said "Here are the materials you have requested." It contained a BROKERAGE application for a brokerage IRA, a description of fees and commissions, and a prospectus for a fund we had not discussed. Ed never mentioned the word "brokerage" in our entire phone conversation. Is this really the only option for transferring a SEP-IRA to Vanguard? I don't think I'm getting full disclosure from this Vanguard employee.

Did you have an existing account with Vanguard? The instructions you are referring to seem like you are setting up a new account. Typically once you have an account, I've always just called up Vanguard, they immediately called my other account companies, handled the transfer while I was on the phone and sent a follow up email of where to send the check once I received it in the mail...Vanguard took care of almost everything.. even when I was transferring just $10k from an old ROTH IRA. It only became a problem if I didn't have an account already set up in Vanguard, then extra steps were needed.

 

[RE2Boys]

I too think things have changed recently at Vanguard. I recently requested transferring a SEP-IRA from T.RowePrice to Vanguard, an amount of $200K. The Vanguard rep transferred me to someone named Ed from "concierge services," not sure what that means. After confirming that I wanted to simply transfer in kind to Vanguard, he requested a copy of my most recent statement. He called me back after receiving it and informed me that I needed to do the following:

Fill out Vanguard's application form for a new account with a Medallion signature guarantee from my bank, get on the phone with T.RowePrice and Ed simultaneously, liquidate my old SEP-IRA account, and pay an $8 fee to Vanguard for the transaction and possible other fees from T.RowePrice. Regarding the $8, I said I have not experienced a mutual fund company charging a fee for receiving an IRA. Ed said it was not a fee, it was the cost of the transaction to its shareholders. (Huh?) He said it was also because we were dealing with a SEP-IRA instead of a Traditional IRA. (Never saw anywhere in Vanguard's materials that it made a difference.) So he mailed the account application and I received it yesterday.

The package said "Here are the materials you have requested." It contained a BROKERAGE application for a brokerage IRA, a description of fees and commissions, and a prospectus for a fund we had not discussed. Ed never mentioned the word "brokerage" in our entire phone conversation. Is this really the only option for transferring a SEP-IRA to Vanguard? I don't think I'm getting full disclosure from this Vanguard employee.

Interesting!! I too recently transferred a SEP-IRA brokerage account to Vanguard from TRowePrice. No funds involved, just in-kind securities. Did the whole thing through the website, no paperwork or phone call involved to initiate. Had an existing Roth IRA at Vanguard for many years. Only glitch was the transfer of the money market sweep didn't transfer but got that resolved in a 5 minute phone call. No Vanguard fee but got hit with $50 fee by TRowe.
A week earlier I transferred a Roth from TRP to Vanguard, again all through website. Not in-kind, liquidated the TRP fund, moved cash and invested in my existing Roth IRA at Vanguard.
Trying to cut down the number of accounts to track. After having been an executor of two estates in recent years, trying to simplify and reduce the number of accounts I have.

 

[swakyaby]

Interesting!! I too recently transferred a SEP-IRA brokerage account to Vanguard from TRowePrice. No funds involved, just in-kind securities. Did the whole thing through the website, no paperwork or phone call involved to initiate. Had an existing Roth IRA at Vanguard for many years. Only glitch was the transfer of the money market sweep didn't transfer but got that resolved in a 5 minute phone call. No Vanguard fee but got hit with $50 fee by TRowe.
A week earlier I transferred a Roth from TRP to Vanguard, again all through website. Not in-kind, liquidated the TRP fund, moved cash and invested in my existing Roth IRA at Vanguard.
Trying to cut down the number of accounts to track. After having been an executor of two estates in recent years, trying to simplify and reduce the number of accounts I have.

Wow, look at all these responses! You guys (and gals) are terrific! Perhaps I misspoke when I requested an in-kind transfer, that is what I really wanted was to transfer a SEP-IRA at T.RowePrice to a SEP-IRA at Vanguard. Like RE2Boys, I wanted to hold all my retirement accounts in fewer mutual fund companies for easier management.

@Karen1972 Yes, I have existing accounts with Vanguard, both SEP-IRAs and regular non-retirement mutual funds, all Vanguard funds only.

@Churchill Yes, you guessed it right, the prospectus Ed sent was for Vanguard's Prime Money Market, although I was requesting the funds be transferred into Vanguard's Inflation-Protected Securities fund as a SEP-IRA.

Thank you, thank you for all these thoughts!