Why vanguard's expenses are so cheap, lousy customer service/hidden fees

[justin]

Justin, did you initiate and then cancel a transaction just for the sake of this forum?? Man, that's above and beyond.

I mainly wanted to verify whether VG displays the early redemption fees clearly (for my own purposes). I also figured out that if you have some shares that you've held for longer than 2 months, and you attempt to sell a number of shares less than the amount you have held over 2 mos., then they will not assess any type of short term trading fee.

 

[FinanceDude]

Which discount broker do you trust more than Vanguard?
2Cor521

Schwab...........

 

[Olav23]

Wow, Justin, that screen was complete news to me and thank you for posting it!

I certainly did not see such a screen, or I certainly would not have done the transaction! Thank you for posting how clear it *should* be. I wonder if tehre is some tech support that I can address to why I never saw such a screen.

I have been using TD Ameritrade since it was Waterhouse. Honestly, I have not had to deal too directly with them since the change, but while they were Waterhouse, I always had things addressed quickly, fees reversed rather easily and generally a "we'll try to make you happy" ethic generally by flexing the "look how much in assets I have with you". I guess I am a hill of beans in the VG world and they react differently.

Yes, I agree, had I read the prospectus, I certainly would have seen that, and also agree that I probably saw it when I purchased the fund. But of course, it slipped my mind when I made the exchange, and just thought it should be more prominently displayed, like Justin showed. I unfortunately didn't seem to see that screen for whatever reason.

I have dealt with VG support one other time, also to attempt to cancel a transaction, to no avail. It just seems like tehy should be able to cancel a transaction if it still in a "PENDING" state. It makes no sense that they should have any issue with this. I also wonder if it is more simple to do all trades through the phone, where they will have to offer the information on a recorded line. If there is no extra cost to do that, I might take that route in the future.

 

[ERD50]

Just to show I'm not a total hard-@$$ about this:

I am a bit surprised, considering that the transaction does not occur until the close of the market the next day, that Vanguard would not allow you to just cancel the transaction.

I realize, mistakes can happen, and since nothing was done yet, what harm is there in simply canceling it? Sure, they would not want to be doing this 1,000 times a day, and if the same customer made multiple requests, they could deny them, but otherwise, I think it would be good customer service to cancel it.

OTOH, maybe they *do* get asked this thousands of times each day. In that case, the costs would add up, so maybe it is the right thing to do.

-ERD50

 

[justin]

Olav,

How long have you had the account at VG? How large are the assets you have at VG? Are we talking under $50,000 (probably small beans to VG) or $250,000 or $1,000,000? Usually the more you have with them, the more accomodating they are (funny how $$ talks...). Just curious.

I am surprised they wouldn't work out anything with you (either rescind the pending exchange or waiving part/all of the early redemption fee). They are very serious about limiting short term trading. In fact, when I did the trial run of selling my VEURX to get the screen cap image I posted, they stated that I would be restricted from making any new purchases within 2 months since I was withdrawing my $$ early. "In order to curb short term trading". That is why Vanguard's costs/fees are so low (for most folks). But in any event, it sucks to lose $450, especially in this manner.

 

[Olav23]

Currently, $85k, but I told them I was planning in the short term to add another $40k. This did not help my argument at all. Talk about inflation, that $50k is now considered small beans! hehehe.

As far as how long I have had the accounts, probably about 7 months at this point. Still a noob, as you can see.

Thank you everyone for letting me vent. I guess I continue fighting this or take it as a learning expense as you said. I feel slighted and it might negatively impact what assets I put where. But, I definitely will know now to check the fees page BEFORE any transaction. It is too bad that the lesson of "read the fees page" will cost me the price of a nice 3 day cruise....

Olav,

How long have you had the account at VG? How large are the assets you have at VG? Are we talking under $50,000 (probably small beans to VG) or $250,000 or $1,000,000? Usually the more you have with them, the more accomodating they are (funny how $$ talks...). Just curious.

 

[Bikerdude]

IMHO a transaction done on the web should be no different than one done with a representative. If the rep would have said "Sir, you understand there will be a $450 fee for this transaction" then the web should also.

I'm in favor of limiting short term trades too.

 

[Texas Proud]

Why not call back and talk to someone else.... maybe with the info you have you can get some relief... that is IF you had not screamed by the warning screen... but, if they normally display it and it was NOT displayed, you have a legit argument...

Have them research and get back with you..

 

[teejayevans]

Here's what it looks like:

Seems straight forward to me, I would eat the $450, lesson learned.

 

[free4now]

I've gotten bitten by unexpected early redemption fees over at Fidelity years ago too so this isn't just a Vanguard thing. I think it's a rite of passage for investors, something you learn early in your investing career to look at carefully. A good reason to start investing your own money with small balances so you learn these things while the costs are low.

 

[ScaredtoQuit]

I'm invested in the Vanguard Int'l Value Index Fund. So I'm sharing in the benefits from your $450 loss. : : :

Sure we can't persuade you to re-invest?

 

[LOL!]

Wow, Justin, that screen was complete news to me and thank you for posting it!

I certainly did not see such a screen, or I certainly would not have done the transaction! Thank you for posting how clear it *should* be. I wonder if tehre is some tech support that I can address to why I never saw such a screen.

