WSJ: Discount Brokers Win Bonuses to Push Costlier Products

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Munir
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WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by Munir » Wed Jan 10, 2018 3:08 pm

https://www.wsj.com/articles/advisers-a ... 1515604130

"At Fidelity, Schwab and TD Ameritrade, employees win extra pay or other incentives to put clients in products that are more lucrative for them, and the firm. Customers may end up with products and services that are costlier than they need."

"Vanguard does not have such incentives."

Jason Zweig is a co-author of this article in today's Wall Street Journal.

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Taylor Larimore
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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by Taylor Larimore » Wed Jan 10, 2018 3:41 pm

Munir wrote:
Wed Jan 10, 2018 3:08 pm
https://www.wsj.com/articles/advisers-a ... 1515604130

"At Fidelity, Schwab and TD Ameritrade, employees win extra pay or other incentives to put clients in products that are more lucrative for them, and the firm. Customers may end up with products and services that are costlier than they need."

"Vanguard does not have such incentives."

Jason Zweig is a co-author of this article in today's Wall Street Journal.
Munir:

Strange, my issue of today's (1/10/2017) Wall Street Journal does not carry this article. I wonder if their biggest advertisers asked the WSJ to remove the article?

This is the first I have heard that the employees of Fidelity, Schwab and TDAmeritrade receive extra pay for switching customers to higher cost products (although I'm not surprised).

I am glad I am with Vanguard where all profits are returned to fund shareholders.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by SlowMovingInvestor » Wed Jan 10, 2018 3:46 pm

Taylor Larimore wrote:
Wed Jan 10, 2018 3:41 pm
Munir wrote:
Wed Jan 10, 2018 3:08 pm
https://www.wsj.com/articles/advisers-a ... 1515604130

"At Fidelity, Schwab and TD Ameritrade, employees win extra pay or other incentives to put clients in products that are more lucrative for them, and the firm. Customers may end up with products and services that are costlier than they need."

"Vanguard does not have such incentives."

Jason Zweig is a co-author of this article in today's Wall Street Journal.
Munir:

Strange, my issue of today's (1/10/2017) Wall Street Journal does not carry this article. I wonder if their biggest advertisers asked the WSJ to remove the article?

This is the first I have heard that the employees of Fidelity, Schwab and TDAmeritrade receive extra pay for switching customers to higher cost products (although I'm not surprised).

I am glad I am with Vanguard where all profits are returned to fund shareholders.

Best wishes.
Taylor
That may be in tomorrow's paper. But I doubt very much that the WSJ (and Zweig) would go along with removing an article.

I will say that at Fidelity, Schwab and TDAM, I just had to tell the brokers that I'm a self-directed investor and they backed off any sales pitch immediately. But I cannot comment on what they might do or say if I had expressed some interest in managed accounts.
Last edited by SlowMovingInvestor on Wed Jan 10, 2018 3:57 pm, edited 1 time in total.

stats99
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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by stats99 » Wed Jan 10, 2018 3:50 pm

The print article often follows the internet version the next day

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Munir
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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by Munir » Wed Jan 10, 2018 6:26 pm

This was from the internet version. It is interesting that among the comments on the article, many were defensive and one or two said Vanguard, Vanguard, Vanguard!

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by Olemiss540 » Wed Jan 10, 2018 6:35 pm

I think it is false to proclaim these firms as discount brokers and it is a misleading way to make a story.

These are NOT discount brokers, they are full service (re: full price) brokerage houses that offer some discount investments. All publicly traded brokerage houses outside of Vanguard HAVE to be this way to turn a profit for their board/shareholders. It is inherent in their structure and to be a consumer and be surprised there is a push or metric to improve employee compensation (re commission) for selling higher prices products is naive and dangerous.

Vanguard is owned by the fund investors, which is why Mr. Bogle is worth factors less that the CEO's of these "discount brokerage houses".....
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by alec » Wed Jan 10, 2018 7:18 pm

yeah, this seems like S.O.P. for the brokerage industry.
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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by nisiprius » Wed Jan 10, 2018 7:27 pm

Vanguard may not be perfect, but, boy, are they good. Good for Vanguard!
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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by HueyLD » Wed Jan 10, 2018 8:32 pm

Even Vanguard is not completely innocent.

