By Dr. Jim Dahle, WCI FounderI've been a huge fan of Vanguard for as long as I've been financially literate. Even though I'm an ardent capitalist, I still love the mutual ownership of Vanguard (the only mutual mutual fund company). Since the funds own Vanguard and I own the funds, I'm the owner, albeit in a very tiny, very indirect way. That's not to say Vanguard has not had its problems. It certainly has. However, every few years someone trots out an article about how Vanguard has “lost its way.” The criticisms are almost always valid, but I don't see them quite as pessimistically as most.
Has Vanguard Lost Its Way?
The most recent article on this topic, from John Rekenthaler at Morningstar, is similar to other articles (and dozens of Boglehead Forum posts) on the topic. Like most, it idealized the founding of Vanguard as being all about St. Jack helping out the little guy. I like Jack Bogle as much as the next person, but it's important to read his own words about the founding of Vanguard. It wasn't ALL about helping out the little guy. You can get all the details in his 2018 “Stay the Course,” but the bottom line is that Bogle had worked for the conservative Wellington Fund from 1951 when he came out of college until he became the executive vice president in 1965. In 1966, he merged with the “ARK funds of the 1960s,” called Thorndike, Doran, Paine & Lewis. Bogle became CEO of the merged company. It subsequently collapsed in the early 1970s, Wellington lost 3/4 of its assets, and the stock price of Wellington Management Company plunged by more than 90%. Unsurprisingly, Bogle was fired.
Bogle was a smart dude, though. As far as I know, we only have Bogle's side of the story, but part of the founding of Vanguard involves a management dispute and some legal wrangling (shenanigans?) over this firing. Basically, the only way he could stay in control was to have the funds own the management company. So, he did that, and voilà, Vanguard was founded. Yes, that had the awesome side effect of a mutual mutual fund company. And this idea of an index fund had been percolating around in his head for a while too and was soon implemented. But knowing the REAL story certainly takes a little luster off of the legend. I'm sure the story would be even less flattering if it were told by some of the other people involved rather than Jack.
My point in sharing this is not to denigrate Jack or his subsequent work in any way, shape, or form. It's simply to lower your expectations from Vanguard. Jack was human. Vanguard is just a company. And it probably never would have existed at all if Jack had not had to scramble to keep his place in it.
Problems at Vanguard
Some people trot out various “evidences” from time to time that Vanguard has lost its way.
#1 Active Management
Perhaps the funniest is when people realize that Vanguard not only offers actively managed mutual funds but actually promotes them both to the general public and its advisory clients. The critics think this is some kind of a new thing. It's not. Remember Wellington? Yeah, it's still there (and has been since before The Great Depression):
So is Wellesley. And Windsor. And PrimeCap. Vanguard is coming out with new actively managed funds all the time. Some do well. Some do poorly. The ones that do poorly are eventually closed and merged and swept under the rug, just like at all the other actively managed mutual fund companies. They've had “hedge fund-like” strategies, factor-based strategies, quantitative funds, private equity funds, and multiple manager strategies. Even Jack Bogle owned plenty of shares of actively managed mutual funds. Expect this to continue in the future. But don't lose faith in Vanguard because of it. Vanguard was never an index fund-only shop.
#2 Vanguard Is No Longer the Low-Cost Leader
After a few decades, the trend away from active management and toward passive management became very clear. The other “good guy” large mutual fund/discount brokerage firms, including privately owned Fidelity and publicly owned Charles Schwab, had to jump on board or get left in the dust. So they did. They started offering index funds, too. The funds weren't as large, maybe weren't quite as well run, and weren't benefiting from the patented fund/ETF structure that Vanguard had. But they could at least compete on price. They first dropped their expense ratios to be in the same neighborhood as Vanguard, and then they went even lower than Vanguard (though Vanguard announced in February 2025 that it was dropping the expense ratios between 1-6 basis points on 87 of its funds). For a few funds, they even went to 0%.
The real competition turned out to be other companies that beat Vanguard into the ETF space such as BlackRock (iShares) and SSGA (SPDRS). Low cost, passively managed, and an ETF package . . . what's not to like? Sure, there were lots of scammers entrepreneurs out there trotting out their high-cost index funds and bribing their way into 401(k)s, and Fidelity and Schwab certainly have plenty of investment offerings that aren't so good for investors. However, the big four or five companies that actually offer reasonable low-cost passive investments eventually rose to the top. Now their offerings are all basically the same. Does that mean Vanguard lost its way? Of course not. It means it forced the industry to change. This is what winning looks like! Imitation is the most sincere form of flattery. Just be glad you have more options for your 401(k) or HSA or for tax-loss harvesting or whatever.
