Vanguard “Updates to our forecasting model”

[a60dan]

Anyone else receive this message from Vanguard advisor?

They are lowering expectations, which isn’t a surprise after the Fed printed a few trillion dollars.

Moved most of my retirement funds there since April. We are up about 10% since then, and happier with the much lower fees.

 

[Wille]

I received an email that my Vanguard advisor requested to set up a call with me. I have not had that happen before. I scheduled it for next week.

 

[Lsbcal]

Anyone else receive this message from Vanguard advisor?

They are lowering expectations, which isn’t a surprise after the Fed printed a few trillion dollars.

Moved most of my retirement funds there since April. We are up about 10% since then, and happier with the much lower fees.

Are you using their advisory service and thus got this message as part of that?

I haven't received any special communication from VG. I don't really follow their guesses on future performance but will occasionally read one of their articles.

 

[a60dan]

Are you using their advisory service and thus got this message as part of that?

Yes.

Subsequently I received a message from the advisor himself suggesting that if I have any concerns to make an appointment.

Our “probability of success” has dropped from 93% to 87%.

I think it’s just that they’re adjusting their algorithms because they consider the recent stock market gains unsustainable and perhaps overweighted in the algorithms.

I’m still hedging with gold and dabbling (purely as a hobby) with Bitcoin, and he knows it.

Still “staying the course” as he recommended in the personal email.

 

[WyomingLife]

Yes.

Our “probability of success” has dropped from 93% to 87%.

We are huge Vanguard fans but have never made use of their advisor services, so we never receive communications like this from them.

As to retirement planning, I've always found their free online tools (e.g., the "Retirement Income Planner") to be pretty primitive generally, and restrictive as to inputs. Perhaps it is that way intentionally to drive customers to fee-based advice. Financial planning for retirement is perhaps the only thing I don't use Vanguard for, which is yet another reason why I'm so thankful for this site and tools like FIRECalc.

 

[Markola]

Sure enough, our Success likelihood score is down to 81% from 92% with no changes on our end. I wrote to our advisor to clarify and will report here what he says.

 

[mickeyd]

Subsequently I received a message from the advisor himself suggesting that if I have any concerns to make an appointment.

That's good to know. Folks that are paying 30bps for that service should receive timley advice that helps them understand what is going on in the markets.

 

[Exchme]

The forecast is likely due to the zero or negative bond yields. That greatly reduces future income and gains in bonds. Meanwhile stock investors have noticed and bid stock prices up. So their forecast is credible (which is of course completely different than saying it will turn out to be right.)

 

[Markola]

Here’s the reply from our VG advisor:

“... Why did Vanguard’s market forecasts change?

We update our expectations regularly because market fluctuations are normal. In this case, a combination of the following conditions caused us to change our forecasts:

· Equity markets fared exceedingly well over the last decade, rising over 10% a year, on average.
· Given already elevated equity valuations, returns over the next decade are anticipated to be more modest.
· Our expectations for fixed income returns have fallen due to declining interest rates...”

 

[moneyequalstime]

People pay 30 points to get index funds managed for them by vanguard?? Anyway I love vanguard products and am grateful to Mr. Bogle. ... just don't see the need to have managed indexed funds... kinda goes against the original philosophy

 

[Markola]

People pay 30 points to get index funds managed for them by vanguard?? Anyway I love vanguard products and am grateful to Mr. Bogle. ... just don't see the need to have managed indexed funds... kinda goes against the original philosophy

I didn’t need help either in the simple earn/save/invest phase. The spend down phase is a lot more complicated and there are many related benefits to DW and me from the service.

 

[a60dan]

People pay 30 points to get index funds managed for them by vanguard?? Anyway I love vanguard products and am grateful to Mr. Bogle. ... just don't see the need to have managed indexed funds... kinda goes against the original philosophy

I tried out Vanguard advisor services by moving my profit sharing plan in April. That’s the only account Vanguard manages.

I later moved my 401K from Fidelity which currently I am mirroring the profit sharing. The advisor supports this too.

My bride is reluctant to be fully engaged in the retirement planning. I’m still working full time, and I’m far happier with the “value” of the input I’m getting from the current advisor. My previous advisor was charging 1% and costing me over 2%. Long story.

My father’s situation further confounds our situation, and suggests a much higher tax rate in the future.

VG advisor convinced me to fully invest rather than DCA my way back into the market, and has so far saved me many years worth of the 0.3% fee on the single account.

