Vanguard, Fidelity or Schwab?

[Midpack]

Just finished The Four Pillars of Investing Second Edition, and pgs 276-277 give the most concise but informative summary of the majors I've ever read - some I've heard, some I hadn't but never so clearly stated. I would love to share it word for word, but I've been correctly advised that's too close to copyright infringement. This doesn't have near the impact, but a few tidbits:

• Pay attention to the number of securities held by any fund or ETF. e.g. two similar sounding funds at differing firms one has 855 holdings while an other has 7881.
• Limit your purchases of open-end funds to those of your custodian (Vanguard, etc.)
• When this book went to press a couple months ago, the default sweep fund yield at Schwab was 0.40% vs 3.7% at Vanguard or Fidelity - in 2019 134% (not a typo) of Schwabs earning came from net interest. If you have money that sits in cash, allocation or between trades, for whatever reason...
• Fidelity offers low fees on index/passive funds to lure investors into active funds. And check fees closely, some Fido funds that sound almost the same have substantially different fees.
• The author acknowledged elsewhere "customer support at Vanguard has deteriorated." He also says "how long this free ride (customer service) at Fido and Schwab will last is anyone's guess, so enjoy it while it lasts."
• Competition among the three will only intensify, so stay tuned, as their relative advantages and disadvantages can easily change.

Again, the actual text is FAR better than my summary...

 

[Koolau]

Just finished The Four Pillars of Investing Second Edition, and pgs 276-277 give the most concise but informative summary of the majors I've ever read - some I've heard, some I hadn't but never so well summarized. I would love to share it word for word, but I've been correctly advised that's too close to copyright infringement. This doesn't have near the impact, but a few tidbits:

• Pay attention to the number of securities held by any fund or ETF. e.g. two similar sounding funds at differing firms one has 855 holdings while an other has 7881.
• Limit your purchases of open-end funds to those of your custodian (Vanguard, etc.)
• When this book went to press a couple months ago, the default sweep fund yield at Schwab was 0.40% vs 3.7% at Vanguard or Fidelity - in 2019 134% (not a typo) of Schwabs earning came from net interest. If you have money that sits in cash, allocation or between trades, for whatever reason...
• Fidelity offers low fees on index/passive funds to lure investors into active funds. And check fees closely, some funds that sound almost the same have substantially different fees.
• The author acknowledged elsewhere "customer support at Vanguard has deteriorated." He also says "how long this free ride (customer service) at Fido and Schwab will last is anyone's guess, so enjoy it while it lasts."
• Competition among the three will only intensify, so stay tuned, as their relative advantages and disadvantages can easily change.

Again, the actual text is FAR better than my summary...

Very interesting. Thanks for posting.


My gut is suddenly telling me that Vanguard is in (well, how should I say this) the VANGUARD of changing the business model. Less service, higher fees for stuff like paper work, etc. Lean and Mean! I don't like it, but if I were to bet on one of the houses getting an advantage, right now it would be the first one to make such a radical change. Of course, it's gonna cost V some business - they pi$$$ed me off. BUT in the long run, they are going for a business advantage. IF they are right in what they're doing, they might just emerge on top. I'm thinking maybe I want to be with a winner. Will I be wrong? I was once, so who knows.



Strictly my SWAG here, so YMMV.

 

[tulak]

Thanks for sharing.

I'm slowly going through the second edition, and jumping around for topics that I want to read about now, and so far I've found that it's been a worthwhile update.

I read the parts on TIPS earlier today, which he covers in more detail in this version than in the first edition. When the first edition was written, TIPS had a 3.4% real yield. Those were the days!

Interesting summary regarding the major brokerages. I'll have to read that section soon, since I always debate about consolidating. I'm finding that lately I have less complaints about Vanguard, even though there are some annoyances with their website that I hope they fix soon.

