Vanguard Customer Service Mega-thread

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exodusNH
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Re: Vanguard Customer Service Mega-thread

Post by exodusNH »

Kookaburra wrote: Fri Nov 18, 2022 10:33 pm How is it that, over the short course of a few years, Vanguard went from providing reasonably good service to what can only be described as a dumpster-fire in the customer service front? This sort of thing usually doesn’t happen overnight. Did all the competent people quit at the same time and get replaced with former waiters, bus drivers, and paperboys? Seems to me like someone at the top is intentionally orchestrating all this. But what motivation would there be? If not, then they are setting a cultural example with gross negligence and incompetence.
I don't think there's an easy answer.

Part was probably driven by people opening accounts to gamble with stonks.

Part was the "great resignation" and related hiring difficulties.

Part was probably the slow attrition that finally hit a breaking point.
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Re: Vanguard Customer Service Mega-thread

Post by galawdawg »

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
bondsr4me
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Re: Vanguard Customer Service Mega-thread

Post by bondsr4me »

galawdawg…..thanks for the above post and links…I opened my accounts with VG while Jack was still around.

I would be very hesitant to open accounts with the current VG; website leaves a lot go be desired; app IMHO is lacking; management reporting to us “owners”….well I’ll leave that opinion for the other “pseudo-owners”.

thanks again.

Happy Thanksgiving to everyone.
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Re: Vanguard Customer Service Mega-thread

Post by astrohip »

galawdawg wrote: Tue Nov 22, 2022 6:22 am
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.
Could you elaborate in this? I think I fall into this category...

I moved my holdings to Fidelity. But due to massive CapGains, I left them in VG funds. Have I created a situation where VG still reaps the benefit of my holdings, while Fid has to handle the paperwork?

If so, what can I do? I have no desire to let VG make money off me. But I can't afford to sell most of my funds, the CG would kill me. Ideas?
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galawdawg
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Re: Vanguard Customer Service Mega-thread

Post by galawdawg »

astrohip wrote: Tue Nov 22, 2022 9:26 am
galawdawg wrote: Tue Nov 22, 2022 6:22 am
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.
Could you elaborate in this? I think I fall into this category...

I moved my holdings to Fidelity. But due to massive CapGains, I left them in VG funds. Have I created a situation where VG still reaps the benefit of my holdings, while Fid has to handle the paperwork?

If so, what can I do? I have no desire to let VG make money off me. But I can't afford to sell most of my funds, the CG would kill me. Ideas?
Yes. Even though you hold your VG funds at Fidelity, the expense ratio of the fund(s) hasn't decreased for you. You still pay the same as you did when you held them at VG. And the vast majority of money paid by investors in the form of expense ratios is then paid to the Vanguard Group. You can review the annual report for each fund you own to see how much that is. For the Total Stock Market Index Fund (VTSAX/VTI/VITSX/VTSMX), 99.9947% of that fund's revenue is paid to the Vanguard Group. (In 2021, that was $524,315,000 just for those funds alone).

However, Fidelity now has the expense of handling all of your customer interactions, providing transaction reports, statements and tax forms, etc. They do not receive anything from the expense ratios you pay for each VG fund to provide those services.

I'm not suggesting that there is anything you can or should do about that. I'm merely pointing out in response to another poster's question a motivation for Vanguard executives to make a very strategic decision to divert resources away from servicing what are referred to in some industries, "profit-drain" or low-profit customers. (The credit card industry refers to low-profit customers who pay their bill in full each month as "deadbeats.")

As to those investors who eschew the 0.03% AUM of VPAS, Vanguard is happy to cut them loose. After all, they still get to keep the revenue from those investors but no longer have the expense of servicing their accounts. That immediately increases profitability for the Vanguard Group.
exodusNH
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Re: Vanguard Customer Service Mega-thread

Post by exodusNH »

astrohip wrote: Tue Nov 22, 2022 9:26 am
galawdawg wrote: Tue Nov 22, 2022 6:22 am
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.
Could you elaborate in this? I think I fall into this category...

I moved my holdings to Fidelity. But due to massive CapGains, I left them in VG funds. Have I created a situation where VG still reaps the benefit of my holdings, while Fid has to handle the paperwork?

