VG catering to advisors, that's funny! Reprise

[youbet]

Hey, I'm curious.....

Just what does Barclays, or any ETF provider, do for FA's that Vanguard does not? Does it involve either $$$ or information to the FA that the individual investor cannot get?

From the article, I couldn't really tell what Vanguard was going to do for FA's going forward that it isn't doing now. And, more importantly, whether it would cost me money via higher fund expenses.

The situation seems analogous to the old conumdrum of whether a manufacturer should sell direct to the customer or through a string of distributors and retail dealers. I've seen both options work for various reasons and under various circumstances.

 

[Moemg]

What Vanguard has figured out is that the average DIY doesn't do a lot of Vanguard ETF's for whatever reason.

I'm one of those investors .The only ETF I have is QQQQ because I really do not understand the difference between a ETF SP 500 and an Index SP500 and what the advantages are .

 

[samclem]

Rewind to 1965

"Yep, I've sold these Magnavox TVs in my store for years. Get a good markup on them. A few days ago, some guy from a Japanese company called Sony called me up, said maybe I should sell their TVs. No way, I'll stick with the proven brands. My friend at the American Motors dealer said he'd gotten a call from a "Toyota" distributor wanting to work something out, too. Nope, we're sticking with the brands that give us a big margin, that's where the security is."

 

[FUEGO]

Well, the difference between .14% and .24% to my clients or myself is not a big deal. It's not like 5.75% and 1.25% every year versus .18% a year on funds...............

Do you have any clients w/ substantial wealth invested w/ you? If I had a million bucks and I (or my financial adviser that I pay) could save 0.1%, that translates to $1000 back in my pocket year in and year out. That's pretty substantial to me. You are a lucky man indeed if your clients don't mind paying an extra $1000 on top of your fees! I wish I had clients like that in my line of work.

Maybe this is why I don't have a financial adviser and prefer vanguard and fidelity and their ilk.

 

[FinanceDude]

Do you have any clients w/ substantial wealth invested w/ you?

Yes..why does that matter?

If I had a million bucks and I (or my financial adviser that I pay) could save 0.1%, that translates to $1000 back in my pocket year in and year out. That's pretty substantial to me. You are a lucky man indeed if your clients don't mind paying an extra $1000 on top of your fees!

You wouldn't pay an advisor anyways.........Again, my fees are transparent in the IPS I set up for them. Most of them are millionaires who don't want to take the time and/or take the responsibility to manage their own investments.

They hire me to manage their money for them. I have always had an open-door policy with my clients. If they don't like the work I am doing for them, the have the right to leave anytime they want.

I realize a fair number of folks on here have had bad experiences with advisors, have chosen to DIY, and there's absolutely nothing wrong with that.

10 bp is not a lot to bicker over........ For comparison, there's almost a TRILLION dollars in hedge funds......which charge 2% a year in expenses, plus keep 20% of the profits also........that make our discussion pretty trivial in comparison..........

 

[youbet]

Getting back to the article...........

What is Vanguard proposing they will do for FA's. It's really not clear to me what is going to change and if it is going to cost me, a DIY'er, any money or give the FA's any sort of advantage in securing information.

If it's nominal, a few color borchures and even a card at xmas, no problem. But I'd really be disappointed in Vanguard if they compensate FA's at the expense of DIY'ers.

 

[FinanceDude]

Getting back to the article...........

What is Vanguard proposing they will do for FA's. It's really not clear to me what is going to change and if it is going to cost me, a DIY'er, any money or give the FA's any sort of advantage in securing information.

If it's nominal, a few color borchures and even a card at xmas, no problem. But I'd really be disappointed in Vanguard if they compensate FA's at the expense of DIY'ers.

They're not going to do much of anything, fear not.......

DIYers are safe.........

 

[terminator]

You could always use "ignore posts", and then you wouldn't have to deal with me at all..........

I'm not sure if the winky face means you realize that we can't do that b/c you are a moderator.

 

[youbet]

Quite honestly, Vanguard has been weak on this issue........I got some calls a year ago asking me to do ETF business with Vanguard, but their support is terrible.