#3 Vanguard Customer Support
Bogleheads have been complaining about this for years, and it's not just anecdotal. Vanguard apparently used to pick up within three rings. Now, you might be on hold literally for hours (make sure that your cell phone is charged and you have something else to do when you call). You can have a bad customer service experience at Fidelity or Schwab, but it's less likely. The good news? With the ETF revolution, you don't have to use Vanguard. You can own funds built by Fidelity, Schwab, or BlackRock, and you can hold Vanguard funds (usually the ETF version) at Fidelity, Schwab, or any other brokerage your heart desires. Vanguard funds and top-notch customer service, what's not to like? Let's be honest, people go to Vanguard for the low price, not the customer service. That's not all that new in my opinion. Vanguard customer service wasn't awesome in 2005 when I moved money there, and it still isn't. Rekenthaler speculates:
“To be sure, outsiders cannot know if Vanguard’s customer-service woes have occurred because the company lacked the assets to pay for the necessary upgrades, or through mismanagement, or because of a calculated business decision. Some organizations have opted against answering their telephones for routine calls, figuring that the cost savings outweigh the reputational harm. (Try to reach somebody at Uber. I dare you.) Perhaps Vanguard is among that group.”
However, I think this is a case of chalking something up to malfeasance that is better explained by incompetence. This is simply growing pains. Vanguard is the third-largest mutual fund company in the world by assets under management (BlackRock and Charles Schwab are slightly ahead). BlackRock doesn't offer individual accounts like Vanguard. Vanguard got to that level very quickly. Scaling a business is a lot harder than it looks, especially when you're trying to run the business at cost. Schwab adopted a lot of what worked well at Vanguard. It's time for Vanguard to do the same!
#4 Offering Advice
Vanguard is also frequently criticized for offering advice, despite the fact that it does so at a 70% discount to the industry standard fee of 1% of Assets Under Management (AUM). My beef with the Vanguard advisory service isn't the price or even the fact that it now has some funds only available to its advisory clients. It's the fact that you simply cannot provide high-quality, personalized financial planning and investment management for 0.3% of a $100,000 portfolio. People have way too high expectations of what they should get for their $300 a year. What you get at Vanguard is to make sure you don't have a stupid portfolio and that your portfolio gets rebalanced periodically. Anything useful you get above and beyond that should be considered icing on the cake. This is a product for the masses designed to compete with the robo-advisors, not a serious contender for a real financial advisor.
#5 Vanguard Target Retirement Funds Debacle
I have discussed the royal tax screw-up with the Vanguard Target Retirement Funds in detail elsewhere. I was not surprised to see the initiation of a class-action lawsuit about it. Those who held these funds in a taxable account (despite everyone I know advising against doing so) really paid an unexpected price for something Vanguard did. Whether knowingly or unknowingly, the pain was very real. Perhaps worse than the actual tax hit was the sense of betrayal by Vanguard, that it put institutional investors ahead of individual investors. I was as disappointed as anyone else, but again, I think this was probably better explained by incompetence rather than by malfeasance. I don't expect it to happen again, and even though I'll have to pay (as one of the owners of Vanguard) to defend against the lawsuit, it should be a good reminder to Vanguard execs about the importance of thinking about unforeseen consequences.
As of now, I have the following accounts at the following firms:
- Vanguard: Trust brokerage account, Roth IRAs for everyone in the family, four UTMAs, DAF (Vanguard Charitable)
- Fidelity: WCI 401(k), HSA, and a credit card
- Schwab: Partnership 401(k) and Cash Balance Plan
- Thrift Savings Plan: Military 401(k)
- Utah 529: Four 529s
- Various real estate companies: Numerous private funds and syndications
Obviously, I still invest at Vanguard, but I confess it probably has at least as much to do with inertia as low costs and appreciation for Jack Bogle and mutual ownership. However, I am well aware that there are many product lines that Vanguard does about the same as others or worse. It wouldn't break my heart to have to move everything over to Fidelity or Schwab. I'm not sure it would bother Vanguard either!
What do you think? Has Vanguard lost its way? Why or why not? Have you had any surprisingly bad or good experiences with Vanguard? Comment below!
I started investing with Vanguard in 1984. I advised my children and many colleagues to invest there. However due to markedly deteriorating customer service, I moved all my funds to Schwab. I waited an hour or more on hold many times over the last 3 years. They have no computer chat option. Their web site is substandard.