 

[jazz4cash]

I was hoping for something actionable.
You can have more than one.
Your choice is not permanent, you can switch. Be careful about proprietary products in taxable accounts, though. We have VG and Fido. Going forward we’ll use VG less. I was a loyal Vanguardian until Megacorp chose Fido to manage the 401k 30 yrs ago. Since them the two organizations have gone on opposite directions as far as how I feel about being a client.

 

[Montecfo]

Vanguard presumably ranks poorly as a brokerage since they do not participate in the annual reviews by Kiplinger and Barron's.

Kiplinger (August 2022)
1. E*Trade
2. Fidelity
3. Schwab

https://www.kiplinger.com/investing...the-best-online-brokers-and-trading-platforms
(Paywall)

Barron's
1. Interactive Brokers
2. Schwab
3. Fidelity
4. E*Trade

2023’s Best Brokers: The Breakdown: https://www.barrons.com/articles/interactive-fidelity-schwab-best-online-brokers-ratings-52d73cb3
(Paywall)

I would caution folks to consider more than Fidelity Schwab and Vanguard.

I also found the idea of only buying your custodian's open end funds to be dubious. It all depends on prices and offerings.

 

[Route246]

I closed my Fidelity and chose Vanguard 20+ years ago. I am truly low-maintenance, though and my deciding factor was expense ratios for equivalent in-house funds was and is lower at Vanguard. I have never had a problem getting a human to answer the phone but that may be due to some sort of elite status, I have not checked into this because almost never call them unless something on the website is confusing.

Interestingly, I did notice that Schwab and Fidelity had local offices down the street from where I live. I thought this was a useful waste of earnings and admired Vanguard for not having that local presence, something I have never really needed or thought about.

I also have a Schwab account for my company ESPP and RSU but that is limited to one stock. I have no desire to return to Schwab (I was a long-time customer when I was first starting out but switched to Vanguard later when I started paying very close attention to expense ratios.

Very interesting. Thanks for posting.


My gut is suddenly telling me that Vanguard is in (well, how should I say this) the VANGUARD of changing the business model. Less service, higher fees for stuff like paper work, etc. Lean and Mean! I don't like it, but if I were to bet on one of the houses getting an advantage, right now it would be the first one to make such a radical change. Of course, it's gonna cost V some business - they pi$$$ed me off. BUT in the long run, they are going for a business advantage. IF they are right in what they're doing, they might just emerge on top. I'm thinking maybe I want to be with a winner. Will I be wrong? I was once, so who knows.



Strictly my SWAG here, so YMMV.

 

[stephenson]

Vanguard presumably ranks poorly as a brokerage since they do not participate in the annual reviews by Kiplinger and Barron's.

Kiplinger (August 2022)
1. E*Trade
2. Fidelity
3. Schwab

https://www.kiplinger.com/investing...the-best-online-brokers-and-trading-platforms
(Paywall)

Barron's
1. Interactive Brokers
2. Schwab
3. Fidelity
4. E*Trade

2023’s Best Brokers: The Breakdown: https://www.barrons.com/articles/interactive-fidelity-schwab-best-online-brokers-ratings-52d73cb3
(Paywall)

I would caution folks to consider more than Fidelity Schwab and Vanguard.

I also found the idea of only buying your custodian's open end funds to be dubious. It all depends on prices and offerings.

Sure, maybe - but V rates lower with me because they perform lower. In comparison to Fidelity, they are a pain to work with. My earlier IRAs are in their funds, but held by Fidelity. Everything was hard with Vanguard. Fidelity answers the phone quickly and says, "Good morning, Mr XXXX, my name is XXXX. What can I help you with?"

 

[OldShooter]

... Competition among the three will only intensify, so stay tuned, as their relative advantages and disadvantages can easily change. ...

While this is technically true IMO the three are nearly identical on the important stuff and the only thing left are small, usually irrelevant and easily copied features-of-the-day. So yes there will be small relative changes but not life-altering ones.

