What Could Stop Vanguard From World Domination? - Article by Ben Carlson

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Rowan Oak
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What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by Rowan Oak »

Article by Ben Carlson: What Could Stop Vanguard From World Domination?http://awealthofcommonsense.com/2017/02 ... omination/
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pyld76
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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by pyld76 »

Vanguard can stop Vanguard.

They won't continue to capture the retail investor flows if they don't fix the customer service trajectory.
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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by lack_ey »

pyld76 wrote:Vanguard can stop Vanguard.

They won't continue to capture the retail investor flows if they don't fix the customer service trajectory.
What percentage of their assets and fund flows are with Vanguard Brokerage Services (or the old mutual fund platform)? My impression is that they have a whole lot of assets invested through other platforms, though I don't know how much exactly.
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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by pyld76 »

I don't know what the percentages are, and I'll bet a lot of the flows are ETF and/or institutional.

I do know that at the <flagship level, the CS has deteriorated noticeably (data point of one) in the last two years or so, and things one reads here tend to give some credence to the idea my anecdotal experiences may not be atypical. Sooner or later, people will leave (so,long as others are price competitive).
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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by *3!4!/5! »

In some ways, Vanguard is the only game in town.
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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by mindboggling »

I could see Vanguard getting out of the retail investment game altogether and just concentrating on institutional. Sell it to Schwab or Fido. Let them handle the customer service hassles, hand-holding, small transactions, etc.

steve
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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by Longtermgrowth »

Since it's not difficult getting their ETFs commission free from some other brokerages, taking the customer service issue out of the picture, I'm guessing not much.
If there wasn't a way to get Vanguard ETFs commission free anywhere else, that might put the damper on things. Unless they turn around the customer service issue if/when that happens. The only reason I use another brokerage is because of concerns over tax form accuracy, which falls under customer service. If the brokerage I'm using didn't offer commission free ETFs of all type with qualifying balance, I'd be at another brokerage using their free ETF lineup of comparable structure and cost to Vanguards.
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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by chw »

*3!4!/5! wrote:In some ways, Vanguard is the only game in town.
I disagree. I'm with Schwab, and have built a low cost portfolio (2/3 rds Vanguard ETFs/funds), and pay little or no cost for transacting the Vanguard ETFs/funds. The Schwab customer service s excellent. I haven't fully experienced Vanguard's customer service, but I do find their website kind of clunky when compared to Schwab (though it is adequate).
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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by CyclingDuo »

chw wrote:
*3!4!/5! wrote:In some ways, Vanguard is the only game in town.
I disagree. I'm with Schwab, and have built a low cost portfolio (2/3 rds Vanguard ETFs/funds), and pay little or no cost for transacting the Vanguard ETFs/funds. The Schwab customer service s excellent. I haven't fully experienced Vanguard's customer service, but I do find their website kind of clunky when compared to Schwab (though it is adequate).
Ditto with regard to Fidelity. Plenty of investment options there including the Vanguard products, and no customer service issues.

The Oblivious Investor (and others) list the various simple portfolios available using the Fidelity products:

http://www.obliviousinvestor.com/8-simp ... ares-etfs/

I'm sure Vanguard will spend a great deal of time addressing the growth issues they are experiencing.
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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by David Jay »

pyld76 wrote:I don't know what the percentages are, and I'll bet a lot of the flows are ETF and/or institutional.
This.

I have noted just over the last year how many newbies coming to BH have some Vanguard options in their 401Ks. SP500, Total Bond, maybe a Mid-Cap, Small Cap. It is great for the 401K investors.

I think this has been partially driven by the fuduciary push, as well as some of the well-publicized lawsuits (such as the one by Edward Jones employees).
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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by nisiprius »

mindboggling wrote:I could see Vanguard getting out of the retail investment game altogether and just concentrating on institutional. Sell it to Schwab or Fido. Let them handle the customer service hassles, hand-holding, small transactions, etc.

steve
Yes, I'd been thinking about that, too. The loss to me, if they did that, or if Vanguard service became unacceptable to me, is the transaction fees for Vanguard funds at Schwab and Fidelity; the (current) (seeming) unavailability of Admiral shares of Vanguard index funds outside of Vanguard; and the (current) (small) ETF fees for Vanguard ETFs bought elsewhere. If nothing changed about the fee structure, and I could not invest directly at Vanguard, would I stick with Vanguard funds or accept Brand X low-cost index funds? I'll cross that bridge if and when I come to it.

Several times before, though, I've thought "why isn't Vanguard doing obvious thing X? They really should be doing obvious thing X," and, after three years or so, they began doing obvious thing X. So my guess is they will probably beef up their staffing and their IT and fix their problems.

I think it's good that Vanguard has more or less acknowledged to the press that they are having growing pains.
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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by ResearchMed »

mindboggling wrote:I could see Vanguard getting out of the retail investment game altogether and just concentrating on institutional. Sell it to Schwab or Fido. Let them handle the customer service hassles, hand-holding, small transactions, etc.

steve
If they kept their retirement plans (not individual IRA's, but 403b's/etc.), then they'd still have "retail clients" in the employees.
(Are these considered "institutional"? They use "institutional" shares, etc.)

