My Review of Vanguard's Financial Plan

[Bustoff]

As a "Voyager Class" investor with Vanguard, they lavish me with services unknown to the ordinary commoner.
When someone as fortunate as myself reaches "Voyager Class" status I am entitled to:
"Sophisticated support from representatives who can answer your more complex investment questions."

What's more, I am entitled to "a complimentary financial plan by a CFP professional from Vanguard that analyzes my investments and saving strategy."

Eager to take advantage of these "exclusive" privileges, I requested my financial plan prepared by a "CFP professional". (I can't wait to see it)

WOW, I just had a Vanguard CFP financial planner call me Monday. Here is the complete plan provided by the sophisticated support staff:

21% Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)
9% Vanguard Total International Stock Index Fund Investor Shares (VGTSX)
70% Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)

In contrast, here is the result that some poor soul off the street would be stuck with using Vanguard's simple portfolio tool below


Your fund recommendation:
21% Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)
9% Vanguard Total International Stock Index Fund Investor Shares (VGTSX)
70% Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)

wah wah wah

[Grt2bOutdoors]

If you don't like the services provided, you are free to go elsewhere.

[Bustoff]

If you don't like the services provided, you are free to go elsewhere.

Who said they "don't like" the services ?

[letsgobobby]

I think it's funny. What would they give a select or flagship client?

[ObliviousInvestor]

On the one hand, I can see how you might feel underwhelmed.

On the other hand, I find some degree of reassurance in the fact that they're consistent with their advice.

[rob]

I think it's funny. What would they give a select or flagship client?

Not sure but how about
21.5% Total Idx
8.5% Int Idx
70.0% Total Bond

lol

[Rick Ferri]

There is clearly less risk as a Voyager client. Before, you could have strained your fingers typing in data. Now you don't have that risk.

Rick Ferri

[prudent]

When you say "complete plan", was that the only thing included - an 3-line asset allocation?

[dbr]

On the one hand, I can see how you might feel underwhelmed.

On the other hand, I find some degree of reassurance in the fact that they're consistent with their advice.

That and the fact that the recommended portfolio is actually the most sophisticated one out there.

The point made in the OP may be that the less you spend on the answer the more sophisticated you are. It is a variation on the mantra that in investing you get what you don't pay for.

[retiredjg]

I think your point is that the sophisticated staff didn't add any apparent value?

Maybe not. Here's an example. I used to work at a hospital and my boss (a physician) once told me that sometimes the most important thing a doctor can do is to recognize when test results are incorrect and should not be acted on because they don't actually reflect what is happening in the patient.

The CFP performs the same function. In your case, the tool appears to have been "right" and there was no need for the CFP to suggest anything different. So I guess no added value there.

The CFP should also help you locate your assets in a tax-efficient manner and suggest funds to use when substitutes are necessary because the funds suggested by the tool are not available to you or not tax efficient in your situation. Maybe this is not needed in your case - no added value there either.

I suspect a CFPs most important function is to steer people away from doing stupid stuff. Maybe you weren't about to do stupid stuff, so no added value there either.

Is it possible that the fact that you got no added value (if that is your point) might reflect more on you and your situation than on what Vanguard offers?

[mikegerard]

I get similar service from Fidelity because almost all my retirement funds are now managed by them. The advice is not going to get "better"...it's not like they tell average investors one thing and high net worth investors another.

What you're getting is some time with a CFP to talk about YOUR plan. So go in with questions you have on your plan. Do they think you are taking too much or too little risk? Could you get similar results with lower cost funds, etc. In the end it's just advice. If you want to invest everything you have in a copper mining company you're free to do that. Hopefully your CFP would discourage this.

What I got out of my review was that I definitely have a high risk tolerance (my portfolio and investing history during the last two downturns show this). I also learned how to scrub out some capital gains by setting up a charitable trust fund. Nothing life changing but it was worth the two hours and I am going to do another one this spring.

Mike

[NAVigator]

Time and again I see criticisms of the Vanguard CFP portfolio recommendations as being "cookie cutter". I would be very, very concerned if these plans weren't at least similar. I take comfort in having plans offered that are consistent with their own investing philosophy AND consistent with your own investing approach, risk tolerance, and investing goals in the information given to them.

Why would the recommendation be significantly different based on the level of investment assets? There may be an ability to add in small components of some asset classes with a larger portfolio, but the core investments should remain intact.

Jerry

[Bustoff]

On the one hand, I can see how you might feel underwhelmed.

On the other hand, I find some degree of reassurance in the fact that they're consistent with their advice.

Oh well, even flying "First Class" isn't what it used to be.