But maybe one has an office near you or another will assign you a rep that you really like and trust. Maybe you have enough money that one will give you a VIP support phone number or one will assign a dedicated rep and another will not. IMO stuff like that might be included in a decision process, though of course reps come and go.

I don't think an investor can go seriously wrong with any of them.

 

[audreyh1]

• Fidelity offers low fees on index/passive funds to lure investors into active funds. And check fees closely, some Fido funds that sound almost the same have substantially different fees.

Interesting perspective. When Fidelity finally came out with a reasonable set of index funds at extremely low expense ratios I moved over to those and away from more expensive funds including Fidelity’s. I suspect I’m not the only one.

I suspect corporate 401K type accounts ultimately demanded this very low cost funds.

 

[Montecfo]

if you go back or think back, there have been reports here or very long waits on phone for Fidelity and VG. Not sure I have seen as much for Schwab and E*Trade.

But agree offerings similar. Choice comes down to how you like website or app, specific offerings, etc.

 

[stephenson]

Not sure I've seen much about long waits for Fidelity - but, a LOT about long everything for Vanguard.

Again, I can only provide my experience - Fidelity reps at every level have been "can do."

 

[audreyh1]

Long waits for Fidelity was around 2020-2021 pandemic related. I haven’t experienced such since.

 

[Montecfo]

Long waits for Fidelity was around 2020-2021 pandemic related. I haven’t experienced such since.

That one I experienced personally. 30-40 min on hold was not fun.

Fortunately I have made sure to not need to call them.

 

[rkser]

Long term index investor with Vanguard, still continue with their ETFs but had to go to Fidelity & Schwab because of their poor customer service on many occasions & at many levels. They work behind an opaque wall.

Fidelity's efficiency & can do attitude impresses me. Their Local Offices & helpful Reps help us with our taxable accounts.

Schwab local office helps us with all our retirement funds, they are OK but are better than that of the firm I left.

Yes, some more work at tax time but less stressed than being frustrated with Vanguard.

Just my 2 cents, one data point among millions of investors.

 

[ShokWaveRider]

I moved all our cash from maturing CDs into Schwab from Vanguard and have been very happy with them. Never had an issue with CS and love the fact that they have a B&M office nearby. Saying that I went there once to open the account. Their MMs pay well, just gotta remember not to leave any spare cash in their wweep account. Not really an issue for me.

 

[Midpack]

I’ve considered transferring some assets from Vanguard to Fidelity, but I am not willing to eat a taxable event or pay any future transaction fees to do so. I can move IRAs without a problem if I’m willing to convert to Fido funds, but not taxable (all in VG funds) as far as I can tell. I either have to sell VG funds and buy similar Fido funds (huge tax hit), or accept transaction fees on my VG funds. What am I missing? Since I need almost zero hand holding, deteriorating customer service at VG hasn’t been a big issue.

And Dr B seems to think the superior customer service at Fido and Schwab vs Vanguard won’t last forever, customer service isn’t free and Schwab and Fido’s low fee index funds aren’t bringing in much if any revenue - time will tell.

 

[frayne]

Thanks for the summary Midpack. I finished the book this past Saturday and for the most part it only reinforces what many here already know, with a few new tidbits here and there. For my own piece of mind, I have accounts at both FIDO and Vandy. T-IRA with Fidelity and after tax brokerage account with Vanguard. Same pair of pants, different pockets, so to speak. It makes sense and works for me, especially come tax time. I would encourage anyone who is not familiar with Bernstein to pick up this book, excellent and easy read, not much math but plenty of graphs for those so inclined and like pictorial illustration of numbers for easy comprehension.

 

[Midpack]

Thanks for the summary Midpack. I finished the book this past Saturday and for the most part it only reinforces what many here already know, with a few new tidbits here and there. For my own piece of mind, I have accounts at both FIDO and Vandy. T-IRA with Fidelity and after tax brokerage account with Vanguard. Same pair of pants, different pockets, so to speak. It makes sense and works for me, especially come tax time. I would encourage anyone who is not familiar with Bernstein to pick up this book, excellent and easy read, not much math but plenty of graphs for those so inclined and like pictorial illustration of numbers for easy comprehension.