It appears that Vanguard has been promoting Vanguard PAS especially for their Flagship customers. Their CFPs have also highly recommended international bond funds and international stock funds even though some of their customers previously indicated that they didn't want international products.

Look, all of them want to make money and it is normal in a capitalistic society. It is just that Vanguard is less pushy than their competitors.

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Taylor Larimore
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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by Taylor Larimore » Wed Jan 10, 2018 8:41 pm

HueyLD wrote: Even Vanguard is not completely innocent.

It appears that Vanguard has been promoting Vanguard PAS especially for their Flagship customers. Their CFPs have also highly recommended international bond funds and international stock funds even though some of their customers previously indicated that they didn't want international products.
Look, all of them want to make money and it is normal in a capitalistic society. It is just that Vanguard is less pushy than their competitors.
HueyLD:

I am surprised you do not know. Vanguard does not want to make money. Vanguard is the only mutual, mutual fund company. Any "profit" goes right back to fund shareholders--not to company stockholders because Vanguard doesn't have any stockholders like Schwab and Fidelity.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by neilpilot » Wed Jan 10, 2018 10:25 pm

There must be something wrong with me. We opened 5 accounts with Scottrade in 3rd qtr of 2015. Here it is almost 2.5 years later and Scottrade has never called or written us with a suggestion to buy or sell anything.

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by Taylor Larimore » Wed Jan 10, 2018 10:37 pm

neilpilot wrote:
Wed Jan 10, 2018 10:25 pm
There must be something wrong with me. We opened 5 accounts with Scottrade in 3rd qtr of 2015. Here it is almost 2.5 years later and Scottrade has never called or written us with a suggestion to buy or sell anything.
neilpilot:

Scotttrade is currently "joining" TD Ameritrade featured in the article. Beware. :twisted:

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by neilpilot » Wed Jan 10, 2018 10:54 pm

Taylor Larimore wrote:
Wed Jan 10, 2018 10:37 pm
neilpilot wrote:
Wed Jan 10, 2018 10:25 pm
There must be something wrong with me. We opened 5 accounts with Scottrade in 3rd qtr of 2015. Here it is almost 2.5 years later and Scottrade has never called or written us with a suggestion to buy or sell anything.
neilpilot:

Scotttrade is currently "joining" TD Ameritrade featured in the article. Beware. :twisted:

Best wishes.
Taylor
I'm well aware. I just moved some assets over to Merrill Edge and, around mid-year, I will evaluate if I want to consolidate everything with either ME or TDA.

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by NYC_Guy » Wed Jan 10, 2018 10:55 pm

Taylor Larimore wrote:
Wed Jan 10, 2018 8:41 pm
HueyLD wrote: Even Vanguard is not completely innocent.

It appears that Vanguard has been promoting Vanguard PAS especially for their Flagship customers. Their CFPs have also highly recommended international bond funds and international stock funds even though some of their customers previously indicated that they didn't want international products.
Look, all of them want to make money and it is normal in a capitalistic society. It is just that Vanguard is less pushy than their competitors.
HueyLD:

I am surprised you do not know. Vanguard does not want to make money. Vanguard is the only mutual, mutual fund company. Any "profit" goes right back to fund shareholders--not to company stockholders because Vanguard doesn't have any stockholders like Schwab and Fidelity.

Best wishes.
Taylor
But the officers at Vanguard are not so altruistic. They don’t work for free... Remember that Northwestern Mutual also returns all profit to its members, too. And their employees and agents also aren’t altruistic.

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by triceratop » Thu Jan 11, 2018 12:33 am

acanthurus wrote:
Thu Jan 11, 2018 12:21 am
I find a polite "no" works well on the rare occasion it's needed. It's an extremely small price to pay for accurate record keeping and a decent brokerage platform.
I hope Vanguard reads this forum. Never have I seen index investors so scathing in their (accurate) perceptions about brokerage quality, even as the investment products continue to be top-notch.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by DippityDoo » Thu Jan 11, 2018 2:57 am

HueyLD wrote:
Wed Jan 10, 2018 8:32 pm
Even Vanguard is not completely innocent.

It appears that Vanguard has been promoting Vanguard PAS especially for their Flagship customers.
According to this article, Vanguard "financial planners who don't reach company-set quotas for signing up customers for Personal Advisor Services don't qualify for performance bonuses.