I recently moved both my retirement accounts and my wife’s retirement account away from Vanguard. They’re platform is too cumbersome for diy investors. I moved to a platform that offers fractional shares of ETFs and allows me to set my desired percentage of my portfolio I want each ETF to be and it automatically invests new money to match that percentage goal and has a button you can click to rebalance back to your set point at any time.
From the website for Fidelity below regarding Vanguard advisor class mutual funds:
It can rollover in kind as long as it is not a proprietary fund, such as an advisor fund that is only held with Vanguard. Everything else, such as ETFs and stocks, will be fine.
https://usefidelity.com/t/transfer-from-vanguard-to-fidelity-everything-you-need-to-know/28
It seems to me, that most of the folks who are saying that they are not having any problems have the funds sitting there and never needed to change anything or take it out. Of course, that would be the case. What if they need to change something and Vanguard messes it up like they have with others? What if they need the money quickly and can not get it out? Does one want to wait until then?
Their website and app are my biggest issues. As a hands on investor, I just need things to work correctly. Last time I tax loss harvested 3 of the 4 orders went through. The one that didn’t wasn’t found anywhere online so I selected the same shares and placed it again. Next day, both the first, and now the second went though for the same amounts, but when the second set went through and the tax lot I selected wasn’t there, they just pulled them from my oldest shares. Instead of a 5 figure loss, I now had an almost 6 figure gain.
I called right away, just like the statement said to if something was wrong, and they couldn’t/wouldn’t do anything. When I asked how could I sell the same shares twice on the website, they didn’t know and that’s where it ended.
In the end I have enough losses over the years to offset it, it was more of an annoyance and the principle of it bothered me more than anything. It was like any other large company where you call with an issue they have some reasonability for and they shrug and transfer you until you hang up or get disconnected.
My Vanguard account has a six-figure debit balance that is incorrect. I cannot find anyone there to work with me on straightening it out. I have filed a complaint with FINRA. Has anyone here had a similar experience? How did you solve it?
Never had that experience, but if I had I would keep asking to talk to a supervisor until I found someone that could fix it. If they didn’t (and it was truly an error), I guess I’d file suit. Should be able to find someone to take it for 1/3 of a 6 figure amount.
Have you sent in something in writing? That might work better than calling the overwhelmed help line folks.
I have notified FINRA . I am hoping to hear back soon. I have a case# with Vanguard & FINRA. I would like to connect with others with incorrect cash balances. I am just flabbergasted that management would not insist on accurate recordkeeping
Follow up. The definition of insanity I repeating an action and expecting a different result. My wife is near tears over this problem. Your suggestion of a lawyer is our next step if FINRA lets us down.
Sorry to hear that. How much money are we talking about?
Finally heard from a knowledgeable person! Lets C where it goes.
There is no excuse for frequent bookkeeping errors in customer asset statements. This must be addressed soon or FINRA will step in.
In Aug 2022 Vanguard forced my IRAs into a brokerage acct. When I asked why, the harried rep said something about a more efficient platform. The rest of her reply sounded like gobbledygook. They only sent an Aug report showing zero balances for the “former” accts, no 3Q rpt yet. I never traded brokerage with Vanguard, though I always trusted them. But these posts concern me. Does anyone know if the change will cost me? Thank you.
It’s no big deal. Most of us made that change 5-6 years ago. You’ll be fine. No additional costs and actually a few benefits to the change.
I found this exchange googling about VG complaints, because there is NO ONE or NO WAY to complain to Vanguard directly about horrific customer service. We’ve invested with Vanguard for years without issue, albeit some clunky processes on the website and a few call hassles. But, I always had full confidence that my requests or issues would be resolved and that I was a valued client. No longer. Not after the target fund tax surprise debacle, security issues with the website, and complete lack of caring or follow-up to any of my inquiries. This, after repeated phone calls and wait times in the HOURS ( every time, starting with awful, poor connections to overseas uninformed reps) once you do get through. I just need to work out the details to move our assets to Fidelity or Schwab. The service downfall goes way beyond the Covid effect. It’s the poorest customer service I’ve received from any company, ever. I delightedly filled out their latest cust. sat survey with 1s, and said “yes” please have someone contact me, which assuredly is never going to happen. Except to pitch me advisory services. So pathetic, as it seems as recently as a year or two ago, I was giving them 8s and 9s, and wholeheartedly recommending them. For those here who have said they’ve had no reason to contact customer service, be warned.
I’m dealing with Vanguard for the first time as POA for my sister who has become incapacitated. It has been nothing short of a nightmare since day one. I send off the forms I think they need, and I hear nothing back. I call to check on things, only to be told, “Oh no, you need to send ‘this.'” So I send that. Still no word. I call back again. “I don’t know who told you that, but you need to send ‘this.'” So I send that.
