Kookaburra wrote: ↑Fri Nov 18, 2022 10:33 pm
Seems to me like someone at the top is intentionally orchestrating all this. But what motivation would there be?
While Vanguard refuses to disclose information about executive compensation, a deep dig into the annual reports of their largest funds and research into the history of Vanguard does shed some light on possible motivations.
The Vanguard Group, which is owned by its member funds, receives the same compensation whether the investor holds their funds at Vanguard or at another brokerage (such as Fidelity, Schwab, etc.). The Vanguard Group receives additional revenue from those investors who are enrolled in PAS and it appears that those funds are retained by the Vanguard Group and not returned to the funds (i.e., the investors).
Executives and upper management at the Vanguard Group receive Partnership Plan payments each year based, in part, on the net income of the Vanguard Group. By choosing not to invest in customer service, such as well-trained representatives, 24/7 support hours, robust IT and so forth, the Vanguard Group increases its net income and thus the Partnership Plan payouts.
That decision has other benefits for executives and upper management. Some investors will move their holdings to other brokerages. That further reduces the expenses of the Vanguard Group without a corresponding decrease in revenue from that investor. More "profit" for the Partnership Plan payouts. Other investors will move to PAS and pay the 0.03% AUM fee. Other than the modest expense for some additional advisors, that 0.03% AUM is pure profit for the Vanguard Group. Again, that revenue is not returned to the funds (i.e., the investors) but retained by the Vanguard Group. That also serves to increase Partnership Plan payouts.
Here's a previous post on the subject with links to illuminating reporting from Joseph DiStefano, who covered Vanguard for the Philadelphia Inquirer for a number of years and may be the most knowledgeable journalist as to all things Vanguard. viewtopic.php?p=5622977#p5622977
Here is a recent article on the subject, "Vanguard May Be Shorting Much Vaunted 'Owners' of its Low-cost Index Funds": https://riabiz.com/a/2022/5/15/vanguard ... -investors