If so, what can I do? I have no desire to let VG make money off me. But I can't afford to sell most of my funds, the CG would kill me. Ideas?
Yep. It's the perfect scenario for Vanguard. All of the money, less of the work. Fidelity is hoping that some percent of people in your situation will use their wealth management services and / or switch to Fidelity funds.
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Re: Vanguard Customer Service Mega-thread

Post by astrohip »

Thanks both of you for educating me. I should move my IRA funds immediately. I'll talk to my Fid advisor and see if he has any ideas for my taxable account funds.
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Re: Vanguard Customer Service Mega-thread

Post by LadyGeek »

Don't compromise your investments simply because you have a gripe against one company's (lack of) customer support. Fidelity isn't perfect, either. But at least they answer the phone quickly.

A Fidelity rep will want to talk you into the Fidelity ZERO funds. You don't want that in a taxable account because they're not portable if you want to move things elsewhere. (Fidelity - Note 2)

I own Vanguard funds at Fidelity. Vanguard saw the outflow when I transferred everything to Fidelity, which is "good enough" to make my point.

If you have more than $1 million to move, get paid to do so. See: The Final, Definitive Thread on Brokerage Transfer Bonuses Your Fido rep can help with that.
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exodusNH
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Re: Vanguard Customer Service Mega-thread

Post by exodusNH »

astrohip wrote: Tue Nov 22, 2022 2:18 pm Thanks both of you for educating me. I should move my IRA funds immediately. I'll talk to my Fid advisor and see if he has any ideas for my taxable account funds.
Just don't spite yourself via capital gains to punish Vanguard.
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Re: Vanguard Customer Service Mega-thread

Post by galawdawg »

astrohip wrote: Tue Nov 22, 2022 2:18 pm Thanks both of you for educating me. I should move my IRA funds immediately. I'll talk to my Fid advisor and see if he has any ideas for my taxable account funds.
As others have said, be cautious about what changes you make to your taxable account holdings. You don't want to incur unnecessary capital gains taxes simply to divest from your VG holdings. LadyGeek has already noted the portability problem with holding Fidelity ZERO funds in a taxable account.

You can create a portfolio of low-cost index funds using Fidelity funds if you so choose. Here is a Wiki page which has a chart showing the Fidelity equivalents to many Vanguard index funds: https://www.bogleheads.org/wiki/Fidelity
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Re: Vanguard Customer Service Mega-thread

Post by Doom&Gloom »

exodusNH wrote: Tue Nov 22, 2022 2:31 pm
astrohip wrote: Tue Nov 22, 2022 2:18 pm Thanks both of you for educating me. I should move my IRA funds immediately. I'll talk to my Fid advisor and see if he has any ideas for my taxable account funds.
Just don't spite yourself via capital gains to punish Vanguard.
+1
Vanguard won't even notice, so be sure to do what is in your best interests.
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Re: Vanguard Customer Service Mega-thread

Post by Kookaburra »

galawdawg wrote: Tue Nov 22, 2022 6:22 am
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
Makes sense. Follow the money.

But they’ve upset me enough that I won’t be buying any more Vanguard funds.
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Re: Vanguard Customer Service Mega-thread

Post by beyou »

galawdawg wrote: Tue Nov 22, 2022 6:22 am
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
Ou come on. Your description of the financial incentives is the same at every broker and fund manager. The execs all get bonuses, based on various goals such as revenue and profits. They all want to sell PAS-like products (at even higher prices than Vanguard). They all want to cut costs on tech and other overhead, which adds to short term profits, and short term bonuses. I worked for BlackRock, and a few other asset managers over an 4 decade career. They were all horrible how they cut corners on tech, even worse on operations staff, meanwhile treating themselves lavishly. I was so glad to retire and leave this industry behind. I do think Vanguard is among the worst out there in terms of how they cut corners on cost, but they all do it. Fidelity and Schwab moved much of their operations from their home cities, disrupting the lives of their tech and ops staffs, in the quest to reduce cost. Fidelity recently offered buyouts to older tech staff to get rid of them. BlackRock has no customer facing tech and ops at all, you can’t buy an ishares etf directly from BlackRock. They are the extreme of what you accuse Vanguard (manage the funds and let someone else deal with shareholders).

The main problem with Vanguard is they are among the cheapest in number of hires and how much they pay hires. This shows in their tech (crappy mobile app), poorly trained customer support and long hold times to get the bad support. But the others are always under pressure to cut costs. Many times in my career, I built up good processes and tech at these firms, only to watch some cost cutting execs later ruin by cutting costs after I leave the firm or department. They all do it, but they are all at different points in the cycles of spend/improve/cut costs/suffer/spend to fix what they broke. I personally interacted with Vanguard IT staff and see that they are doing the same as other firms, just slower and more bureaucratically. They refuse to blaze trails in tech, wait for competitors to build solutions, study and slowly adopt industry success stories. They build slowly and steadily, just as one builds wealth slowly and steadily via boring old index funds.