I have no idea what percent these types of plans make up, vs. individual IRA's/taxable, vs. true institutional (e.g., endowments or ?).

And yes, if they don't fix the service problems, they won't take over the universe...

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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by David Jay »

Best web source I could find for the top 401K funds here: http://www.thinkadvisor.com/2015/07/29/ ... s-brightsc

[edit] Just in the Top 3 funds in each of 9 categories covered in the article, Vanguard has 790 Billion in 401K assets. Not a bad little sideline. So that is a trillion, minimum by the time you add in all the other funds (TBM didn't make any of the lists, for instance).
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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by BeachPerson »

Ric Edelman on Vanguard
The online services are simply today’s version of Vanguard. They are simply a product that appeals to the do-it-yourself investor, the no load client who would never pay 1% a year for advice. The person who’s a hobbyist who likes to do it himself. They would never hire us anyway.”
Another reason why Vanguard is “kicking butt” is because they have an incredible brand.
From Jack Brennan's "Straight Talk on Investing", page 23 "Living below your means is the ultimate financial strategy"
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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by pyld76 »

I'll tell you the one thing that's problematic for me going anywhere else but VG: one of philosophy and a wee bit of paranoia.

I own VG, as a fund shareholder. That structure is what the rational agent would choose every time as it limits the ability (somewhat) and the motivation (more) to screw one's clients.

Yeah, know I can (today) do better on costs and maybe CS at Fido or Schwab. But they aren't in it for me. They are in it for them. And they get to decide when to offer me a loss leader, rather than having a cheap fund be ostensibly an intentional byproduct of the corporate structure.

So if VG got unbearably bad I'd bail. And be a lot more wary going forward.
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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by hoops777 »

S C H W A B
Better customer service.
Offices
A lot of lower cost options
Much better web site.

There is something called competition and Schwab will lose it's clients if they do not treat them well.I am not drinking the Vanguard kool aid anymore about being morally superior and more trustworthy.Vanguard is great and so is Schwab,but they are different.Schwab also agreed to let me buy Vanguard funds at no cost when I switched.
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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by Portfolio7 »

All our investment vehicles are at Fidelity. My AA is consistent, but funds/etfs have changed as I become less convinced of some other fund families. We have a couple 401k and several IRA accounts, t and r for both of us. At this point our funds/etfs are about 60% Vanguard, 25% DFA, 8% Fidelity, 8% misc, mostly American (forced into this) / Blackrock.

A year ago we were about 40% Vanguard, 35% DFA, 15% Fidelity, 10% misc.
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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by triceratop »

hoops777 wrote:S C H W A B
Better customer service.
Offices
A lot of lower cost options
Much better web site.

There is something called competition and Schwab will lose it's clients if they do not treat them well.I am not drinking the Vanguard kool aid anymore about being morally superior and more trustworthy.Vanguard is great and so is Schwab,but they are different.Schwab also agreed to let me buy Vanguard funds at no cost when I switched.
Hoops777,
Are you referring to no-transaction-fees on Vanguard mutual funds purchased at Schwab? How did you convince them of that? I am aware of some ETF trade offers but never heard of a NTF VG fund offer.
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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by afan »

Competition is great and I hope Schwab and Fidelity keep it up. Maybe I am a cheap date, but I have been perfectly happy with all three. I rarely need customer service so I have not noticed a change from V.

I don't use branches.

I do wonder how long S and F can compete on price. They have much higher cost structures and cannot match V on that measure. It is wonderful they have decided they need the assets and will challenge V for them. But at some point they have to turn a profit on these dirt cheap index funds. Even charging the S commission on a few trades a year is not going to generate much revenue.
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Re: What Could Stop Vanguard From World Domination? - Article by Ben Carlson

Post by CyclingDuo »

afan wrote:Competition is great and I hope Schwab and Fidelity keep it up. Maybe I am a cheap date, but I have been perfectly happy with all three. I rarely need customer service so I have not noticed a change from V.

I don't use branches.

I do wonder how long S and F can compete on price. They have much higher cost structures and cannot match V on that measure. It is wonderful they have decided they need the assets and will challenge V for them. But at some point they have to turn a profit on these dirt cheap index funds. Even charging the S commission on a few trades a year is not going to generate much revenue.
Certainly has been a disruptive force in the investment industry that companies are finally responding to in force. The Millennials being the next huge wave of investors that will continue to drive low cost index fund investing, robo-investing, low cost ETF investing, and keep the competition on their toes for decades to come.

In spite of the trend of money moving from actively managed funds into passive funds, Fidelity certainly seems to be doing fine, and reported record revenue for 2016...

http://www.investors.com/etfs-and-funds ... e-in-2016/

There is a nice chart at that link from Morningstar that shows the top 10 largest fund families, how many assets are under management in active and passive funds, as well as the flows in and out of active and passive funds for 2016.
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