Then I get an email saying they received something, but they’re missing information. Hey, at least the email is an improvement! I call the number they say to call, and spend 10 minutes on hold, only to be disconnected. I call back, wait on hold another 15 minutes, and the guy tells me I have to talk to an account specialist. Back on hold I go. My estimated wait time is 16 to 24 minutes. After about 7 minutes, I went out to the kitchen to do something, and my call dropped.
I could just cry.
I concur with all the negative complaints, problems , and frustrations expressed above and at the below link.
https://topratedfirms.com/brokers/customer/vanguard-review.aspx
I have had the displeasure of trying to deal with Vanguard as an individual investor, as POA for an incapacitated adult, and as a successor trustee for a trust. I am throughly exhausted and disgusted with dealing with Vanguard these last two and a half years and I will be gone as soon as feasible.
They are trying to force me into a brokerage account, mainly for their own benefit, to change their image. Evidently mutual fund only can’t compete. There are no benefits for me. When I called to get details using the phone number they provided in their email about the change, I got someone who had no clue what I was asking about. Transferred to another person who looking thru all my exchanges to see when I had last taken an RMD. Wrong place to look. I asked when I had to make my next RMD and they said the end of the year even though I had set up an earlier date. The email about the brokerage account said mutual funds not changed to brokerage would not have SIPC insurance but brokerage funds would. What???? This can’t be right.
I am losing confidence in them and think their customer service is lacking. Previously I found they had used a very old address for some form that was issued. When I contacted them, there was a long wait for an answer. Then they told me it didn’t matter because I was doing everything online! Wow. How many people had confidential investing information sent to a 10 year old address in another state?
With this experience, I am now concerned that when my beneficiaries tried to claim inheritance of funds, it will not go smoothly.
I actually prefer the brokerage account I was “forced into” years ago. What don’t you like about it?
I always dreaded what I knew would happen, but I am shocked at how rapid the decline has happened. In the ‘good days’ I would end any call I had, or survey finished stating: “I want the company to be run as Mr. Bogle envisioned and I am used to, and if this high standard was to fall I would be on the lookout for a replacement” – That time has come. Like many of you I have been with Vanguard for decades, had recommended them to many who joined, and you could not have pried a bad word about them from me… Now I can barely say much good as I am starting to see the cracks. USAA was held in a very similar vein by myself many years ago – But now is a complete shell of themselves, lost their way and lowered their very high standards. Now they are just another crappy company.
I am a “Flagship” member, but what does this even mean anymore? Use to get a free use of TurboTax every year, use to have my own assigned advisor, use to receive an annual portfolio review from my assigned advisor, use to be able to ask questions without feeling as though you have to join their paid advisor, use to be able to email them. All of this and more is gone. I try to never call VG if possible, but the website seems disjointed, hard to find what you need, and seems what could be viewed before big changes is no longer doable. I mean how pathetic is it that I can not pull up what dividends and capital gains are/were for more than last year???
Lately I had to call a few times and what happened to being asked for my voice password? Now I have to enter multiple times basic information? Also, the quality of the reps I do get now have not been up to standard. I now get a sorta “OK bud” when I speak with these people. Used to be very business polite and effective to I hate having to call them at all with their borderline rudeness and incompetence.
Never thought I would ever consider a switch, but I am. I will be looking very hard at Fidelity and see if the service is what one would expect. Way screw up the very best their was, and I guess as you add trillions more $ the service will continue to decline. What a true shame, and an absolute joke you ‘leaders’ at VG allowed to happen, basically spitting in the face of the founder… I knew when ETFs started to happen and Mr. Bogel was not happy about it was the start.
Interesting. I feel like the service has gotten better the last couple of years than it was 5 years ago or even when this post was written. I think the service you used to get at “Flagship” now shows up at a higher tier of assets maybe.
I have to second the customer service concerns. I’ve been with Vanguard since 2010 and have contacted them rarely over the years but today found my online account disabled – after tax loss harvesting earlier this week. I sat on hold for 3 hours before reaching someone that could help and was told that my account was disabled due to an internal security sweep that had nothing to do with me. I received no email or other notification from Vanguard that my account was going to be disabled and it took sitting on hold to figure out if there was fraud or any other issue. I have recently kept most of my emergency fund in VUSXX, but now I am concerned that I won’t be able to access my money if I need it in a timely way. I have already started transferring my accounts out of Vanguard to another institution.
3 hours? Wow. Very different from the experience I have every time I call Vanguard these days. Maybe it doesn’t bother them to lose smaller accounts? Dunno.