All we really hope for is that everyone arrives safely at the same destination.

[livesoft]

Well, you got the plan for free apparently even though the website says Voyager class has to pay $250 for the plan.

[kenner]

Frankly, I suggest that OP should just read the esteemed literature from Rick Ferri and/or the Boglehead's Wiki. The advice given by Vangaurd regarding asset allocation will probably beat 80% of other invetment plans over the next 20 years.

[Browser]

As a Vanguard client, I've never noticed any upgrade from being a Rabble client. Same customer service number and procedures as before. Nobody ever greets me using "Sir" or "Your Excellency" or anything like that. Have you noticed any difference? Reminds me of that line from Huckleberry Finn about being tarred and feathered and run out of town on a rail: "If it weren't for the honor of the thing [being ridden out of town on a rail], I would just as soon walk."

[Bustoff]

Frankly, I suggest that OP should just read the esteemed literature from Rick Ferri and/or the Boglehead's Wiki. The advice given by Vangaurd regarding asset allocation will probably beat 80% of other invetment plans over the next 20 years.

Lighten up Francis. The post is not a criticism. It's merely having some fun with the way "marketing" can affect expectations.

The other day I found out that I could use TurboTax "Basic" rather than continuing to spend extra money on TurboTax "Premier". The "basic version" offered all the same tax forms as the "premier version". I had been using the Premier for years simply because I thought it was more thorough. (Thanks to the people on this forum pointing that out.)

So everybody relax . . . no need to take everything so seriously. Remember, you are Bogleheads .

[wesleymouch]

Looks like good advice to me.

[Browser]

After a detailed and customized analysis by our team of financial specialists, we recommend that you allocate 20% to domestic stocks and 10% to international stocks instead. If your portfolio is over $1M, we recommend 10% international and 20% domestic.

[JamesSFO]

I will add that the handholding may have independent value even if the allocation is the same.

[1210sda]

When you say "complete plan", was that the only thing included - an 3-line asset allocation?

I too have wondered what's included in a complete plan.

I understand that you fill out a questionaire and from that they generate the plan.

Bustoff, what else is included in the financial plan ?

1210

[tuckeverlasting]

I think this goes back to "The Majesty of Simplicity". But, I was wondering...was the TIPS fund discussed?

[KyleAAA]

Not a bad plan. Personally, though, I think

20.13% Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)
9.87% Vanguard Total International Stock Index Fund Investor Shares (VGTSX)
70% Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)

would be dramatically superior.

[JamesSFO]

When you say "complete plan", was that the only thing included - an 3-line asset allocation?

I too have wondered what's included in a complete plan.

I understand that you fill out a questionaire and from that they generate the plan.

Bustoff, what else is included in the financial plan ?

1210

I did the "Ask a CFP" in 2012, and got a ~20-30 page document with two potential re-allocations. The first was a "moderate changes" where they tried to minimize the moves of funds around and the second was a "three fund portfolio" where things were all moved to the three fund portfolio. For each they provided specific transactions (sell-buy) to execute to achieve the plan.

[hoppy08520]

I agree with what retriedjg wrote.

I don't know what you expected. Vanguard's investing philosophy is expressed in its LifeStrategy and Target Date funds, all* of which are variations (different stock:bond ratios) on the same 3-fund portfolio that the Vanguard CFP provided to you. Vanguard believes in broad-market index funds as a starting point. They recommend in their research papers a 20% - 40% international holdings as a percentage of equities, and their all-in-one funds use 30%.

Why would you expect them to deviate from that company philosophy by recommending anything else?

Unless you have some specific exceptional circumstances, or unless you tell the CFP that you want to include a certain sector or asset class, which you didn't mention in your review, then you're going to get a 3-Fund portfolio. If you didn't specify any special requests/concerns, then I'd be concerned if you got anything other than a 3-Fund portfolio.

If you want a complicated portfolio with a lot of spice, there are plenty of firms that will give it to you.

* Exception is the Target Date "income" portfolio which adds TIPS and money market.

[Bustoff]

I too have wondered what's included in a complete plan.

I understand that you fill out a questionnaire and from that they generate the plan.

Bustoff, what else is included in the financial plan ?

1210

First, you fill out an outline that will reflect your current assets. Then you provide answers to the basic "Investor Questionnaire" provided on the Vanguard site. The questionnaire is meant to provide an indication of your willingness to take risk. It does not consider your need to take risk. Based on those answers they rec an asset allocation. The rec'd asset allocation is limited to TS,TI and TB. Once you complete the online process, they prepare and place a written plan in your account for you to review for a future telephone conversation with a Vanguard CFP.