None are perfect, and established firms like Schwab, Fido and Vanguard have a huge complex infrastructure to maintain and enhance. Fidelity spends big $ to try and meet that goal, but by mass layoffs of senior staff, they set themselves back as much institutional knowledge was let out the door. Personally I don’t think their online services are any better than Vanguards. I regularly use Vanguard, etrade and Fidelity sites, and they all seem about the same in terms of usability.
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Re: Vanguard Customer Service Mega-thread

Post by Fallible »

beyou wrote: Wed Nov 23, 2022 1:34 am
galawdawg wrote: Tue Nov 22, 2022 6:22 am
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
Ou come on. Your description of the financial incentives is the same at every broker and fund manager. The execs all get bonuses, based on various goals such as revenue and profits. They all want to sell PAS-like products (at even higher prices than Vanguard). They all want to cut costs on tech and other overhead, which adds to short term profits, and short term bonuses. I worked for BlackRock, and a few other asset managers over an 4 decade career. They were all horrible how they cut corners on tech, even worse on operations staff, meanwhile treating themselves lavishly. I was so glad to retire and leave this industry behind. I do think Vanguard is among the worst out there in terms of how they cut corners on cost, but they all do it. Fidelity and Schwab moved much of their operations from their home cities, disrupting the lives of their tech and ops staffs, in the quest to reduce cost. Fidelity recently offered buyouts to older tech staff to get rid of them. BlackRock has no customer facing tech and ops at all, you can’t buy an ishares etf directly from BlackRock. They are the extreme of what you accuse Vanguard (manage the funds and let someone else deal with shareholders).

The main problem with Vanguard is they are among the cheapest in number of hires and how much they pay hires. This shows in their tech (crappy mobile app), poorly trained customer support and long hold times to get the bad support. But the others are always under pressure to cut costs. Many times in my career, I built up good processes and tech at these firms, only to watch some cost cutting execs later ruin by cutting costs after I leave the firm or department. They all do it, but they are all at different points in the cycles of spend/improve/cut costs/suffer/spend to fix what they broke. I personally interacted with Vanguard IT staff and see that they are doing the same as other firms, just slower and more bureaucratically. They refuse to blaze trails in tech, wait for competitors to build solutions, study and slowly adopt industry success stories. They build slowly and steadily, just as one builds wealth slowly and steadily via boring old index funds.

None are perfect, and established firms like Schwab, Fido and Vanguard have a huge complex infrastructure to maintain and enhance. Fidelity spends big $ to try and meet that goal, but by mass layoffs of senior staff, they set themselves back as much institutional knowledge was let out the door. Personally I don’t think their online services are any better than Vanguards. I regularly use Vanguard, etrade and Fidelity sites, and they all seem about the same in terms of usability.
"beyou", I boldfaced areas of your informative post that I think shed balanced light on Vanguard AND its competitors. As I experienced some incredible, potentially very serious, and repeated errors from Vanguard's customer service in the last year, I often wondered just how much worse (or better?) VG really is than Fidelity, Schwab, etc., but with no way to know for certain.

I do have a question for you: in your second paragraph where you describe Vanguard's "main problem" what are your thoughts about why VG is "among the cheapest..."?
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Re: Vanguard Customer Service Mega-thread

Post by aspiringboglehead »

Sadly (because I love the idea that Vanguard was built on and love their individual funds), Vanguard Brokerage Services is unremittingly terrible at providing customer service. They recently processed a partial incoming ACATS transfer incorrectly, treating it as a full transfer, which caused them to seize all my assets in the sending account for the 29 days (!) it took them to unwind the problem. The entire sending account, which had been open for almost 20 years, was closed because of this and had to be "repapered" to be reopened, and I believe I've lost a variety of grandfathered benefits in that account because it's too complicated for the other firm to restore them.

Vanguard barely seems to care about the serious inconvenience and costs that it has caused. It has yet even to reimburse me for the sending firm's "full transfer" fee, which I paid almost a month ago. Despite repeated promises to do so, they alternate between saying "of course we'll reimburse it" and telling me, almost insultingly, to ask for the money back from the other firm. I had been working with someone on Vanguard's "Executive Communication Team" (I don't really know what that is) who seemed to moving things in a more helpful direction, but I just got an online letter from a different group at Vanguard telling me to call the general customer-service number if I had any questions.