Thanks. Great article. With the recent news on Vanguard I wonder what your thoughts are today.
What recent news? The handful of new fees that apply to few? The new CEO?
My thoughts are similar. I have no plans to move my accounts anytime soon.
According to several post on Bogleheads, many of the calls to Vanguard are now going to a Vanguard call center in the Phillipines (FINRA licenses highly doubtful there). When I called recently to try to get a simple TOD beneficiary designation issue settled (because their website form request sent the wrong form), that call went to a call center with a rep with somewhat limited English understanding (just like my health insurance company reps), and loud chattering from other people in the background. And of course he mailed me the wrong Vanguard form again.
Also, if the Vanguard automated phone system routes you to the wrong department based on what you tell it you need, when you get the call back, you now either go on hold for another long wait, or get another call back in an hour (if you are lucky). Your only hope is to call at some time before the 8 am eastern time opening to get near the front of the line. Then there must be some secret words to use with the automated system to get to an actual FINRA-licensed rep in the U.S. who knows what they are doing. Anyone have a guess? Up to about five years ago, when I called the “Voyager Services” number on my statement, I would get such a person no matter what. No more.
And with the now FORCED conversion of retail customers from their traditional (Bogle-inspired) mutual fund platform to the brokerage platform (with huge disadvantages for low-tech folks of any age), Jack Bogle would have hated what Vanguard has now become. If you don’t want to handle issues online and hope for the best -in stead of talking to a knowlegeable rep for 10 minutes who knows your account – you just are now screwed at Vanguard.
If you have a local Schwab or Fildelity office where you can actually make an appointment to talk to a human, I’d say transfer everything out of Vanguard to them ASAP. It may be a SIGNIFICANT taxable event though, unless you are doing an IRA transfer with trustee to trustee (the simplest way of the two methods).
Others commenting have suggested that you can somehow transfer TAXABLE funds to Schwab or Fidelity with no capital gains tax consequence, but I don’t know if that is true. For those still on the legacy mutual fund platform, the recent June 6, 2024 forced transfer warning letter raises this as a possibility under “Transfer to an alternative provider,” but provides absolutely no details – they say you have to contact the “alternative provider” for info. So I’d make an appointment at a Schwab or Fidelity office to see if it is possible (obviously take your Vanguard account info), and if Vanguard will actually cooperate in the transfer and not screw things up (like so many comments here have mentioned).
The letter said they will soon be forcing legacy mutual fund customers into a sort of “limbo” where they can’t do much with their accounts until they sign the new brokerage account agreement – which is MUCH different than the old Vanguard mutual fund company agreement.
I have had significant assets with Vanguard for many years, but will either be moving on to Schwab or Fidelity (they have local offices ner me), or perhaps just switching the funds to no-risk laddered bank CDs since the interest rates are (somewhat) decent now. Then I can at least walk into my local bank anytime and almost immediately talk to the manger, who can solve any issue (unlike with Vanguard).
By the way, Vanguard’s website has pages now pushing ESG, DEI, and even “climate change” initiatives both within the company itself and on certain managed investment products. And as you may know, they just got a new CEO, some dork from Blackrock, which has been pushing the same stuff in the media – that is, forcing politics on customers rather than investing for their best financial interest.
A few items:
# 1 I converted to the brokerage account many years ago. It’s way better. I’m not sure why it bothers some people. It seems they just don’t like change even if the new thing is better than the old thing in most ways.
# 2 There is no taxable event to move funds or stocks or ETFs “in-kind” from one brokerage to another. If you hate Vanguard, just move it all to Fidelity or Schwab.
# 3 I don’t call Vanguard all that often, but they’ve never sent me to a Phillipines call center. I actually get better attention than I ever have there, but that may be function of the amount of money we now have at Vanguard.
# 4 Bogle wouldn’t be rolling in his grave over these customer service and IT issues. They’re all his fault. His focus on low costs and antipathy toward technology is the direct cause of these issues. Want low costs? Stay at Vanguard. Want better service? Go elsewhere. But as one with accounts at Fidelity, Schwab, and Vanguard, I find the online experience basically the same and the telephone experience only slightly worse.
Thanks for the comments.
On #1:
It isn’t just that some people don’t like change.
