Actual Vanguard PAS recommendations by account type?

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Topic Author
joeschmo
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Joined: Thu Mar 23, 2017 2:37 pm

Actual Vanguard PAS recommendations by account type?

Post by joeschmo » Sun Jan 12, 2020 6:16 pm

Thanks in part to Bogleheads board, I at last fired my 0.5% AUM financial advisor. They had me in funds as expensive as 1.05%, for total blended expenses of 1.28%. Over the past 10 years my 3 self-managed funds at Vanguard almost always did better than the advisors' in both the down years AND the up years. :)

At one point I talked to Vanguard PAS and learned lots about particular funds they use for a high-tax-bracket person, but I was wondering if any current high-net-worth clients had more details to share. For example:

1. Within IRA accounts do they go 100% VBTLX since that seems to throw off the most taxable income?
2. They mentioned dividing the bond piece as a 30-40-30 split (short/interim/long munis). Is that advice different for CA residents?
3. Vanguard's research papers claim that PAS clients eliminated their home country bias, but according to Vanguard's other research, US stocks comprised 55% of world in 2019. What is the actual US/world stock balance people have gotten from Vanguard?

My only last sticking point before going all-in at Vanguard is just worrying about information security etc of having all my investments in a single account. I know Vanguard is liable if they're fraud, but their info security requirements for that are very stringent. I'd feel better having half at Fidelity but I can't stand how much Fidelity tries to hide expense ratios, and I just trust Vanguard more...

Also, it sure is frightening moving large amounts of money around...almost feel like I should just sign up for PAS for a year. I don't like that they claim to be unbiased and then of course can only recommend Vanguard products. But I can't see getting any other products anyway....

Thanks again for the help via forum archives and replies!

JoeSchmo

GmanJeff
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Re: Actual Vanguard PAS recommendations by account type?

Post by GmanJeff » Sun Jan 12, 2020 7:29 pm

The most direct and authoritative way to answer to your questions around initial asset allocation would be to ask PAS for their recommendations for you. There is no cost for that, and you'll get their suggestions for you as a specific individual, under your particular circumstances, taking into account your time horizons, objectives, and risk tolerance. The portfolio for any one high net worth individual will not necessarily be identical or even all that similar to that of another high net worth individual whose situation is different.

While VG may demonstrate "bias" in their focus on their own products, that's not anything I'd worry about. Their offerings are more than competitive with alternatives in terms of diversity, expenses, and performance, so you're not really giving up anything meaningful by investing exclusively within their fund family unless you have some very particular needs which they cannot meet. And, you're always free to maintain external investments which are not under PAS management.

smectym
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Re: Actual Vanguard PAS recommendations by account type?

Post by smectym » Sun Jan 12, 2020 8:41 pm

You can also get a sneak peak at what will very likely be recommendations similar to what Vanguard will offer by using the Fidelity Go analyzer, the Schwab IP tool, etc. All run on similar algorithms that take into account your age, some subjective statement by you about risk tolerance, and a few other variables and then spit out a portfolio. Typically, the PAS suggested portfolio will be similar, even if the particular funds suggested are Vanguard. (NB: I used PAS for a few years, then quit, but it can be a good option.)

alex_686
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Re: Actual Vanguard PAS recommendations by account type?

Post by alex_686 » Sun Jan 12, 2020 8:45 pm

This is probably the wrong question. No specific knowledge of Vanguard but this is not the way it should be done.

The way it should be done is figure out the client's goals and risk tolerance. Create the AA. Then allocate the AA into the various account types that produce the least tax drag.

Different high wealth clients are going to have different goals, risk tolerances, and tax advantage space.

The logical next step might be to read up on "Mental Accounting" for more specific reasons why you should not do this.

Topic Author
joeschmo
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Joined: Thu Mar 23, 2017 2:37 pm

Re: Actual Vanguard PAS recommendations by account type?

Post by joeschmo » Mon Jan 13, 2020 2:43 am

alex_686 wrote:
Sun Jan 12, 2020 8:45 pm
This is probably the wrong question. No specific knowledge of Vanguard but this is not the way it should be done.

The way it should be done is figure out the client's goals and risk tolerance. Create the AA. Then allocate the AA into the various account types that produce the least tax drag.
To clarify, I have actually done the work on goals, risk tolerance, and AA, and was looking for information on how Vanguard PAS implements a given AA (what specific funds) with the various account types that I already have (Roth & traditional & rollover IRAs, to be specific). I wasn't looking for one-size-fits-all AA. Sorry if that was unclear.