Every time I call Vanguard, I get a different response and a lot of broken promises about timeframes and paths to resolution. I'm thinking of FINRA arbitration on principle because there doesn't seem to be any other way to get a proper resolution. ACATS transfers are never as easy as anyone would want them to be -- which itself is silly and reflects problems with the industry -- but this whole cascade of errors at Vanguard exposes how threadbare their customer-service organization is. It genuinely pains me to say it. I have an almost emotional resistance to moving to Fidelity or TD Ameritrade but it may well be time.
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Re: Vanguard Customer Service Mega-thread

Post by jebmke »

jebmke wrote: Wed Nov 16, 2022 10:17 am On November 7 I donated some shares of a stock that was in my VG brokerage account to our VG DAF. Normally this has gone smoothly. As of yesterday, there is only an ack of the shares transfer but no indication that they were sold nor is there a change in the balance of our DAF other than minor market fluctuations.

This is the first time I've had a VG "glitch." I left a e-message with the DAF custodian and I am interested in watching how quickly they investigate this as well as resolving the issue.
This was resolved. I received a message from VG Charitable the same day that they would investigate. It took several days (at least 10 days, maybe longer) but the funds appeared in the account. I would have liked them to at least send me a second email that it was resolved rather than having to periodically log in an check their site.
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Re: Vanguard Customer Service Mega-thread

Post by beyou »

aspiringboglehead wrote: Wed Nov 23, 2022 4:32 pm Sadly (because I love the idea that Vanguard was built on and love their individual funds), Vanguard Brokerage Services is unremittingly terrible at providing customer service. They recently processed a partial incoming ACATS transfer incorrectly, treating it as a full transfer, which caused them to seize all my assets in the sending account for the 29 days (!) it took them to unwind the problem. The entire sending account, which had been open for almost 20 years, was closed because of this and had to be "repapered" to be reopened, and I believe I've lost a variety of grandfathered benefits in that account because it's too complicated for the other firm to restore them.

Vanguard barely seems to care about the serious inconvenience and costs that it has caused. It has yet even to reimburse me for the sending firm's "full transfer" fee, which I paid almost a month ago. Despite repeated promises to do so, they alternate between saying "of course we'll reimburse it" and telling me, almost insultingly, to ask for the money back from the other firm. I had been working with someone on Vanguard's "Executive Communication Team" (I don't really know what that is) who seemed to moving things in a more helpful direction, but I just got an online letter from a different group at Vanguard telling me to call the general customer-service number if I had any questions.

Every time I call Vanguard, I get a different response and a lot of broken promises about timeframes and paths to resolution. I'm thinking of FINRA arbitration on principle because there doesn't seem to be any other way to get a proper resolution. ACATS transfers are never as easy as anyone would want them to be -- which itself is silly and reflects problems with the industry -- but this whole cascade of errors at Vanguard exposes how threadbare their customer-service organization is. It genuinely pains me to say it. I have an almost emotional resistance to moving to Fidelity or TD Ameritrade but it may well be time.
While VBS has been around a long time, it was originally outsourced to Pershing. Pershing is a long established player who gave Vanguard quick access to functional but expensive brokerage services. To cut costs, they had to insource, which means years of building out tech, processes and training staff to redo what Pershing had done for them. Fidelity started this many years before Vanguard, and Schwab way before Fidelity. Vanguard will get where they need to be, but it takes time.
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Re: Vanguard Customer Service Mega-thread

Post by beyou »

Fallible wrote: Wed Nov 23, 2022 4:26 pm
beyou wrote: Wed Nov 23, 2022 1:34 am
galawdawg wrote: Tue Nov 22, 2022 6:22 am
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
Ou come on. Your description of the financial incentives is the same at every broker and fund manager. The execs all get bonuses, based on various goals such as revenue and profits. They all want to sell PAS-like products (at even higher prices than Vanguard). They all want to cut costs on tech and other overhead, which adds to short term profits, and short term bonuses. I worked for BlackRock, and a few other asset managers over an 4 decade career. They were all horrible how they cut corners on tech, even worse on operations staff, meanwhile treating themselves lavishly. I was so glad to retire and leave this industry behind. I do think Vanguard is among the worst out there in terms of how they cut corners on cost, but they all do it. Fidelity and Schwab moved much of their operations from their home cities, disrupting the lives of their tech and ops staffs, in the quest to reduce cost. Fidelity recently offered buyouts to older tech staff to get rid of them. BlackRock has no customer facing tech and ops at all, you can’t buy an ishares etf directly from BlackRock. They are the extreme of what you accuse Vanguard (manage the funds and let someone else deal with shareholders).