My written plan consisted of a breakdown showing that the proposed equity holdings be placed in my taxable account and the bond holding in my tax advantaged account, as one would expect.
They also include some cool graphs showing probability of success.

After I reviewed the plan, but prior to the telephone interview, I asked the forum for comments/advice on the 50/50 rec'd stock/bond mix. I subsequently decided to start out with a more conservative 30/70.

Next came the interview. They give you a lot of basic "buy and hold", low cost indexing advice. I updated the CFP regarding my desire for a more conservative portfolio and they initially suggested replacing the 50/50 with a 40/60 mix, but that was still too high. For me, the potential damage of unexpected negative outcomes far exceed the benefit gained from incremental wealth, so I asked him to change the mix to 30/70.

Overall, they tended to stick to a framework of basic advice as opposed to tailoring their advice to specific issues. I think its a great service and they offer good solid advice and spend about an hour with you. And it's free.

[greg24]

I find that Vanguard is excellent at running mutual funds.

Everything else, notsomuch.

[j70]

Bustoff, thanks for sharing this. It helps us non Voyager class folks a glimpse at the difference classes at Vanguard. I appreciate it.

[retiredjg]

First, you fill out an outline....

Thanks for that summary Bustoff. Very informative. I've always wondered what's involved.

[Kernschatten]

WOW, I just had a Vanguard CFP financial planner call me Monday. Here is the complete plan provided by the sophisticated support staff:

21% Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)
9% Vanguard Total International Stock Index Fund Investor Shares (VGTSX)
70% Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)

Hold fast, Voyager! The CFP recommended Investor shares, not Admiral Shares? He should walk the plank.

[SSSS]

WOW, I just had a Vanguard CFP financial planner call me Monday. Here is the complete plan provided by the sophisticated support staff:

21% Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)
9% Vanguard Total International Stock Index Fund Investor Shares (VGTSX)
70% Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)

Hold fast, Voyager! The CFP recommended Investor shares, not Admiral Shares? He should walk the plank.

Depends how dedicated to the voyage you are. If you're satisfied with doing just the bare minimum, that 9% would be too low for Admiral, and the 21% would be cutting it close (or not at all if forced to split between accounts).

[Browser]

I find that Vanguard is excellent at running mutual funds.

Everything else, notsomuch.

That's been my experience too. It's a good thing we're DIY investors, which is what you should be anyhow.

[Taylor Larimore]

WOW, I just had a Vanguard CFP financial planner call me Monday. Here is the complete plan provided by the sophisticated support staff:

21% Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)
9% Vanguard Total International Stock Index Fund Investor Shares (VGTSX)
70% Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)

Bustoff:

You may not realize it, but your Vanguard recommended plan is about as sophisticated as you can get. This link explains:

The Three Fund Portfolio

Less is more.

Best wishes.
Taylor

[baw703916]

Bustoff,

Since you mentioned in another thread that you are retired, some TIPS (20%, say) may be worth adding to the portfolio in place of TBM (depending on what other income you have and how much of it is indexed for inflation).

Brad

[LFKB]

I moved over $100k (less than $500k) of assets to Vanguard this week and was offered a free conversation with a CFP as well. He basically recommended the three fund portfolio but with California Intermediate-Term Tax Exempt in place of Total Bond Market due to my tax rate. I told him I wanted to tilt to small cap and he said that was fine and asked how much of my US equities I wanted in small cap and we came up with the split for TSM and small cap index. He was also useful in answering some other questions about the funds and taxes. Overall, I didn't learn anything that I hadn't already read on here. I went with with an allocation I was planning on and he agreed with it. Basically the jest of it is the advice you get on here is likely just as good as the advice you'll get from the planner. That's not a knock on the planner, just shows that people here generally know what they're talking about.

[willardx]

We have a telephone consultation scheduled for next month with a Vanguard CFP who works with our rep after I read about what benefits our account had. I had previously been looking at paying a local fee-only CFP a flat fee of between $2,500-4,000 for what I hope is similar work.

I have a raft of questions to ask (how to save for college for our 3 kids, on top of our retirement; bond allocation in light of real estate investments; IRA and backdoor Roth conversions, etc.), so I do hope it's worth something. As others have said, all the answers may boil down to the 3-fund portfolio, which is definitely not what we have now, so if I find the journey informative, I would need to reconcile the destination.

Prior to our phone call, I was not told to fill out anything, maybe that will come as the scheduled call gets closer. I may still want to meet face-to-face with a local advisor, but I figured it couldn't hurt to get a free consultation first. My expectations after reading this thread have certainly been ratcheted down.