Bogleheads has threads from the past few years on certain disadvantages of the brokerage account platform and what you are agreeing to legally in the brokerage account agreement versus the legacy mutual fund-only platform and previous agreement. Forbes also has info in their 2024 Vanguard Online Brokerage Review 2024. There are also some other significant issues such as U.S. citizens with foreign address, etc. Obviously Vanguard Brokerage Services and The Vanguard Group (legacy) are legally two different entities and operate much differently. People can do a Google search on the Vanguard transition and a Google site search on Boglehead if interested. Yes, most Vanguard customers don’t care (and don’t understand the difference). Vanguard’s info page is here:
Moving Your Vanguard Funds to a Vanguard Brokerage Account
https://personal1.vanguard.com/pdf/vbafqm.pdf
Also, you used to be able to do the transistion with a very simple mail-in paper form (just list your accounts & sign) to avoid some problems that several Bogleheads have previously had online (perhaps fixed), but now that pdf form link for taxable accounts takes you to the website for transition. If you just have IRAs, the very simple mail-in form for that transition is still available on the Vanguard forms page, with all the transition legal and service details appended.
The most recent Bogleheads thread on the forced conversion has comments also questioning the legality, and saying that Fidelity and other fund companies are not forcing previous mutual fund only customers into brokerage accounts. Forcing the legacy accounts into the limbo that they have come up with was apparently Vanguard’s lawyers solution. The previous letters to retail customers before the June 6 “surprise” did not indicate the platform would be terminated, just that there would be fees (currently just $25/fund/year) associated with maintaining it – per fund, not per account . Knowlegeable Boglehead commenters have said the Vanguard legacy platform is actually not “going away;” it remains in place for the Vanguard institutional investors. Don’t know if true, but if so, they could do the same for the retail investors who want to remain and charge fees accordingly.
The switch to the brokerage platform coincides with the obvious push for people to handle all their issues online rather than calling (something that health insurance companies also push these days, with the same issues). And some people also still like mailed quaterly and complete annual paper statements, which is no big deal if you pay for it (just like at banks now).
Also, one thing people on investing blogs don’t seem to realize is that there is a significant fraction of the population that does not want to (or is not able to) handle all their investing matters online, and is much more comfortable with having someone to talk to (in a reasonable wait time) when an issue comes up – or even just to request a distribution. This isn’t just the elderly. There are many reasons for this that I won’t go into in detail but it includes age, disability, intelligence, technical ability, lack of reliable & low-cost Internet service (many rural/moutain areas still), and even religion, such as the Mennonites (who do use some limited tech).
# 3. As I wrote, there are several threads on Bogleheads where people said they were connected to a Vanguard Philipines call center; don’t know if that is who I was talking to with my TOD issue. I think you may get directed there if the automated system interprets your stated call request as a “minor” issue – e.g. forms, beneficiary designation, etc. Posters said they asked the rep where they were located and they said Manila.
By the way, Cigna is now doing the same thing for patient customer service calls and it is just awful. Patients can no longer send them a secure email either through the myCigna site, and preauthorization issues are ridiculous on the patient’s end since the call center people are incompetent (not an insult, just a fact). Having people like this in a foriegn call center handing people’s life savings at a financial firm or their health insurance just to save the company money is dumb. Charge the customers what it takes to have competent people handle the calls in a reasonable amount of time. For Vanguard, that would mean trained U.S. FINRA licensees only.
Yes, the level of call service does seem to depend on how much you have with Vanguard – either under $50K, Voyager (up to $500K), Flagship (over $1 million), Flagship Select (over $5 million). While Vanguard has changed services for those designations, they still do appear on the mailed paper statements with different telephone numbers for each, and obviously the call sytem knows who you are when you call, and likely routes your call accordingly. So no, if you are a Flagship or Flagship Select customer, they probably won’t send you to the Philipines call center no matter what the issue.
# 4. I disagree. As I indicated, I never had any customer service issues when Jack Bogle was at Vanguard or for many years after he retired. I’d call and be connected to a competent person in ten minutes. This has just come up within the last few years, which seems to also be the case for many people posting on Bogleheads. Even if you want people to use the website for routine things, you still need a call center with reasonable wait times when issues arise which cannot be corrected online. And the use of chatbots giving you scripted answers is often little help. I haven’t used secure email with them (still offered?), but posters have noted odd unresponsive answers with that (perhaps automated also).
As far as having a local office with a different firm for in-person service (what some people derisively call “hand holding”):
Years ago, there was a trend with some banks with brick & mortar branches offerrng relatively low-cost mutual funds through their wealth management divisions, though that seems to have mostly disappeared. And you obviously got a local rep assigned. For example, the now defunct Atlas Funds through World Savings which was taken over by Wells Fargo (to customers’ detriment).
That still exists in a different form with the bank wealth management department affiliated with a high-fee company like Raymond James or Edward Jones. Although some seem to offer American Funds separately – decent managed funds, but with loads and relatively high fees.