+1. Agree with the book review. The updates are interesting, but it’s largely the same content as the first edition. OTOH since my IP has been 100% based on his first book since 2002 thru today - I don’t begrudge sending book royalties to Dr B again.

Frankly I thought the book would change more based on Dr B’s experience with his very high net worth clients reactions to 2008-09 - evidently many of them panicked and turned paper losses into real losses against Dr B’s recommendations.

And I really enjoy Dr B’s writing style and sense of humor, makes it very easy to read.

 

[rwdflynavy]

We moved to Vanguard when USAA got out of the investing business and moved me to Schwab.

I'm pretty low maintenance and I've never had a problem with Vanguard. With the big brokers meeting and now beating TSP's "low" fees, I'll probably move my TSP over to Vanguard as well.

 

[Badger]

I am pretty much low maintenance with Vanguard. We each have an IRA (Wellington and Wellsley) that automatically sweeps dividends into a cash account that is used for RMDs to be paid automatically. Schwab is for individual stocks (dividends are swept into cash account) and lately CDs. The only thing I do is buy a new CD when one matures or access some of the cash to spend. Since we are financially secure and have a modest lifestyle with options to BTD if we want, life has become less stressful.
As much as I am not pleased with charging us an annual fee for mailed paper reports I will just go digital and wait to see what Schwab, Fidelity, etc. does in the future.

Cheers!

 

[audreyh1]

I’ve considered transferring some assets from Vanguard to Fidelity, but I am not willing to eat a taxable event or pay any future transaction fees to do so. I can move IRAs without a problem if I’m willing to convert to Fido funds, but not taxable (all in VG funds) as far as I can tell. I either have to sell VG funds and buy similar Fido funds (huge tax hit), or accept transaction fees on my VG funds. What am I missing? Since I need almost zero hand holding, deteriorating customer service at VG hasn’t been a big issue.

And Dr B seems to think the superior customer service at Fido and Schwab vs Vanguard won’t last forever, customer service isn’t free and Schwab and Fido’s low fee index funds aren’t bringing in much if any revenue - time will tell.

FWIW I’m pretty sure folks have reported transferring assets in kind from Vanguard to Fidelity. There maybe a couple of hoops to jump through first, but not taxable.

 

[Midpack]

FWIW I’m pretty sure folks have reported transferring assets in kind from Vanguard to Fidelity. There maybe a couple of hoops to jump through first, but not taxable.

But then there are fees on any transactions thereafter with those VG funds as I understand it. No? So I have to pay taxes to move the funds and convert, or pay a$75 transaction fee to Fido ever after?

 

[frayne]

And I really enjoy Dr B’s writing style and sense of humor, makes it very easy to read.

+1

A few passages had me laughing out load.

 

[Midpack]

+1

A few passages had me laughing out loud.

Me too. Regarding the change from defined benefit to defined contribution e.g. 401k's:

This shift in retirement funding offloaded the risk of shortfall (in plain English, living over your kid's garage) from employers to employees - good for them, bad for you. Saving and investing for retirement and then spending it down require no small amount of ability, investment knowledge and self-discipline, and it strains credulity to expect the average worker to execute all these things well. Imagine boarding an airliner. Instead of turning right and heading to your seat, the flight attendant tells you that the pilots have decided, because of the risk and stress of piloting, to stay home. Turn left at the door, please. You're flying the plane.

 

[starry night]

Vang serves me well

We have been with VG since 1995. We are self-managing customers, consolidated most all our assets there (401k rollovers), seldom needing customer service, etc. Have given way to the inevitable transition to digital account docs.

Our most recent direct contact with them was last fall when we wanted to efficiently manage the transfer of funds received at closing from the sale of our home.
I got quick service by phone, excellent advice, and the whole thing took place flawlessly.