Vanguard Gave the Only Honest Rollover Advice (In a Survey)

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BillyG
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Vanguard Gave the Only Honest Rollover Advice (In a Survey)

Post by BillyG »

See:

Ditch a Super-Cheap 401(k) for an IRA? Sure, IRA Sellers Say

http://blogs.wsj.com/totalreturn/2014/1 ... llers-say/

"Eleven of the 15 firms—including Bank of America, Merrill Lynch, Wells Fargo, T. Rowe Price Group -- told him to roll the money over to an IRA. The remainder declined to provide advice, but “tended to try to sell the idea that a rollover would be desirable,” the report says. Only one firm, Vanguard Group, advised him to consider remaining in the federal government’s Thrift Savings Plan.

Mr. Turner’s findings echo the conclusions of a 2013 study by the Government Accountability Office, which assessed the rollover advice offered by call-in centers run by several financial-services companies. “Plan participants often receive guidance and marketing favoring IRAs when seeking assistance regarding what to do with their 401(k) plan savings when they separate from their employers. GAO found that service providers’ call center representatives encouraged rolling 401(k) plan savings into an IRA even with only minimal knowledge of a caller’s financial situation,” the GAO report found."

Billy
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nisiprius
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Re: Vanguard Gave the Only Honest Rollover Advice (In a Surv

Post by nisiprius »

Holy cow. Good for Vanguard. I am really impressed. I try not to be more enthusiastic about Vanguard than they deserve, but that is just great.
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Re: Vanguard Gave the Only Honest Rollover Advice (In a Surv

Post by ogd »

Yes! I am bookmarking this.

Here's why: in past threads discussing this or that broker I've mentioned the lack of profit incentive as a unique advantage of Vanguard. Even firms that are quite well behaved, like Fidelity or Schwab, will inevitably "err" towards the choice that makes them more money, every now and then. This is often met with skepticism, but I would say this undercover survey is proof of precisely that uniqueness.
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BillyG
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Re: Vanguard Gave the Only Honest Rollover Advice (In a Surv

Post by BillyG »

nisiprius wrote:Holy cow. Good for Vanguard. I am really impressed. I try not to be more enthusiastic about Vanguard than they deserve, but that is just great.
I agree. It was not by any means a scientific survey, and you never know who will pick up the phone on the other side of an 800 call, but I am impressed too!

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tfb
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Re: Vanguard Gave the Only Honest Rollover Advice (In a Surv

Post by tfb »

WSJ article wrote: Last winter, he called 15 financial-services firms to ask for advice on whether he ought to roll over—or transfer—the retirement money he had saved via a 401(k)-type plan in his prior job at the U.S. Labor Department to an IRA.
If the question was exactly as stated, I'm surprised that the reps, including Vanguard's, were allowed to give advice one way or the other. The correct answer should be "Ask your advisor or make up your own mind. If you want to rollover, I will help you do it." In this regard, Vanguard's rep was wrong too.
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Re: Vanguard Gave the Only Honest Rollover Advice (In a Surv

Post by dbr »

tfb wrote:
WSJ article wrote: Last winter, he called 15 financial-services firms to ask for advice on whether he ought to roll over—or transfer—the retirement money he had saved via a 401(k)-type plan in his prior job at the U.S. Labor Department to an IRA.
If the question was exactly as stated, I'm surprised that the reps, including Vanguard's, were allowed to give advice one way or the other. The correct answer should be "Ask your advisor or make up your own mind. If you want to rollover, I will help you do it." In this regard, Vanguard's rep was wrong too.
I agree. Brokers have no business giving financial advice and anyone who asks a broker for financial advice is an idiot.
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Re: Vanguard Gave the Only Honest Rollover Advice (In a Surv

Post by Laura »

Kudos to Vanguard. When I have had the chance to meet them at their headquarters what always strikes me is how deep their culture goes and how truly focused they are on lowering costs to their customers. Sadly, I think most people have no ideas that brokers are salesman. Many people think they have expertise and are working in the best interest of their customers.

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The views presented are my own and not necessarily those of the Department of State or the U.S. Government.
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Re: Vanguard Gave the Only Honest Rollover Advice (In a Surv

Post by BillyG »

tfb wrote:
WSJ article wrote: Last winter, he called 15 financial-services firms to ask for advice on whether he ought to roll over—or transfer—the retirement money he had saved via a 401(k)-type plan in his prior job at the U.S. Labor Department to an IRA.
If the question was exactly as stated, I'm surprised that the reps, including Vanguard's, were allowed to give advice one way or the other. The correct answer should be "Ask your advisor or make up your own mind. If you want to rollover, I will help you do it." In this regard, Vanguard's rep was wrong too.
I think that's the point of the article -- that the reps are salespeople. Vanguard was balanced in discussing the considerations.

This is what Vanguard says on its website:
https://investor.vanguard.com/401k-rollover/

Under "Explore Your Options" they state:

There are important factors to consider when rolling over assets to an IRA or leaving assets in an employer retirement plan account. These factors include, but are not limited to, investment options in each type of account, fees and expenses, available services, potential withdrawal penalties, protection from creditors and legal judgments, required minimum distributions, and tax consequences of rolling over employer stock to an IRA.

You may wish to consult a tax advisor about your situation.