[Browser]

We have a telephone consultation scheduled for next month with a Vanguard CFP who works with our rep after I read about what benefits our account had. I had previously been looking at paying a local fee-only CFP a flat fee of between $2,500-4,000 for what I hope is similar work.

I have a raft of questions to ask (how to save for college for our 3 kids, on top of our retirement; bond allocation in light of real estate investments; IRA and backdoor Roth conversions, etc.), so I do hope it's worth something. As others have said, all the answers may boil down to the 3-fund portfolio, which is definitely not what we have now, so if I find the journey informative, I would need to reconcile the destination.

Prior to our phone call, I was not told to fill out anything, maybe that will come as the scheduled call gets closer. I may still want to meet face-to-face with a local advisor, but I figured it couldn't hurt to get a free consultation first. My expectations after reading this thread have certainly been ratcheted down.

Hope you can give us an "executive summary" of your experience. Frankly, I'm skeptical that you're going to have a chance to cover all your personal situation issues in any depth. You only get that when you're paying some advisor by the hour and they're happy to chat with you just as long as you want.

[JamesSFO]

We have a telephone consultation scheduled for next month with a Vanguard CFP who works with our rep after I read about what benefits our account had. I had previously been looking at paying a local fee-only CFP a flat fee of between $2,500-4,000 for what I hope is similar work.

I have a raft of questions to ask (how to save for college for our 3 kids, on top of our retirement; bond allocation in light of real estate investments; IRA and backdoor Roth conversions, etc.), so I do hope it's worth something. As others have said, all the answers may boil down to the 3-fund portfolio, which is definitely not what we have now, so if I find the journey informative, I would need to reconcile the destination.

Prior to our phone call, I was not told to fill out anything, maybe that will come as the scheduled call gets closer. I may still want to meet face-to-face with a local advisor, but I figured it couldn't hurt to get a free consultation first. My expectations after reading this thread have certainly been ratcheted down.

You will get asked to fill out a questionnaire before your call. I think you will get some answers to your questions.

I found after the fact, the biggest value was that it got me off my ass to actually implementing the three fund portfolio as opposed to thinking about implementing it. It also provided some specific tactical instructions to do so which I could have figured out, but I hadn't done. Seeing it spelled out was helpful.

I did get specific helpful advice about saving for my niece in my 529 and saving for a new home purchase for me. A lot of those questions don't fit into the questionnaire. Additionally the software will default you into admiral shares even if they are not available, e.g. I401K @ VG cannot have admiral shares, but the software will default to admiral if the balance is high enough, etc.

[bdpb]

Did you know there really is no "portfolio tool"? It's just a CFP running the numbers and the tool reports back their advice.

Or, the CFP doesn't do anything more than run the "portfolio tool" and reports back the results of the tool.

Take your pick.

[convert949]

WOW, I just had a Vanguard CFP financial planner call me Monday. Here is the complete plan provided by the sophisticated support staff:

21% Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)
9% Vanguard Total International Stock Index Fund Investor Shares (VGTSX)
70% Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)

Bustoff:

You may not realize it, but your Vanguard recommended plan is about as sophisticated as you can get. This link explains:

The Three Fund Portfolio

Less is more.

Best wishes.
Taylor

I couldn't agree more... Having had a relationship with an outside planner in my pre-Boglehead days, it is refreshing to be given honest answers rather than why you should be buying a raft of Annuity and insurance products and being told what your risk tolerance should be. Maybe we have become a little jaded.

The changes suggested when I went to the Vanguard CFP for the first time included the tax implications of each of two different plans as well as a safe withdrawal rate in retirement. I agree that less IS more

Best to all,

Bob

[JamesSFO]

Did you know there really is no "portfolio tool"? It's just a CFP running the numbers and the tool reports back their advice.

Or, the CFP doesn't do anything more than run the "portfolio tool" and reports back the results of the tool.

Take your pick.

I think if you are expecting a snowflake-special-just-for-you plan, then sure, but as a practical matter the CFP will custom tailor the plan to your wishes on the phone/video conference and discuss your needs and you will get a revised plan. Is it the same as a non-VG hourly CFP, no, it's fundamentally a three-fund oriented plan with some variance for your situation.

[dpc]

I guess I'm having trouble understanding all of the quotation marks and apparent sarcasm in the OP. I have taken advantage of this service from Vanguard in the past and have no reason to doubt the credentials of the people on the other end of the phone. I have seen articles by the same people on Vanguard's website from time to time.

I do agree that there is a certain cookie-cutter approach to the process and everything seems to be done by a fairly tight script. My survey feedback to Vanguard after my session with the planner mentioned this complaint and I received a phone call from someone at Vanguard to discuss the issue. All of the recommendations involve Vanguard funds, but I expected that.