A financial planner at the firm who spoke on the condition that he not be identified confirmed that it "counts against you" when you don't recruit enough customers."


According to this Glassdoor review, the quota is 20%. The reviewer notes, "They tell you PAS is not a sales job, but you have to enroll 20% of the clients you speak with everyday. Just because advisors are salaried doesn’t mean it’s not a sales job..."

I'm not convinced that ANY brokerage employee acting as an advisor is conflict-free. Vanguard may not compensate CFPs based on the funds they recommend, but if they offer bonuses for new PAS sign-ups or retention of PAS accounts, that's a ding against the conflict-free claim in my book. Especially if the advice is a cookie-cutter plan that can be accomplished more affordably for the client by a target date or life strategy fund.

That said, in the short time I've had a Vanguard account, I have not been pushed toward PAS. Nor has Fidelity tried to steer me toward funds or services I don't want.

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by veggivet » Thu Jan 11, 2018 5:42 am

I'm shocked! Companies pursuing profits in a capitalist economy? What's next, gambling at Rick's casino in Casablanca?

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by dogagility » Thu Jan 11, 2018 6:39 am

Knowledge is power and saves you money.

Can I be placed into high cost funds at Fidelity if I express an interest to be hand-held by a CFP? Sure. If I have enough knowledge and confidence in myself to be a DIY investor, can I choose low cost funds at Fidelity that are appropriate for a Boglehead-approved portfolio? Yes.

Vanguard probably saves money (in fees) for some within the naive-investor pool, but to say Fidelity is a poor choice for Boglehead investors is not true.

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by chambers136 » Thu Jan 11, 2018 7:08 am

I have most of our money at Schwab and Fidelity. I'm a DIY investor, never receive calls to push me into anything. Advisors are there if I choose, but they seem to be fine leaving me alone.

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by livesoft » Thu Jan 11, 2018 7:46 am

DippityDoo wrote:
Thu Jan 11, 2018 2:57 am
That said, in the short time I've had a Vanguard account, I have not been pushed toward PAS. Nor has Fidelity tried to steer me toward funds or services I don't want.
We have gotten more than one letter and e-mail about Vanguard PAS from Vanguard. We are nowhere near Flagship level at Vanguard, too.

Every firm markets itself. I don't buy up the entire rack of candy right there at the checkout. And I don't even pay for the WSJ either despite all the junk mail I get from them. :)
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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by HueyLD » Thu Jan 11, 2018 7:50 am

Taylor Larimore wrote:
Wed Jan 10, 2018 8:41 pm
HueyLD:

I am surprised you do not know. Vanguard does not want to make money. Vanguard is the only mutual, mutual fund company. Any "profit" goes right back to fund shareholders--not to company stockholders because Vanguard doesn't have any stockholders like Schwab and Fidelity.
I have nothing but the utmost respect for Taylor, the King of Bogleheads.

However, I absolutely disagree with the statement that “Vanguard does not want to make money.”

Making money is not a sin in a capitalistic society. Vanguard is a company with a good reputation because it offers good products at reasonable prices and it does not treat customers like ATMs. But Vanguard wants to make “reasonable” profits because without profitable operations the company will cease to exist. And its executives are well compensated as they should be.

Many 501(c)3 tax-exempt companies have paid officers and staff on board because very few people have the desire and/or resources to work for free. And it is not unusual to have paid staff in key positions (accounting for example) in the nonprofit sector because certain critical functions cannot be reliably done by volunteers.

I am grateful for the Vanguard effect, but I am also fully aware of the profit motive in every brokerage on the planet.

Again, thank you Taylor (and others) for the success of the BH forum.

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by saltycaper » Thu Jan 11, 2018 8:12 am

Taylor Larimore wrote:
Wed Jan 10, 2018 8:41 pm

Vanguard does not want to make money.
Of course Vanguard wants to make money. The people running the company want to be paid, and they want to invest in their operations and expand their reach. They want to make money so they can lower the cost of their funds, attract more investors, and in that way make even more money. Being a Vanguard fund owner, I would be very frustrated if the company came out and said they didn't want to make any more money and would no longer be reinvesting in their operations. If Vanguard suddenly didn't want to make money, they wouldn't be around very long.
Quod vitae sectabor iter?

