Why did Vanguard drop TurboTax?

[John151]

Vanguard used to offer Vanguard clients discounted or even free access to TurboTax’s tax preparation services. But Vanguard dropped its discounts several years ago, saying that Vanguard considered its core mission to be investment services, not tax services. Was Vanguard’s decision to drop TurboTax just a matter of defining its mission, or could there have been other factors in play? Other mutual fund companies, including Fidelity and T. Rowe Price, continue to offer discounts on TurboTax. Why did Vanguard decide not to?

[retiringwhen]

Vanguard used to offer Vanguard clients discounted or even free access to TurboTax’s tax preparation services. But Vanguard dropped its discounts several years ago, saying that Vanguard considered its core mission to be investment services, not tax services. Was Vanguard’s decision to drop TurboTax just a matter of defining its mission, or could there have been other factors in play? Other mutual fund companies, including Fidelity and T. Rowe Price, continue to offer discounts on TurboTax. Why did Vanguard decide not to?

My credit union dropped it the same year. My assumption (unverified) at the time was the Intuit was changing the fee model in a way that was no longer attractive for low-cost institutions to offer it.

[Eric]

Vanguard operates "at cost," so the cost of providing clients discounted access to TurboTax was passed through to shareholders. In effect, Vanguard was redistributing some shareholders' money (those who don't use TurboTax) to other shareholders (those who do use TurboTax).

This assumes that Vanguard was subsidizing the discount, rather than just negotiating a deal with TurboTax on behalf of its customers. But since the size of the discount varied based on your status at Vanguard (Voyager, Flagship, etc.), it appears that Vanguard was in fact subsidizing it.

[CABob]

I don't know the answer but I suspect it had to do with getting an acceptable agreement with TurboTax. It was dropped at about the time TT was going through some organizational changes.

[abuss368]

Vanguard used to offer Vanguard clients discounted or even free access to TurboTax’s tax preparation services. But Vanguard dropped its discounts several years ago, saying that Vanguard considered its core mission to be investment services, not tax services. Was Vanguard’s decision to drop TurboTax just a matter of defining its mission, or could there have been other factors in play? Other mutual fund companies, including Fidelity and T. Rowe Price, continue to offer discounts on TurboTax. Why did Vanguard decide not to?

Hi John151 -

I do recall that Vanguard eliminated the service which was provided at a discount. I am unsure if Intuit offered the product at a discount that was negotiated by Vanguard or if Vanguard absorbed the discount and passed to fund Shareholders. Either way I am curious how that was accounted for.

[tfb]

Vanguard dropped its discounts several years ago

Vanguard didn't drop TurboTax discounts. TurboTax is still featured on Vanguard's website. No other tax software vendor receives the same treatment. This likely means Vanguard receives revenue for marketing TurboTax.

https://investor.vanguard.com/taxes/turbotax/

Vanguard customers still receive a discount off TurboTax's list price, although TurboTax also offers the same or similar discount through other financial institutions and it often offers the same or similar discount itself. The change at Vanguard is only that Flagship customers no longer receive free TurboTax. Conceivably Vanguard used to use the marketing revenue to buy TurboTax for its Flagship customers. Now Vanguard just keeps the marketing revenue for itself, as other financial institutions also do.

[RudyS]

This topic was popular last year at tax time too. I buy TurboTax for around $40-$50 each year, except when it was cheaper/free through Vanguard. It is interesting how much time is spent on the Forum discussing how to save so few bucks once a year. There's also the issue of having to reenter a lot of information if I switch provider.

[stan1]

Right, Vanguard's expense ratio reductions including Admiral shares over the past 20 years more than offset the cost of TurboTax plus it gives you the choice to buy which tax software you want to use. Vanguard's average expense ratio in 1996 was 0.29%; in 2016 it was 0.12%. That includes their active funds as well as index funds. For someone with a $1M portfolio that amounts to $1700/year in savings so you can buy a lot of tax software.

Source:
https://investor.vanguard.com/expense-r ... ard-effect

[sailaway]

This topic was popular last year at tax time too. I buy TurboTax for around $40-$50 each year, except when it was cheaper/free through Vanguard. It is interesting how much time is spent on the Forum discussing how to save so few bucks once a year. There's also the issue of having to reenter a lot of information if I switch provider.

The disk comes with 5 licenses/federal filings. We just share with family every year.

[Longtermgrowth]

Ah well, cept for those if us that are reaching a billion, I bet most everyone got where they are by watching where every dollar goes.
Noticed a discount for TT advertised on Merrill Edge; hopefully it still applies when tax time comes.....

[pfrank]

Even with the Vanguard discount, I was always able to find TurboTax cheaper on the open market. I would set up a price alert on CamelCamelCamel and keep an eye on Slickdeals. I switched to H&R Block ever since TurboTax tried to force you to upgrade to Premier to file a Schedule D.

[dodgy55]

Like most thinks in life, money is usually the root of why something either does or does not happen.

[abuss368]

In the years we used Turbo Tax, I always l8ked the software and found it easy to use.

[TD2626]

I think that minor perks that companies offer for obtaining a special status (e.g. "voyager" or "flagship") are just that -- minor perks of tiny economic value compared to the amounts invested. They should not influence decisions except to the extent of their (small) true economic value. I feel that the propensity of investors to ascribe outsize psychological significance for these perks is such that not having them likely is helpful to investors. (Others could disagree and feel that perks and special designations encourage people to invest more). I also feel that giving people the lowest fees possible and allowing people to choose tax software themselves is best.

[Broken Man 1999]

I had been using the IRS "free electronic filing vendor list", though generally we don't qualify either through our state of residence, or income. I guess they all know that a Florida resident isn't going to need a state income tax filing, so they look elsewhere for customers.

Last couple of years I have used the IRS "fillable forms" which are easy to use. Even when I could e-file, I had started to just print and file. That way I didn't get into the fraudulent filing frenzy. Plus I also underpay a bit so I don't risk getting a refund "stolen" for who knows how long. BIL was hacked two years running, and last time took almost a full year to get their refund.

Our returns are so darn simple now it takes so little time to prepare, and I just can't see paying to prepare such a few, simple forms.

Filing manually brings some fond memories of the times I would check my Dad's figures as he was filling out the myriad of forms (he had a business). What a complex activity that was. Now, everything seems so simple.

I think everyone should do their taxes manually every now and then. You can really get the feel for what is happening much better I think.

Broken Man 1999

[Not Law]

I always wonder how much more information these electronic filing platforms provide the IRS than my mailed in forms provide. I cannot file electronically because of the infinite loop associated with ACA premiums (for a self employed person) and MAGI. I use tax preparation software, but I always check its numbers. One year it failed to apply state exemptions properly, so I never trust - I verify.

[jimcrawford01]

I recall a few years ago, much confusion over the TT offer from Vanguard.

The free offer did not include Sched D, something that Vanguard folks are likely to need. You had to upgrade to the Deluxe version to get Sched D. Worse, this was poorly explained, by both TT and V.

I learned to dislike TT and was disappointed with Vanguard.