The Fidelity offices for in-person serive are just in larger cities, but Schwab has many more offices in medium-sized towns around the country. And then of course there are the Raymond James and Edward Jones stand-alone offices all over, but the fees there are quite high.
Forgot, Vanguard Voyager Select is $500K to $1 million, and those customer calls also probably won’t go to a foreign call center.
That’s a lot of words. I agree there are many Bogleheads threads on this subject and have been since the brokerage firm transition began what, 7 years ago? The phrases “much ado about nothing” and “tempest in a teapot” come to mind every time I see them. A lot of them just sound like a bunch of old curmudgeons getting together to complain about change in the world and new-fangled ways.
If it bothers you enough to write thousand word comments on blogs about it, it’s hard for me to understand why you still have money at Vanguard and haven’t moved to Fidelity or Schwab. No, they’re not perfect either.
As far as Bogle, he stepped down as CEO in 1996. That’s almost 3 decades ago. You must have quite a memory to recall all of your customer service experiences that long ago accurately. At any rate, he often made decisions to save investor money that resulted in worse IT infrastructure and customer service experiences down the road. For better or worse, the focus at Vanguard has been and continues to be low costs. Sometimes you get what you pay for.
You’ll be happier if you stop expecting perfection from your financial service providers.
I would encourage you to transition to the brokerage platform. It has far more capability than the old mutual fund platform and then many of the issues you’re dealing with would be gone. Plus, you could invest in ETF shares too, a massive benefit in many situations that was not possible on the old platform.
Thanks again for the comments.
“A lot of words” are are necessary since most people reading this popular blog and the others discussing the transition probably don’t actually understand what Vanguard is doing legally, and the difference between the two entitites . And no, it isn’t trivial, if you research it. That’s why Forbes and other investment sites have discussed it at length over the past few years.
As I indicated, Vanguard Brokerage Services (a division of Vanguard Marketing Corporation) is a completely different business and legal entity than the Vanguard Group. They could have dropped “Vanguard” from the name and instead called it “Bob’s Brokerage.” Also, it is not analogous to a typical mutual fund management company (privately or publically held) liquidating that company and telling investors they can switch their fund management into a brokerage with just a similar name. Vanguard Group’s mutual fund structure is unique, much like a mutual insurer, owned by investors in the funds. “Vanguard is owned by the funds managed by the company and is therefore owned by its customers” (Wikipedia). That is one of the reaons people came to Vanguard. All that evaporates for retail fund customers with the brokerage. The fact that the Vanguard Group is NOT going away, and they are not forcing the institutional investors into the brokerage is quite telling.
And no, the online discussions of this on other investment blogs and financial websites (Forbes, etc.) are not just “curmudgeons;” some securities attorneys have been involved, saying what Vanguard is doing to retail mutual fund customers is quite odd (and perhaps unprecidented), and that is why they cooked up the oddball limbo state for people who haven’t transitioned, which could be challenged with regulators.
The push to online use obviously just happens to coincide with the forced transistion to the brokerage. There is nothing more “modern” in a brokerage than a mutual fund-only company, many of which also obviously operate online. My point is having a functional telephone customers service line with competent FINRA licensees and short wait times is not “old fashioned,” and is necessary for when there are issues online . And as I wrote, it is also necessary for the other categories of clientele that I listed . And no, Vanguards lower costs don’t necessitate incompetent customer call service, as evidenced by the excellent past service.
Yes, I have been with Vanguard a long time and do remember my interactions with the company. I started at age 22 in the 1990s on the excellent advice of a much older colleague. And I am a traditional buy and hold investor (stock & bond index funds only), so my necessary interactions with Vanguard have been limited.
BTW, Bogle was Vanguard chairman until 2000, and stayed on the Vanguard campus with the Bogle Financial Markets Research Center for several years therafter, often lecturing around the country on Vanguard’s unique customer ownership structure and investment philosphy (and continued writing popular books about the Vanguard investing philosophy).
And yes, I’m moving out of Vanguard. Just providing info for the several thousand people (probably many more) who haven’t transitioned yet.
FYI, this blog post does come up with Net searches on the Vanguard forced transition, and I assume a lot of people are searching now that they just got the June 6 Vanguard threat letter. So just some more words for people to make the transition decision, and I promise this will be the last for me here. This info is scattered all over on the Bogleheads site threads and elsewhere online, and many people don’t seem to understand the difference between direct ownership of mutual fund shares and brokerage ownership in “street name.”