The main problem with Vanguard is they are among the cheapest in number of hires and how much they pay hires. This shows in their tech (crappy mobile app), poorly trained customer support and long hold times to get the bad support. But the others are always under pressure to cut costs. Many times in my career, I built up good processes and tech at these firms, only to watch some cost cutting execs later ruin by cutting costs after I leave the firm or department. They all do it, but they are all at different points in the cycles of spend/improve/cut costs/suffer/spend to fix what they broke. I personally interacted with Vanguard IT staff and see that they are doing the same as other firms, just slower and more bureaucratically. They refuse to blaze trails in tech, wait for competitors to build solutions, study and slowly adopt industry success stories. They build slowly and steadily, just as one builds wealth slowly and steadily via boring old index funds.

None are perfect, and established firms like Schwab, Fido and Vanguard have a huge complex infrastructure to maintain and enhance. Fidelity spends big $ to try and meet that goal, but by mass layoffs of senior staff, they set themselves back as much institutional knowledge was let out the door. Personally I don’t think their online services are any better than Vanguards. I regularly use Vanguard, etrade and Fidelity sites, and they all seem about the same in terms of usability.
"beyou", I boldfaced areas of your informative post that I think shed balanced light on Vanguard AND its competitors. As I experienced some incredible, potentially very serious, and repeated errors from Vanguard's customer service in the last year, I often wondered just how much worse (or better?) VG really is than Fidelity, Schwab, etc., but with no way to know for certain.

I do have a question for you: in your second paragraph where you describe Vanguard's "main problem" what are your thoughts about why VG is "among the cheapest..."?
A long culture of bringing low cost products to market means a long culture of keeping the lid on costs. Suddenly having to move to expand services meant building tech, processes and hire/train in an industry with a long history of high price products. Essentially, if Vanguard wants to hire experienced people, they need to hire away from firms with more costly products and higher paid staff. If they hire inexperienced and train, that takes a long time and young people tend to have more turnover. Similarly with outsourcing common tech functions, vendors charge prices that those high ER fund managers (and high fee brokers) can afford. They wont necessarily lower the price for Vanguard, so Vanguard is slow to adopt, and sometimes chooses to build instead of buy tech, thinking they will save $ (but in fact delays rolling out tech and ends up costing more than expected). So if you want a low cost provider, in a high cost industry, have to put up with some delays in service quality.
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Re: Vanguard Customer Service Mega-thread

Post by chinchin »

beyou wrote: Wed Nov 23, 2022 4:45 pm
While VBS has been around a long time, it was originally outsourced to Pershing. Pershing is a long established player who gave Vanguard quick access to functional but expensive brokerage services. To cut costs, they had to insource, which means years of building out tech, processes and training staff to redo what Pershing had done for them. Fidelity started this many years before Vanguard, and Schwab way before Fidelity. Vanguard will get where they need to be, but it takes time.
That was 13 years ago.
not financial advice
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Re: Vanguard Customer Service Mega-thread

Post by beyou »

chinchin wrote: Wed Nov 23, 2022 4:57 pm
beyou wrote: Wed Nov 23, 2022 4:45 pm
While VBS has been around a long time, it was originally outsourced to Pershing. Pershing is a long established player who gave Vanguard quick access to functional but expensive brokerage services. To cut costs, they had to insource, which means years of building out tech, processes and training staff to redo what Pershing had done for them. Fidelity started this many years before Vanguard, and Schwab way before Fidelity. Vanguard will get where they need to be, but it takes time.
That was 13 years ago.
Schwab has been in the brokerage bus way longer than 13 years. Believe it or not, this is a hugely complex and ever changing business, and 13 years is a newbie in the brokerage bus.
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Re: Vanguard Customer Service Mega-thread

Post by aspiringboglehead »

beyou wrote: Wed Nov 23, 2022 5:08 pm
chinchin wrote: Wed Nov 23, 2022 4:57 pm
beyou wrote: Wed Nov 23, 2022 4:45 pm
While VBS has been around a long time, it was originally outsourced to Pershing. Pershing is a long established player who gave Vanguard quick access to functional but expensive brokerage services. To cut costs, they had to insource, which means years of building out tech, processes and training staff to redo what Pershing had done for them. Fidelity started this many years before Vanguard, and Schwab way before Fidelity. Vanguard will get where they need to be, but it takes time.
That was 13 years ago.
Schwab has been in the brokerage bus way longer than 13 years. Believe it or not, this is a hugely complex and ever changing business, and 13 years is a newbie in the brokerage bus.
Your approach seems reasonable to me. Also, apparently I am still working with the "Executive Communication Team" after all, which makes me feel a little better.