What do you mean by support? If Vanguard support was absolutely excellent, what would that mean? Would it include FA's getting some kind of propriatary information not available to DIY'ers? Or direct $$$ payments? Or would it simply be the kind of things mentioned in the article like generic info on what makes clients happy and that sort of thing?

Just curious. I have no problem with fee for service FA's, but not if they get compensation or services at my expense or in ways that are in conflict with individual investors.

Edited to add: Hadn't seen your latest post when I wrote this.

 

[FinanceDude]

Just curious. I have no problem with fee for service FA's, but not if they get compensation or services at my expense or in ways that are in conflict with individual investors.

I think you are referring to the many "soft-dollar" arrangements that have surfaced in the news over the years.

Vanguard would never compensate advisors to sell their product, no worries. Most of that stuff has been outlawed anyways for the folks who were guilty of doing it. Most of them paid a big fine but admitted no wrongdoing..........

If all you want in an ETF is indexing, then Vanguard has the cheapest deal in town. That's not a big surprise. If you want an ETF that uses quantitative screens in it's process, then I can't use Vanguard....it's that simple...............

 

[FinanceDude]

I'm not sure if the winky face means you realize that we can't do that b/c you are a moderator.

I did not know that........I am new to the moderator arena..........

 

[youbet]

I think you are referring to the many "soft-dollar" arrangements that have surfaced in the news over the years.

No, not actually. But that's interesting, and appreciated, info.

What I want to know is....... when you say Vanguard support to FA's is not as good as others provide, what do you get from the others that Vanguard does not provide?

I'm just digging for info to help make decisions on who I do business with.

You seem to be dodging the question and if this is too personal or confidential, just say so, no problem.

 

[Moemg]

Okay I'll ask again ,what are the benefits of a ETF as compared to a index fund ?

 

[FinanceDude]

What I want to know is....... when you say Vanguard support to FA's is not as good as others provide, what do you get from the others that Vanguard does not provide?

More than an 800 number and a website. Come on, it's not rocket science. Does anyone on here really THINK or WANT Vanguard to cater to advisors? If they really wanted to get in the game, they would have to spend some money...they're not going to do that...........

From Barclays and others I get:

Webinars (web training and sales ideas)
Local CE and seminars where folks like Ed Slott talk
A dedicated internal and external wholesaler network
E-mail alerts when new ETF's are being launched
Telephone conferences with portfolio managers

From Vanguard, I get:

An 800 number and a website..........

 

[FUEGO]

Financedude,

Maybe you should spend an hour or so tooling around the vanguard advisor's site. They actually have most of what "Barclay's and others" offer, from what I can tell without registering for a login ID. Sure, it might take you a couple hours to figure out what they have to offer, but after all, if you can save your clients tens of thousands of dollars in fees, wouldn't it be worth your while? After all, aren't folks paying you to advise them. I'd expect no less from an adviser if I chose to retain one.

 

[FinanceDude]

Financedude,

Maybe you should spend an hour or so tooling around the vanguard advisor's site. They actually have most of what "Barclay's and others" offer, from what I can tell without registering for a login ID. Sure, it might take you a couple hours to figure out what they have to offer, but after all, if you can save your clients tens of thousands of dollars in fees, wouldn't it be worth your while?

[/quote]

Do you workfor Vanguard or something?

After all, aren't folks paying you to advise them. I'd expect no less from an adviser if I chose to retain one.

I am not paid by my clients to index........they can do that themselves.........

I know this may be hard to understand, but Vanguard is not the only well-run financial firm in America............

 

[Getting short]

"Okay I'll ask again ,what are the benefits of a ETF as compared to a index fund ?"

I'd like to know the answer to this too. FD, gonna help us out here or ignore the question again?

 

[samclem]

Okay I'll ask again ,what are the benefits of a ETF as compared to a index fund ?

Okay, a quick, probably insufficient, answer:

Assuming that both have the same holdings, an ETF generally has lower expenses. You'll have higher trading costs to buy and sell the ETF, since the commissions are similar to the commissions for stocks (through discount brokers you can get this down to about $10 for trade). Of course, the no-load MFs charge nothing to buy or sell.