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by david99 » Thu Jan 11, 2018 8:23 am

chambers136 wrote:
Thu Jan 11, 2018 7:08 am
I have most of our money at Schwab and Fidelity. I'm a DIY investor, never receive calls to push me into anything. Advisors are there if I choose, but they seem to be fine leaving me alone.
I have some of my portfolio at Fidelity and I get calls from them wanting to review my investments. I just ignore the calls and eventually they stop calling. They only call about once a year.

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by david1082b » Thu Jan 11, 2018 8:36 am

veggivet wrote:
Thu Jan 11, 2018 5:42 am
I'm shocked! Companies pursuing profits in a capitalist economy? What's next, gambling at Rick's casino in Casablanca?
Bogleheads® investment philosophy

6. Keep costs low

https://www.bogleheads.org/wiki/Boglehe ... _costs_low
On a forum called Bogleheads, costs matter. Do these high-fee products provide decent value-added or can people avoid them and get good results with lower costs, giving them more money for themselves in the long run? I'm not shocked to see this kind of thread posted on here. Learning to avoid unnecessary fees is an important process.

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by Carl53 » Thu Jan 11, 2018 8:43 am

saltycaper wrote:
Thu Jan 11, 2018 8:12 am
Taylor Larimore wrote:
Wed Jan 10, 2018 8:41 pm

Vanguard does not want to make money.
Of course Vanguard wants to make money. The people running the company want to be paid, and they want to invest in their operations and expand their reach. They want to make money so they can lower the cost of their funds, attract more investors, and in that way make even more money. Being a Vanguard fund owner, I would be very frustrated if the company came out and said they didn't want to make any more money and would no longer be reinvesting in their operations. If Vanguard suddenly didn't want to make money, they wouldn't be around very long.
We only have investments outside of cash based investments with Vanguard. Vanguard is one of only a few companies that I would generally recommend for anything. That said, I find their historical lack of transparency regarding executive compensation most disconcerting. It makes me wonder what their performance bonuses are tied too.

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by Ron Scott » Thu Jan 11, 2018 8:56 am

Munir wrote:
Wed Jan 10, 2018 3:08 pm
"At Fidelity, Schwab and TD Ameritrade, employees win extra pay or other incentives to put clients in products that are more lucrative for them, and the firm."
Olemiss540 wrote:
Wed Jan 10, 2018 6:35 pm
I think it is false to proclaim these firms as discount brokers and it is a misleading way to make a story.

These are NOT discount brokers...
Common, Who's fooling who?
https://www.ispot.tv/ad/Av9V/charles-sc ... autoplay=1

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by Olemiss540 » Thu Jan 11, 2018 9:16 am

Ron Scott wrote:
Thu Jan 11, 2018 8:56 am
Munir wrote:
Wed Jan 10, 2018 3:08 pm
"At Fidelity, Schwab and TD Ameritrade, employees win extra pay or other incentives to put clients in products that are more lucrative for them, and the firm."
Olemiss540 wrote:
Wed Jan 10, 2018 6:35 pm
I think it is false to proclaim these firms as discount brokers and it is a misleading way to make a story.

These are NOT discount brokers...
Common, Who's fooling who?
https://www.ispot.tv/ad/Av9V/charles-sc ... autoplay=1
Funny. I love the end of that commercial "Schwab, a modern approach to wealth management". Surprised their slogan isn't "Schwab, the place to invest that averages the lowest fees in the industry" as that sure would seem like a heck of a better approach!
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by ruralavalon » Thu Jan 11, 2018 9:19 am

Munir wrote:
Wed Jan 10, 2018 3:08 pm
https://www.wsj.com/articles/advisers-a ... 1515604130

"At Fidelity, Schwab and TD Ameritrade, employees win extra pay or other incentives to put clients in products that are more lucrative for them, and the firm. Customers may end up with products and services that are costlier than they need."

"Vanguard does not have such incentives."

Jason Zweig is a co-author of this article in today's Wall Street Journal.
This is useful information for anyone interested in keeping their investing costs low.

This is one reason that I am a huge fan of Vanguard.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by Dottie57 » Thu Jan 11, 2018 9:34 am

Munir wrote:
Wed Jan 10, 2018 3:08 pm
https://www.wsj.com/articles/advisers-a ... 1515604130

"At Fidelity, Schwab and TD Ameritrade, employees win extra pay or other incentives to put clients in products that are more lucrative for them, and the firm. Customers may end up with products and services that are costlier than they need."