As I wrote, The Vanguard Group itself is obviously not “going away” in any sense due to the retail customer forced transition, and info online suggests institutional customers will still be serviced directly by TVG. Again, unlike most mutual fund companies, TVG itself will still be owned by the member funds, which will still be owned by the fund shareholders. But when I wrote that the previous ownership relationship “evaporates” what I mean is that with Vanguard Brokerage Services the fund shareholder is now NOT the customer but VBS, which is instead holding the shares in “steet name” with Vanguard on the customer’s behalf. To be very clear, when you sign the 80 page transition agreement, Vanguard Brokerage Services is now the registered owner of your previous shares, not you. You are now just the owner of the VBS brokerage account. That’s a significant difference. And there is some non-trivial additional risk because of that.
Quote from a Vanguard fund prospectus:
“Vanguard fund shares can be held directly with Vanguard or indirectly through an intermediary, such as a bank, a broker, or an investment advisor. If you hold Vanguard fund shares directly with Vanguard, you should carefully read each topic within this section that pertains to your relationship with Vanguard. If you hold Vanguard fund shares indirectly through an intermediary (including shares held in a brokerage account through Vanguard Brokerage Services), please see Investing With Vanguard Through Other Firms, and also refer to your account agreement with the intermediary for information about transacting in that account.”
And those two text sections they refer to are totally different as far as describing share ownership, risk, and your relationship to Vanguard.
Another quote: “Brokerage firms typically pool client assets and include them on their balance sheet. This process is commonly referred to as holding assets in ‘street name.’ Investors should note the language in a brokerage firm’s account agreement, assessing any permission for the broker-dealer to lend, pledge or otherwise use customer securities. When assets are held in street name, they are often used for a variety of brokerage activities and are potentially subject to seizure by creditors in the event of the brokerage firm’s insolvency.”
Source:
https://www.usbank.com/financialiq/plan-your-growth/find-partners/Bank-vs-brokerage-custody.html
There are dozens of mutual fund companies that still sell their funds directly to customers (online and with paper forms) as well as through affiliated brokerages. With Fidelity, you can actually change BACK from their affiliated brokerage account holding only Fidelity Funds to a direct ownership Fidelity mutual fund only account. There is an online pdf form for this.
What else “evaporates” in the forced transistion to Vanguard Brokerage Services (again legally, a completely separate division of a TVG subsidiary company) is that retail customers will no longer be serviced by the company that they used to directly own via the funds, or be able to deal with them directly. That service relationship is ended. Everything is now done through the broker.
Therefore, for those who don’t want to buy the brokerage products other than Vanguard funds, there is no advantage whatsoever to having Vanguard Brokerage Services hold and manage your mutual funds, rather than the mutual fund company itself. Unlike the impression Vanguard gives in their numerous brokerage “upgrade” pitches, $500K SIPC insurance protects against fraudulent or otherwise improper activity by the brokerage (not your fund’s value going down). So for Vanguard mutual fund only customers the brokerage just adds an unneeded layer of 80 page brokerage agreement legalese between you and your money. Also, moving your funds to a brokerage isn’t more “modern” either (both can have a decent website & call center), and is completely unneeded if you are just working with one or two fund companies like Vanguard or Fidelity which have numerous fund choices in most categories.
Brokers can and do go out of business for many reasons. The Vanguard Group structurally cannot fail for any of those same reasons; it is a totally different business entity engaged solely in directly selling shares in mutual funds to customers. That’s why SIPC insurance doesn’t apply to mutual fund companies themselves (again, lots of info on this online). However small, your risk is needlessly increased by having a broker hold and manage your fund shares.
If anyone is actually interested in the legal details of all this, the Vanguard Brokerage Account Agreement (about 80 pages) is at the link below under “Personal.” It will confirm exactly what I listed above about your actual share ownershop. Then compare that to your original Vanguard Mutual Fund Agreement.
https://personal.vanguard.com/us/litfulfillment/ELFMainResults?cat=OAFM
First of all, the customer service issues are completely separate from the transition to a brokerage issue. There’s no doubt Vanguard can do better at customer service, it’s really just a decision of whether to spend more on it or not. I’m actually fine with the current level of service/cost so I disagree there is a need to change that.
Second, despite all you’ve typed, I’m not convinced the transition is significant. Sure, there’s a different legal structure, but it’s not something I’m going to lay awake at night worrying about. I’ve owned Vanguard funds (mostly ETFs) via brokerage companies for years. I don’t feel that makes me any less of an owner than if I were a direct mutual fund owner still. I’ve got far bigger risks to worry about than whatever you’re spending your time talking to securities attorneys about.