ETFs are good for people who:
- Want to trade a lot. Many of the low-cost MF providers put limits in place to discourage frequent trading, but you can buy/sell ETFs through your broker every time the panicked talking heads come on CNBC. Just pay the fee.
- Buy-and-holders who want rock-bottom costs.

MFs are best for:
- Those who are accumulating small amounts monthly or selling small amounts monthly. They pay no trading costs, and these trading costs costs can easily overwhelm the slightly lower internal costs of ETFs.

IIRC, one reason for the slightly lower internal costs of ETFs is the way taxes are handled.

All that said, I don't own any ETFs yet. I should, as I would be saving some money compared to index funds, but I just haven't gotten around to making the changes and don't want to take the tax hit in our taxable accounts. A lot of folks will probably sell their MFs during the short window before the cap gains tax goes up in 2010 and will buy into ETFs when they do.

 

[FinanceDude]

"Okay I'll ask again ,what are the benefits of a ETF as compared to a index fund ?"

I'd like to know the answer to this too. FD, gonna help us out here or ignore the question again?

Do I know you?

 

[FinanceDude]

Okay, a quick, probably insufficient, answer:

Assuming that both have the same holdings, an ETF generally has lower expenses. You'll have higher trading costs to buy and sell the ETF, since the commissions are similar to the commissions for stocks (through discount brokers you can get this down to about $10 for trade). Of course, the no-load MFs charge nothing to buy or sell.

ETFs are good for people who:
- Want to trade a lot. Many of the low-cost MF providers put limits in place to discourage frequent trading, but you can buy/sell ETFs through your broker every time the panicked talking heads come on CNBC. Just pay the fee.
- Buy-and-holders who want rock-bottom costs.

MFs are best for:
- Those who are accumulating small amounts monthly or selling small amounts monthly. They pay no trading costs, and these trading costs costs can easily overwhelm the slightly lower internal costs of ETFs.

IIRC, one reason for the slightly lower internal costs of ETFs is the way taxes are handled.

All that said, I don't own any ETFs yet. I should, as I would be saving some money compared to index funds, but I just haven't gotten around to making the changes and don't want to take the tax hit in our taxable accounts. A lot of folks will probably sell their MFs during the short window before the cap gains tax goes up in 2010 and will buy into ETFs when they do.

great post...articulated better than I could have....thanks........

 

[samclem]

I'd like to know the answer to this too. FD, gonna help us out here or ignore the question again?

Please see my short response. IMO, FD has no obligation to respond, especially as this topic (ETFs vs MFs) is not what he started the thread to discuss. If you demand quick answers from a particular person, you should pay an advisor.

 

[FinanceDude]

Please see my short response. IMO, FD has no obligation to respond, especially as this topic (ETFs vs MFs) is not what he started the thread to discuss. If you demand quick answers from a particular person, you should pay an advisor.

 

[Getting short]

samclem,
Thanks for your excellent explaination! No, I don't assume that FD has an obligation to answer anything, but since he was going on extensively about how informed he is about this subject, I thought that he would answer a straightforward question. I was not demanding a quick answer, just referring to the fact that he was responding to other questions, but not to this one. Actually, I do pay an advisor, but for some reason I thought that a question like this was what this board was about. Sorry, I must have been wrong, bye.

 

[saluki9]

I'm still not clear on what else is needed to know beyond publicly available information in prospectuses/annual reports/SEC filings plus the VG website.

Is the complaint that there isn't a dedicated adviser hotline you can call in to ask questions about funds? As a vanguard customer, I can call in and talk to very knowledgeable folks. Is a similar service not available to advisers?

Allow me to (try) to clarify.

Barclays (iShares) is a great example of what you can give advisors without charging high fees. Barclays (through their distributor SEI Investments) offers a ton of sales support for their advisor clients. there is a dedicated advisor website that allows you to create proposals, a correlation calculator along with an analysis tool to help you integrate ishares into existing portfolios. In addition, the offer you a dedicated internal wholesaler who will do a lot of the proposal work if you ask them.

We don't use a lot of their tools, but for a smaller shop they could be a huge help for both the advisor and the investing public.

 

[Moemg]

samclem,
Thank you ! I do have an ETF QQQ but I never was really sure of the advantages .Thanks again you made it simple !