Vanguard Free "Financial Plan" - Another Story

[tomz]

A few of you have posted your experiences with the Vanguard Free "Financial Planning" service. I put financial plan in quotes because what they basically provide is an asset allocation plan. You can ask them about withdrawal strategies and other stuff, but the actual plan doesn't have much of that. I'm 55 and plan to RE at the end of 2007.

Well today was my day to review my plan. I got a letter in the mail inviting me to participate and I took them up on it. The planner told me we had 45 minutes, but the call lasted about an hour.

The funds they recommend are pretty consistent with what others have already reported here. Here are their proposed allocations for a combination of taxable and IRA accounts:

REIT 2%
US Large 27%
US Mid/Small 11%
International 10%
Bonds 50%

It's conservative, but I'm comfortable with it. I asked the planner (Eric) about why Morgan growth, for example, instead of S&P500 and why I should get rid of Target 2005 and Target 2015 and the answers he gave were pretty good. I had a few $$ in 2005 and 2015 and his reasoning behind getting rid of them was that if I was going to slice and dice, then I should really slice and dice and not have anything in the one-stop shopping type funds. However, if I wanted to do a no brainer type portfolio, I should just put everything in Lifecycle conservative growth and leave it . He was very professional and not condescending. There were also some changes to the online questionnaire that needed to be made because I couldn't figure out where to put everything when I filled it out. He noted them and in about an hour I had a new plan available online.

We talked about withdrawal strategies, Roth conversions, tax implications (originally they had me putting most of my non ira bond funds into the intermediate tax-exempt fund, but after I told him I planned to retire next year, he said that didn't make sense). I also have some $$ in Selected American and they didn't suggest I sell it. I also love Wellesley so they didn't suggest I dump that either. He also said that I can use this service every year for rebalancing, which I like.

All in all, I was very pleased with this service. A few years ago, I paid a financial planner to put together a plan and what he gave me was not nearly as useful as the free Vanguard plan. Of course, I've been reading this board for about a year now and know a lot more than I did a few years ago so maybe that comes into play.

 

[donheff]

All in all, I was very pleased with this service. A few years ago, I paid a financial planner to put together a plan and what he gave me was not nearly as useful as the free Vanguard plan. Of course, I've been reading this board for about a year now and know a lot more than I did a few years ago so maybe that comes into play.

I am moving a bunch of stuff to Vanguard and may see what they recommend. Like you, I got a reading from an independent fee advisor when I ERd (about a month before I found this board). She gave me reasonable advice but I get better advice here (for a concomitant investment in time). I suspect there are some advisors out there who are very good for people who don't want to learn for themselves but there is no sure way to guarantee that you find them and not a walking, talking disaster.

 

[WanderALot]

It's conservative, but I'm comfortable with it. I asked the planner (Eric) about why Morgan growth, for example, instead of S&P500.

retire next year, he said that didn't make sense). I also have some $$ in Selected American and they didn't suggest I sell it. I also love Wellesley so they didn't suggest I dump that either. He also said that I can use this service every year for rebalancing, which I like.

We just had our free plan completed a few weeks back and our planner also suggested Morgan Growth. This seems to be a standard suggestion for all their plans, at least according to the posts on the Diehards forum. We filled out the questionnaire with a desired AA of 70/30 and a retirement age of 50 (we are currently 32/31).

Our planner suggested that we drop Wellington and Dodge & Cox balanced. When I questioned him on it, he said he understood why I felt that way and said he could redo the plan based on my input. He felt that we needed more growth because most of our large cap was in the form of Total Market and in balanced funds (value oriented).

The planner didn't like our TIPS allocation because he felt that they were too new and felt that our equity portion would handle inflation risk better than TIPS. This sounded reasonable, but as soon as I hung up with him I realized that I should have asked him what he thought about periods of low equity returns and high inflation like 66-82! He also seemed to prefer mid-caps to small caps.

Overall, I'm pretty glad I went through that exercise. It was nice to bounce ideas off of someone.

 

[Poundkey]

My experience was very much like tomz. Very helpful I thought. I'm still in the process of trying to get my AA in line with what he suggested.
Morgan Growth was not suggested to me......maybe because I'm already in Primecap and Windsor II...?
We spoke for about an hour on a variety of subjects. Agree with WanderALot.....nice to bounce ideas with someone.

 

[Foodeefish]

Can anyone get a free "Financial Plan" from Vanguard or do you need a specific amount of money invested with them?

 

[yakers]

I think the minimum for the basic 'free' plan is $100K. At higher levels they give additional services.

 

[WanderALot]

I think the minimum for the basic 'free' plan is $100K. At higher levels they give additional services.

You can get the free plan if you have at least 250K invested with them or if you move 100K in assets to Vanguard.

https://flagship.vanguard.com/VGApp/hnw/accounttypes/advice/ATSAdviceCompFinPlanContent.jsp

 

[Red-y]

I also got mine done recently...when I was signing up, the phone rep looked at my holdings and warned me that the plan would call for me to sell my ETFs and sector funds. I explained my reasons for holding them and she suggested I give those details in the Comments section when I filled out the online form, which I did.

I very explicitly said I have an target Asset Allocation of blah-blah-blah with all the percentages. I further explained that I understood the ETFs and sector funds could be volatile in themselves but as part of a larger portfolio, would tend to dampen overall risk. I also said I am retiring outside the US and need to hedge my exposure to the falling US$.

The plan I got back took very little of all that into consideration...it was pretty cookie cutter. Although the boilerplate text said that Vanguard recommends having no more than 10% of your assets in individual stocks or sector funds, they allowed me only 6% and still recommended that I sell all my VGENX. They cut my international exposure from 35% to 18%. Like some of the other posters, I was touted Morgan Growth and Windsor II, along with their US stock index funds.

Positives: it was nice to hear someone advocate holding a mix of passive index and actively managed funds, which I have done in the past but with some reservations.

I got some good ideas about my bond allocation...I may drop the High Yield and TIPS funds in order to have enough to get in on the Admiral shares of the Total Bond Mkt Index.

And they convinced me to have some exposure to US small/mid caps via the Extended Mkt Index fund. And hey! here we might have a buying opportunity