"Vanguard does not have such incentives."

Jason Zweig is a co-author of this article in today's Wall Street Journal.

I am not surprised their are incentives. I always assumed theremwere. After all we talk about being sold products. This requires sales people.

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by Nate79 » Thu Jan 11, 2018 11:16 am

DippityDoo wrote:
Thu Jan 11, 2018 2:57 am
HueyLD wrote:
Wed Jan 10, 2018 8:32 pm
Even Vanguard is not completely innocent.

It appears that Vanguard has been promoting Vanguard PAS especially for their Flagship customers.
According to this article, Vanguard "financial planners who don't reach company-set quotas for signing up customers for Personal Advisor Services don't qualify for performance bonuses.

A financial planner at the firm who spoke on the condition that he not be identified confirmed that it "counts against you" when you don't recruit enough customers."


According to this Glassdoor review, the quota is 20%. The reviewer notes, "They tell you PAS is not a sales job, but you have to enroll 20% of the clients you speak with everyday. Just because advisors are salaried doesn’t mean it’s not a sales job..."

I'm not convinced that ANY brokerage employee acting as an advisor is conflict-free. Vanguard may not compensate CFPs based on the funds they recommend, but if they offer bonuses for new PAS sign-ups or retention of PAS accounts, that's a ding against the conflict-free claim in my book. Especially if the advice is a cookie-cutter plan that can be accomplished more affordably for the client by a target date or life strategy fund.

That said, in the short time I've had a Vanguard account, I have not been pushed toward PAS. Nor has Fidelity tried to steer me toward funds or services I don't want.
Not surprising at all. Vanguard is not the white knight that everyone seems to claim on this site.

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by ruralavalon » Thu Jan 11, 2018 2:16 pm

Nate79 wrote:
Thu Jan 11, 2018 11:16 am
DippityDoo wrote:
Thu Jan 11, 2018 2:57 am
HueyLD wrote:
Wed Jan 10, 2018 8:32 pm
Even Vanguard is not completely innocent.

It appears that Vanguard has been promoting Vanguard PAS especially for their Flagship customers.
According to this article, Vanguard "financial planners who don't reach company-set quotas for signing up customers for Personal Advisor Services don't qualify for performance bonuses.

A financial planner at the firm who spoke on the condition that he not be identified confirmed that it "counts against you" when you don't recruit enough customers."


According to this Glassdoor review, the quota is 20%. The reviewer notes, "They tell you PAS is not a sales job, but you have to enroll 20% of the clients you speak with everyday. Just because advisors are salaried doesn’t mean it’s not a sales job..."

I'm not convinced that ANY brokerage employee acting as an advisor is conflict-free. Vanguard may not compensate CFPs based on the funds they recommend, but if they offer bonuses for new PAS sign-ups or retention of PAS accounts, that's a ding against the conflict-free claim in my book. Especially if the advice is a cookie-cutter plan that can be accomplished more affordably for the client by a target date or life strategy fund.

That said, in the short time I've had a Vanguard account, I have not been pushed toward PAS. Nor has Fidelity tried to steer me toward funds or services I don't want.
Not surprising at all. Vanguard is not the white knight that everyone seems to claim on this site.
I am a Flagship customer, and no Vanguard rep has ever suggested Personal Advisory Services for me.

Almost any method of employee compensation or bonus has some potential to create a conflict of interest. But with no commissions for Vanguard employees there is certainly less conflict of interest than at other firms.

Being the most conflict-free, having a mutual structure with no outside shareholders to satisfy, being the pioneer in low expense funds, and continuing to offer the widest range of low expense mutual funds, confers "white knight" status in my opinion.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by DippityDoo » Thu Jan 11, 2018 3:42 pm

livesoft wrote:
Thu Jan 11, 2018 7:46 am
Every firm markets itself.
Yep. As an Edward Jones survivor, for me the issue is transparency. I expect less than full disclosure in a marketing brochure or web banner. But when I talk to a rep, I want transparency. And I want it ESPECIALLY when there may be a potential conflict of interest.