Billy
Last edited by BillyG on Thu Dec 04, 2014 8:14 pm, edited 1 time in total.
dbr
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Re: Vanguard Gave the Only Honest Rollover Advice (In a Surv

Post by dbr »

Based on this, Vanguard appears to have given a pretty good answer up to the last sentence. It is still highly inappropriate and should probably be illegal for an investment company to give investment advice, possibly excepting under an agreement with a client for fiduciary for fee advising as a separate business -- and even then . . . ..

In an emailed statement, Vanguard—the sole company that advised Mr. Turner to consider staying in the TSP—said: “Making a 401(k) rollover is not a black-and-white decision—it is highly dependent on the individual’s needs and preferences, combined with a thoughtful, cost-benefit analysis of the choices at hand. We feel it is important to educate investors on the pros and cons of making a 401(k) rollover, whether through discussions with our representatives or over the website.”
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Re: Vanguard Gave the Only Honest Rollover Advice (In a Surv

Post by Herekittykitty »

That link from BillyG is very helpful.

When I clicked on it I expected to go to a Vanguard page that gave clear and objective information. Well, maybe you can find that way at the bottom of the page - but what you see in big letters right at the top is:

"Is a 401(k) rollover right for you?

When you left your old job, did you leave your retirement savings behind? Give your money a fresh start by rolling it over into an IRA"

Way at the bottom of the page in smaller letters is:

"Explore your options and weigh the pros and cons" which is a hyperlink to a small box with advantages and disadvantages to rolling over into an IRA versus keep your money in your 401k or other employer versus cash out your 401k account. You have to scroll up and down in the small box to read it all and it isn't all visible on one page at one time and it literally makes me dizzy/nauseated to try to scroll up and down to see all the info. I can't tell if the info is complete enough to be useful but I didn't notice anything about protection of assets in there although I could have missed it.

So - is Vanguard terrific? Yep. But can I tell that from the Vanguard page "Is a 401(k) rollover right for you?" Nope.
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Re: Vanguard Gave the Only Honest Rollover Advice (In a Surv

Post by SGM »

Thanks for the excellent posts Billy.

Half way down the Vanguard page it states the following:

"Want to make sure a 401(k) rollover is your best choice?
Understand and compare these and other factors before deciding what's best for you:
• Investment options.
• Fees and expenses.
• Withdrawal requirements and potential penalties.
• Tax consequences.
• Account services.
• Protection from creditors."

Then you can click to find additional information concerning the pros and cons of a rollover. Yes you should seek the advice of a CFP or your tax advisor if you are too uneducated to make the decision on your own. I knew the investment options, fees, penalties, tax consequences and protection of every 401k or IRA I ever owned. Account services seem self evident or experiential.

Occasionally I listen to Edelman on the radio for a laugh. Edelman has been pushing government employees to roll over their low cost TSP into IRAs with him. Edelman has seminars for government employees in the DC area. He clearly states that the program is for educational purposes only. His advice is snake oil when you compare him to what the Vanguard rep stated.

Did the Vanguard rep do anything wrong in telling the caller to consider leaving his funds in the low cost TSP?
Throwing out the statement that the Vanguard rep was acting illegally is a conversation ender. Let the lawyers and the anal retentive types haggle over the legality of telling someone to consider remaining in their TSP instead of rolling over to a Vanguard IRA.

The culture at Vanguard is different because of Jack Bogle's efforts. Thank you again St. Jack. You could have pursued being a billionaire, but you chose to keep costs low and help the individual investor. You are not one of the billionaire Johnsons. Thank you. Thank you.
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Re: Vanguard Gave the Only Honest Rollover Advice (In a Surv

Post by nisiprius »

As reported--"Only one firm, Vanguard Group, advised him to consider remaining in the federal government’s Thrift Savings Plan"--goes well beyond dismissive boilerplate disclaimers (even though of course it includes the word "consider.") One would like to know the actual words the representative used, but Turner was left with the impression that the Vanguard rep had "advised him to consider remaining" in the TSP.

There's all the difference in the world between a statement like (my imagination as to the wording)

"Maybe you should consider staying in the TSP plan"

even with that hedged "consider," and something like

"the downside to the Thrift Plan is the fact that you have only five investment choices. None of them are particularly exciting in terms of their performance relative to what’s available elsewhere, so we are not terribly thrilled with the choices in the Thrift Plan although we do acknowledge it’s really cheap, but of course it's your own decision to make and you should consider everything."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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BillyG
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Re: Vanguard Gave the Only Honest Rollover Advice (In a Surv

Post by BillyG »

SGM wrote:Thanks for the excellent posts Billy.

The culture at Vanguard is different because of Jack Bogle's efforts. Thank you again St. Jack. You could have pursued being a billionaire, but you chose to keep costs low and help the individual investor. You are not one of the billionaire Johnsons. Thank you. Thank you.
Hi Sam,

Vanguard is different.

I was reminded this week that Vanguard is different when I tried to close out a brokerage account at Fidelity -- worth a total of $0.69! I had tried to close out the brokerage account over ten years ago when I asked them to send me a check for the balance. They sent me a check for everything except $0.69 which they explained was accrued interest. This ticked me off because I clearly told them to close the account. So I left it in the account. And waited. And they sent me paper statements. And I waited. And they sent me paper statements. I tried to close it online but they would not issue a check for less than $10 so they couldn't close it. And I waited. This year I finally decided to let more trees live and I called them and told them to close the account and write off the $0.69. The Fidelity rep said he was very sad that I was closing my brokerage account. No wonder their expenses are so high. Well, they are not THAT high but they are higher than Vanguard's.

Billy
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