Mental accounting was super interesting to read about - thank you for that! Why were you thinking I was falling prey to it in this case? Oddly enough, reading about this has helped explain some areas in which I have always felt different from others: for example, I have never treated a bonus or tax refund any differently from regular income (to pick random examples). I wonder if I exhibit less mental accounting than average?

vsquid
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Re: Actual Vanguard PAS recommendations by account type?

Post by vsquid » Mon Jan 13, 2020 5:21 am

If I were you, I would go with PAS. You are going to get a huge reduction in fees even with PAS. Also they would provide the kind of support that you are looking for. In addition, you may leave them once you feel confident about managing all of your investments on your own.

Nastywarnob
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Re: Actual Vanguard PAS recommendations by account type?

Post by Nastywarnob » Mon Jan 13, 2020 5:39 am

I’ll second the PAS consultation route. We did this recently fully open to signing on if we thought there would be a benefit. Coming out of the meeting and approach, we were even more comfortable running with it ourselves. Either way, you have literally NOTHING TO LOSE. Best of luck, and congratulations taking control.

alex_686
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Re: Actual Vanguard PAS recommendations by account type?

Post by alex_686 » Mon Jan 13, 2020 7:25 am

joeschmo wrote:
Mon Jan 13, 2020 2:43 am
alex_686 wrote:
Sun Jan 12, 2020 8:45 pm
This is probably the wrong question. No specific knowledge of Vanguard but this is not the way it should be done.

The way it should be done is figure out the client's goals and risk tolerance. Create the AA. Then allocate the AA into the various account types that produce the least tax drag.
To clarify, I have actually done the work on goals, risk tolerance, and AA, and was looking for information on how Vanguard PAS implements a given AA (what specific funds) with the various account types that I already have (Roth & traditional & rollover IRAs, to be specific). I wasn't looking for one-size-fits-all AA. Sorry if that was unclear.

Mental accounting was super interesting to read about - thank you for that! Why were you thinking I was falling prey to it in this case? Oddly enough, reading about this has helped explain some areas in which I have always felt different from others: for example, I have never treated a bonus or tax refund any differently from regular income (to pick random examples). I wonder if I exhibit less mental accounting than average?
I was working off of your title and general thrust of your post. Thongs get lost in translation.

Once again, no specific knowledge of Vanguard, but I do has solid experience in the industry. Logically you put the assets with the highest tax drag into tax advantage accounts. Historically this has been bonds (in general), TIPS (in particular) and REITs. However with bond rates so low I don’t know if that particular bit of math still holds.

Topic Author
joeschmo
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Joined: Thu Mar 23, 2017 2:37 pm

Re: Actual Vanguard PAS recommendations by account type?

Post by joeschmo » Mon Jan 13, 2020 7:17 pm

Thanks all! My knowledge above was based on an initial consultation call where I simply forgot to ask about how they choose which funds to allocate into retirement accounts - hence my question. I'm not sure if they'll do a second free consultation?

I'm definitely tempted to get their help at least for a first year, though I am enjoying learning how to DIY, even though I have been in analysis mode for ages due to fear of actually implementing anything I've decided! :oops:

123
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Re: Actual Vanguard PAS recommendations by account type?

Post by 123 » Mon Jan 13, 2020 7:33 pm

Based on a number of threads on this board I get the impression that many of the PAS recommendations can be boiled down to the component funds and percentages of the four funds within the Target Retirement Fund relevant to the investor's age. I guess if they told people to just buy the Target Retirement Date fund that matches their age that would just be too simple so they jazz it up a bit and charge the .3% fee. I guess there is nothing wrong with that, if they did much of anything else it would be suggesting that something is wrong with a Target Retirement Date fund solution.
The closest helping hand is at the end of your own arm.

Topic Author
joeschmo
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Joined: Thu Mar 23, 2017 2:37 pm

Re: Actual Vanguard PAS recommendations by account type?

Post by joeschmo » Wed Jan 15, 2020 8:57 pm

Thanks for the very good call to refer to the TDFs. The difference for me is due to higher tax bracket, I am replacing all the bonds with munis in taxable accounts (using 70/30 mix of US/non-US taxable bonds in IRAs). I do regret having such a US bias in the much larger taxable account that I maintain...

I'm tempted to just go with PAS, but another complication is that I am keeping a portion of assets at Fidelity in case of fraud or other Vanguard issues. Since Vanguard muni funds seem better than Fidelity's, I am planning to use Fidelity taxable just for stock, in the same balance as elsewhere in my portfolio:

55% ITOT iShares Core S&P Total US Stock Mkt ETF
45% IXUS iShares Core MSCI Total International Stock ETF

I'd welcome any criticisms before I pull the trigger! Also happy to start a new thread with my full picture.

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