I’ve made a few “blunders” along the way and need a sounding board who knows our entire picture.

When I do retire in the next 5 years, we’ll re-evaluate.

 

[Koolau]

I'm trying not to pay for advice anymore. Most (over the ages) has been a mixed bag at best and too often just wrong. I guess when someone is willing to (truly) base their fees on MY gains (or losses) I might take another look. YMMV

 

[Markola]

It was confusing and uncomfortable to see our 92% success likelihood rating fall to 81% over night, and we should have been proactively notified. I will give our advisor some feedback that they really need to let us know before they announce periodic score changes.

Still, I guess I’d rather that Vanguard PAS adjusts its forecasting models as conditions change, allowing us to talk about it and adapt, than to be even more surprised by a falling score during a precipitous plunge in the markets. During last March’s turbulence, our Personal Capital success score fell while the Vanguard one hung steady, evidently because they’d already priced in the high asset prices. Now they must foresee even more turbulence ahead for our portfolio.

 

[kevink]

Much as I love Vanguard I think it’s very much against the firm’s values and Jack Bogle’s approach to charge a percentage of assets under management. You can pay a fixed fee ranging from $1000-3000 a year to a firm like FPL Capital or Evenson Asset Management for far more sophisticated advice and access to a much wider range of funds.

It doesn’t cost Vanguard more to manage $1M than 100K. Why pay them ten times as much?

 

[chassis]

Lowering clients' calculated probability of success generates revenue for Vanguard.

When Vanguard re-jiggers their algorithms, evidently clients' probability of success is reduced. Surprised? I'm not.

Vanguard is generating revenue for themselves.

I have not placed assets under management with an advisor during my investing career, and I don't plan to. All of the posts on this thread support this view, for me.

 

[RetiredAt55.5]

Vanguard is generating revenue for themselves.

As Vanguard continues reducing it's expense ratios to rock bottom, it needs to find other revenue streams for its overhead expenses (think physical buildings, IT and phone staff, computer systems, etc.).

 

[Koolau]

As Vanguard continues reducing it's expense ratios to rock bottom, it needs to find other revenue streams for its overhead expenses (think physical buildings, IT and phone staff, computer systems, etc.).

That makes sense. I suppose for folks who don't have any direction in their investing, a cookie-cutter approach is better than nothing - as long as they don't pay too much for the 'honor' of being told what to do with their own money.

I haven't paid any attention. Are the other big firms doing similar things so they can continue to compete in the low-lower-lowest-cost funds? I only work with Vanguard so don't know about, say Fidelity.

 

[Markola]

I noticed today that our success score is back up to 87%. It was 92% during the summer, then 81% in October. 85%+ is the target threshold Vanguard PAS wants to maintain.

2020 is about to be wiped off the books and 2025 will come into focus in the planning tables, so I imagine the success ratio will change a bit.

 

[Midpack]

I noticed today that our success score is back up to 87%. It was 92% during the summer, then 81% in October. 85%+ is the target threshold Vanguard PAS wants to maintain.

2020 is about to be wiped off the books and 2025 will come into focus in the planning tables, so I imagine the success ratio will change a bit.

I’d be alarmed at an advisor that changed probability of success that much over such short periods. That’s not long term planning, sort of like running FIRECALC based on only the last X period anew every three months.

 

[Markola]

I’m not alarmed but I am curious. Our score didn’t change beyond a point or two during the swoon in March, so my hunch is VG’s model is more forward-looking. I want to ask our advisor more about the model in our January meeting and after I see if the score changes a tic after 2020 is off the books.

 

[a60dan]

My current take is that Vanguard has changed their algorithms to be more conservative, and wanted people to not be taken off guard.

In our most recent conversation, without changing the asset allocation, we chose to rebalance at the time.

We moved up the retirement date by 3 months to 12/2021 for ACA planning purposes, and I decided to give up the one time withdrawal for my Tesla :-(

We've been at 92% for several weeks now.

As reality sets in that the time is drawing near, I'm on an emotional roller coaster. I asked the FA if the fee included counseling for transitioning from 50+ years of saving to spending my savings

Merry Christmas to all!

 

[Markola]

Same to you!

I FIREd in July and it is a big change, as advertised. From what I read, such as the current string about “Are you happier in retirement?” I expect it to remain an emotional roller coaster for up to two years.