I do not think tech support could help you because it is a psychological or mental issue.

To wit: As part of my job, I write graphical user interfaces. Recently I created a new feature for a program I developed and I wanted to test it. So I added a pop-up dialog with information for the user to read and act upon. Then I had my colleagues test the new feature. Without fail, users simply dismissed the pop-up dialog without reading it. So I added bold text "PLEASE READ THIS BEFORE CONTINUING". A new group of testers simply dismissed the dialog without reading it either. In essence, since the users didn't expect a warning or dialog or something to read, when it appeared, they simply ignored it and dismissed it.

I do such things myself, so I was only half surprised that my testers were blind.

 

[cute fuzzy bunny]

I've done a buttload of trading of vanguard funds using their web site. I've ALWAYS gotten a warning screen I had to click through as to any fees/charges involved with the trade, including the redemption fees, and had to click 'I'm okay with this, proceed' before moving ahead with the trade.

 

[riskadverse]

Short term holding fees are the reason I no longer use mutual funds for trading. They are also one of the big reasons for the rise in popularity of ETF's. I would expect this trend to continue.

 

[Retire Soon]

If it weren't for Vanguard we wouldn't have low fees. John Bogle, former chairman and founder of Vanguard is the person we can thank for pioneering index funds and introducing low fees for mutual fund investors. He first wrote about the concept of the customer earning the profits in his 1951 thesis when he was a senior at Princeton. He believed that the customer should make the money off of investments and not the company or the fund managers, because afterall it's the investor taking the risk.

 

[Lusitan]

Olav - that sucks man, I'm sorry you had that happen to you. I have at times overlooked things and made costly financial mistakes, but as others have said, try to take it as a (relatively) cheap lesson that you will never forget. And maybe avoid making large transactions like that so late at night when you are tired and could possibly overlook something.

I do feel I need to respond to your assertion that Vanguard's customer service is lousy or that they have hidden fees. In my roughly 7 years as a Vanguard customer, I have always found their customer service to be just as good, if not better, than that which I receive from any other institution I deal with. Ditto for their website.

I understand your frustration, but strongly disagree with you about Vanguard.

 

[samclem]

I do not think tech support could help you because it is a psychological or mental issue.

To wit: As part of my job, I write graphical user interfaces. Recently I created a new feature for a program I developed and I wanted to test it. So I added a pop-up dialog with information for the user to read and act upon. Then I had my colleagues test the new feature. Without fail, users simply dismissed the pop-up dialog without reading it. So I added bold text "PLEASE READ THIS BEFORE CONTINUING". A new group of testers simply dismissed the dialog without reading it either. In essence, since the users didn't expect a warning or dialog or something to read, when it appeared, they simply ignored it and dismissed it.

I do such things myself, so I was only half surprised that my testers were blind.

Here's a "good" user interface: (turn sound on--not safe for work):
http://www.jibjab.com/jokebox/jokebox/jibjab/id/248736/jokeid/12760

 

[GTBuzz]

As others have said, always read the prospectus. Vanguard did nothing wrong here, short term fees are common.

 

[Texas Proud]

I just noticed that they have a calculator that you can use to estimate the redemption fee on the "Holdings Detail" page...

Just put the date you plan to move and how many shares and they will tell you how much it will be... couldn't be more simple...

To OP, I think you just missed the screen... so used to just clicking the screens until you get it moved... and not reading them..

 

[TromboneAl]

This would be a nice feature: Be able to set your Vanguard profile so that all transactions resulting in redemption fees are disallowed. If you need to do a transaction like this, you can just change your setting (and you'll still get the warning).

I think I'll suggest that to Vanguard.

 

[LOL!]

I think I'll suggest that to Vanguard.

Why bother? They won't be able to implement it before we're all dead anyways.

I absolutely hate the fact that when searching funds on their site, you have to click on a radio button to designate Name, Ticker or Number. What a waste! The software could easily detect whether you entered a Name, Ticker or Number all by itself, so the radio buttons are redundant and a distraction. Anyways, when you submit your suggestion, add this to the list please.

 

[Olav23]

That is classic!!! Maybe I will put this as a feature into my demo on monday

Here's a "good" user interface: (turn sound on--not safe for work):
http://www.jibjab.com/jokebox/jokebox/jibjab/id/248736/jokeid/12760

 

[Delawaredave]

I'm suprised the website doesn't notify you of the short term redemption fee - it should note the fee before the trade and make you acknowledge it.

I think if you did the transaction with a "human" over the phone, they'd detail the early redeption fee before executing the trade - right ?

 

[kat]

I'm still with Vanguard, but I've had several annoying problems with them.

1. Even though I did it right, they put down my IRA contribution for the wrong year.

2. When I contacted customer service online about an option that should have been available for redemptions, but wasn't, the response I got from Vanguard was for ME to call Vanguard and report the problem; i.e. that person -- a Vanguard employee!! -- could not be bothered.

3. A fund I was making an exchange from had a redemption fee that was not calculated correctly.

4. When I wanted to make a rollover to Vanguard, they told me to do it, and send them a check. (Fidelity does nearly all of it for you.)

I'm not at Vanguard for the customer service.

 

[d]

if only to counter ... i have never had a problem with vanguard. (though i have screwed-up on more than one occasion.)