If I wanted to do Vanguard PAS, I'd ask the CFP if he's incentivized. If he admitted to the quota and bonus potential, I'd probably go ahead and sign up for the service. But if he regurgitated Vanguard's marketing materials (no compensation for funds selected) without acknowledging other incentives, I'd probably decline the service. I declined to open an account at Schwab and put only a small amount at TD Ameritrade after their reps didn't answer my compensation questions in a manner consistent with disclosures on the brokerage web site. Most of my assets are at Fido because my rep there was the most transparent.

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by lack_ey » Thu Jan 11, 2018 3:54 pm

Olemiss540 wrote:
Wed Jan 10, 2018 6:35 pm
I think it is false to proclaim these firms as discount brokers and it is a misleading way to make a story.

These are NOT discount brokers, they are full service (re: full price) brokerage houses that offer some discount investments. All publicly traded brokerage houses outside of Vanguard HAVE to be this way to turn a profit for their board/shareholders. It is inherent in their structure and to be a consumer and be surprised there is a push or metric to improve employee compensation (re commission) for selling higher prices products is naive and dangerous.

Vanguard is owned by the fund investors, which is why Mr. Bogle is worth factors less that the CEO's of these "discount brokerage houses".....
Under the common understanding and usage of these terms, no, these [Fidelity, Charles Schwab, TD Ameritrade] are discount brokers, distinguished from full-service brokers in the services offered and fees charged at least in barebones usage of the platforms without signing up for the extras that may be pushed and are more lucrative.

Could you maybe grind your axes in a way that doesn't involve redefining terms and reducing clarity?

Olemiss540
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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by Olemiss540 » Thu Jan 11, 2018 4:39 pm

lack_ey wrote:
Thu Jan 11, 2018 3:54 pm
Olemiss540 wrote:
Wed Jan 10, 2018 6:35 pm
I think it is false to proclaim these firms as discount brokers and it is a misleading way to make a story.

These are NOT discount brokers, they are full service (re: full price) brokerage houses that offer some discount investments. All publicly traded brokerage houses outside of Vanguard HAVE to be this way to turn a profit for their board/shareholders. It is inherent in their structure and to be a consumer and be surprised there is a push or metric to improve employee compensation (re commission) for selling higher prices products is naive and dangerous.

Vanguard is owned by the fund investors, which is why Mr. Bogle is worth factors less that the CEO's of these "discount brokerage houses".....
Under the common understanding and usage of these terms, no, these [Fidelity, Charles Schwab, TD Ameritrade] are discount brokers, distinguished from full-service brokers in the services offered and fees charged at least in barebones usage of the platforms without signing up for the extras that may be pushed and are more lucrative.

Could you maybe grind your axes in a way that doesn't involve redefining terms and reducing clarity?
"Redefining terms and reducing clarity" - We are on a forum nicknamed after the founder of Vanguard. I would presume this forum's majority would share similar definition of discount brokerage as I have in the above quote.

Just because one can use the Schwab and Fidelity web interface to invest in some of their low cost index based funds does not mean they are discount brokerages. It just means they offer a sampling of low cost investments in order to attract a different type of investor (so they can more easily sell that investor higher cost products).

Not trying to downplay those that use Schwab/Fido, and I have considered switching myself at times....
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

neilpilot
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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by neilpilot » Thu Jan 11, 2018 4:48 pm

Olemiss540 wrote:
Thu Jan 11, 2018 4:39 pm


Just because one can use the Schwab and Fidelity web interface to invest in some of their low cost index based funds does not mean they are discount brokerages. It just means they offer a sampling of low cost investments in order to attract a different type of investor (so they can more easily sell that investor higher cost products).

Not trying to downplay those that use Schwab/Fido, and I have considered switching myself at times....
I just googled "discount brokerage". Wiki's definition is "A discount brokerage is a business that charges clients significantly lower fees than a traditional brokerage firm but without providing financial advice.". So, depending on how that's interpreted, that even excludes Vanguard. Most of the internet sources that provide "best discount broker" lists include Schwab & Fido near the top.