I had my first plan done by Vanguard back about 2006. Their cookie-cutter plan put me on a much sounder footing, cleaning up 30 years of a hodge-podge of various retirement savings plans and accounts. When 2008 came around, I was extremely grateful that I had (basically) followed their recommended plan, since it has saved me a big percentage of my money. It may be boring and predictable - and maybe unnecessary for a lot of people on this forum, but I remain thankful that I went through the process.

[retiredjg]

I think we need a "tongue in cheek" smilie. Or maybe a "sarcasm" smilie.

It was hard to tell from the original post just what was on the poster's mind. He did clarify several posts down, though it seems not everybody saw that part.

[carolinaman]

I got a gratis Vanguard plan last year because I moved funds to them (I believe it was a minimum of $100k). I provided some data to questions, etc. and they generated a pretty vanilla plan similar to OP. However, I had a great phone discussion with the CFP. My approach was not pure Boglehead so we had more to talk about. He seemed very willing to meet you where you are investment wise and then try to steer you to a fundamentally sound place, as opposed to a one size fits all retirees. I liked that and felt he was very knowledgeable and provided good advice. I believe our call was scheduled for 30 minutes and we wound up talking for at least 1 hr and 15 minutes. I have had several financial plan reviews, include Fidelity and others, and this was definitely the best.

[Easy Rhino]

I thought the Vanguard financial plans still tended to include some of their active funds. Did that go by the wayside?

[NAVigator]

I received a Vanguard financial plan and consultation with a CFP many years ago. Prior to learning about investing through some books, Vanguard, and then the Diehards forum at M* and then the Bogleheads, I had lost a lot of money following various "advice". Thanks to Vanguard and this forum and books from the recommended reading list, I grew my portfolio. Ultimately, I say "Thank you Jack!"

Regarding the discussion with the CFP, "Vanguard professionals are salaried—not paid on commission—so what you get is sensible, objective, and expert guidance, and advice that’s in your best interests."
the Vanguard Difference

Jerry

[retiredjg]

I thought the Vanguard financial plans still tended to include some of their active funds. Did that go by the wayside?

I wondered the same thing. I think there may be a change and they have gone by the wayside. There was a time when every plan posted here contained at least 1 active fund. That didn't seem like coincidence. But I have not seen that lately.

There was also a time when they were suggesting using Total International when the FTSE Large and FTSE Small combo was "obviously better" (to us anyway). I scratched my head on that one. A possible reason became very apparent when the Total International morphed into it's current form - the best choice of all. At that point, their advice made perfect sense for people who had followed it the year or so before.

[JamesSFO]

I thought the Vanguard financial plans still tended to include some of their active funds. Did that go by the wayside?

I wondered the same thing. I think there may be a change and they have gone by the wayside. There was a time when every plan posted here contained at least 1 active fund. That didn't seem like coincidence. But I have not seen that lately.

There was also a time when they were suggesting using Total International when the FTSE Large and FTSE Small combo was "obviously better" (to us anyway). I scratched my head on that one. A possible reason became very apparent when the Total International morphed into it's current form - the best choice of all. At that point, their advice made perfect sense for people who had followed it the year or so before.

My guess is at this point with the Target Retirement and LifeStrategy funds being so dominant it has become hard(er) to justify something much out of line with those without implicitly opening up questions about their general recommendations.

[willardx]

I'm a little late in following up, but we had a phone call with the CFP, no questionnaire to fill out before, he wanted to know what we had in mind, then we filled out the questionnaire. I admit only I filled out the Q and now I let slide getting input from the spouse to submit it to the CFP for his turn. In the meantime, I did execute on a few things that I wanted to talk about with the CFP, namely college savings, which caused us to move UGMA/UTMA funds into UGMA 529 plans (wish we had done that years ago!). We'll take the tax hit this year and hope for many gains that will be tax-free as qualified withdrawals.

I think it will be worthwhile to go through with the planning with Vanguard, but for now probably won't sign up for the active management of our funds, either with Vanguard or an independent CFA/CFP. If I am mindful enough, I will finish the questionnaire and post a final review.

[trasmuss]

Vanguard used to recommend 50% indexed and 50% actively managed for equities. They also used to recommend six different bond funds instead of total bond. And they also used to recommend 20% of equities to international instead of 30%.

There old plans (in my opinion) were needlessly complex, reduced the opportunity for admiral funds since there were more funds used, and required more rebalancing. I agree with Taylor that although the new recommendations appear simple they are still sophisticated.

The best thing about the plans is the opportunity to ask questions and get feedback. You don't need to implement any of the recommendations.