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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by DippityDoo » Thu Jan 11, 2018 4:58 pm

ruralavalon wrote:
Thu Jan 11, 2018 2:16 pm
Almost any method of employee compensation or bonus has some potential to create a conflict of interest.
Yes, that was my point but you stated it better.
But with no commissions for Vanguard employees there is certainly less conflict of interest than at other firms.
If Vanguard has bonuses for PAS sign-ups, is that a lesser conflict of interest than Schwab or Fidelity incentivizing their reps with sign-up bonuses to their respective robo advisors? PAS, from what I have read, tends to recommend a cookie-cutter, four-fund portfolio. Schwab and Fido also put the investor into funds from a larger but still preferred pool of funds. It may not be commission-based, but it still sounds like financial incentive to put the investor into particular funds when the rep gets a bonus for doing so. Please correct me if I'm missing something here.
Being the most conflict-free, having a mutual structure with no outside shareholders to satisfy, being the pioneer in low expense funds, and continuing to offer the widest range of low expense mutual funds, confers "white knight" status in my opinion.
I'll gladly grant "white knight" status to Vanguard's mutual fund endeavors. But I'm not convinced PAS is as conflict-free as often claimed. For example, if a Target Date fund with a .14 ER would serve my needs most cost-efficiently, is it "white knight" behavior to charge me twice as much for essentially the same thing in PAS if all I'm looking for is allocation assistance not hand-holding?

Anyway, I don't mean to sound argumentative. I appreciated your response. Edward Jones taught me to distrust financial services in general.

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ruralavalon
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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by ruralavalon » Thu Jan 11, 2018 6:11 pm

:happy
DippityDoo wrote:
Thu Jan 11, 2018 4:58 pm
ruralavalon wrote:
Thu Jan 11, 2018 2:16 pm
Almost any method of employee compensation or bonus has some potential to create a conflict of interest.
Yes, that was my point but you stated it better.
ruralavalon wrote:But with no commissions for Vanguard employees there is certainly less conflict of interest than at other firms.
If Vanguard has bonuses for PAS sign-ups, is that a lesser conflict of interest than Schwab or Fidelity incentivizing their reps with sign-up bonuses to their respective robo advisors? PAS, from what I have read, tends to recommend a cookie-cutter, four-fund portfolio. Schwab and Fido also put the investor into funds from a larger but still preferred pool of funds. It may not be commission-based, but it still sounds like financial incentive to put the investor into particular funds when the rep gets a bonus for doing so. Please correct me if I'm missing something here.
I read the two linked sources, from thestreet and glassdoor. They did not say that at Vanguard selling particular funds made the CFP eligible for bonuses.

I don't doubt the cookie-cutter approach at Vanguard PAS, which has often been mentioned on the forum, but that involves using very low expense ratio total market index funds. I have not seen anything to suggest that high expense funds are touted by Vanguard PAS.


DippityDoo wrote:
ruralavalon wrote:Being the most conflict-free, having a mutual structure with no outside shareholders to satisfy, being the pioneer in low expense funds, and continuing to offer the widest range of low expense mutual funds, confers "white knight" status in my opinion.
I'll gladly grant "white knight" status to Vanguard's mutual fund endeavors. But I'm not convinced PAS is as conflict-free as often claimed. For example, if a Target Date fund with a .14 ER would serve my needs most cost-efficiently, is it "white knight" behavior to charge me twice as much for essentially the same thing in PAS if all I'm looking for is allocation assistance not hand-holding?
If they sell PAS to someone who only needs a target retirement fund, then there is an actual conflict. But there is nothing to show that Vanguard CFPs do that. The two linked sources do not say that.

The articles from thestreet and glassdoor were not very specific about practices at Vanguard, on any management pressure and size of bonus incentives, to show me that Vanguard CFPs were actually signing up people for PAS who did not need or want the service.


DippityDoo wrote:Anyway, I don't mean to sound argumentative. I appreciated your response. Edward Jones taught me to distrust financial services in general.
I don't want to seem argumentative either. I think we are mostly in agreement. I just felt that too much was inferred from very little actual information in the two linked sources.

Solomon Smith Barney taught me to be wary of the financial services industry.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Earl Lemongrab
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Re: WSJ: Discount Brokers Win Bonuses to Push Costlier Products

Post by Earl Lemongrab » Fri Jan 12, 2018 7:20 pm

I've used most of the popular discount brokerages at one time or another. I have never had any try to push anything on me. Some have contacted me to ask I need to go over my portfolio, and if I had said yes they might have made suggestions. I but didn't and that was always the end of it.

Like I've said in the past, if the non-profit model guaranteed the best then it dominate all facets of modern life. Yet that isn't what happens. Vanguard doesn't need to make a profit. They also don't need to care if they are profitable. That means that if the web site is antiquated or customer service bad, oh well.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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