I don't know a lot about customer service (behind the scenes) but my instinct is that they need a better case-management system and better communication between front-line teams and back-end teams that can't talk to customers. (Alternatively, they need to let the back-end teams talk to customers.) It's not Vanguard's fault that ACATS is such a complicated and manual system, but that complexity plays to Vanguard's customer-service weaknesses at the moment, and they should be able to try to at least muddle a way around it. Anytime an organization has to expose that much of its inner workings, requiring the customer to be aware of different "departments" and their limitations, it's an opportunity to improve customer service.

It's also unfortunate to be an unusual case in a customer-service system that isn't adaptive. I imagine it's rare for Vanguard to accidentally cause a securities account at another firm to be closed because of their own manual processing error -- and for assets never meant to be implicated in an ACATS transfer to be seized and unavailable to a customer for a month. It's almost like they need some credible mode of quick customer-service escalation that doesn't yet exist. There aren't really any "supervisors" to speak to. There was some back end "processor" I couldn't speak to who, as far as I could tell, simply didn't recognize the gravity of the error that their team had made, and there was no easy way to convey that problem to anyone over the first two weeks that I was wrestling with the problem.
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Re: Vanguard Customer Service Mega-thread

Post by nisiprius »

As a single data point, reported in another thread: I had a problem with my RMD.

I would grade Vanguard's handling "grudgingly adequate" or "irritating but satisfactory" or "not infuriating," The situation was resolved (a week and two calls), and I didn't spend excessive time on hold (five minutes? ten?)

I have automatic monthly RMD withdrawals, which (for years) were scheduled for the 15th of every month.

On 11/15 I got a flurry of emails saying only "Your automatic transaction couldn't be processed," promising "We've sent you a message with more details" in the online account message center, where I learned only that the AWP option you have established on the accounts listed below was not processed."

Plus: I got an email alert.

Plus: The situation is resolved--at least, the account is showing the transactions as having occurred.

Minus: I still have no explanation of the cause of the problem. (The rep resolved it by blowing away my existing RMD auto-withdrawals and setting them up afresh.)

Minus: I was forced to do a "try-this-first-then-wait-and-call-again."

Minus: To get to the "real" representative in Malvern, every time, I had to got through a "call-center-type" gatekeeper who killed me with kindness but knew nothing about the account, and wouldn't simply connect me to the retirement center without a brief interview first. The call was answered promptly, there was a perfectly acceptable hold to get to the "real" representative.

Minus: A lot of wasteful repetition. After talking to the first person, I needed to repeat all of my identity and security information to the second. The second, who "refreshed" my automatic RMD, had to ask me to confirm that I wanted the same tax withholding percentages as before, and listen to a longish recorded message disclosing the options open to me. Yes, I understand that it would be unwise for the representative to say "everything the same as before?" and leave it at that.
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Re: Vanguard Customer Service Mega-thread

Post by Miriam2 »

beyou wrote: Wed Nov 23, 2022 4:51 pm A long culture of bringing low cost products to market means a long culture of keeping the lid on costs. Suddenly having to move to expand services meant building tech, processes and hire/train in an industry with a long history of high price products. Essentially, if Vanguard wants to hire experienced people, they need to hire away from firms with more costly products and higher paid staff. If they hire inexperienced and train, that takes a long time and young people tend to have more turnover. Similarly with outsourcing common tech functions, vendors charge prices that those high ER fund managers (and high fee brokers) can afford. They wont necessarily lower the price for Vanguard, so Vanguard is slow to adopt, and sometimes chooses to build instead of buy tech, thinking they will save $ (but in fact delays rolling out tech and ends up costing more than expected). So if you want a low cost provider, in a high cost industry, have to put up with some delays in service quality.
Beyou - thank you for your many detailed explanations from your perspective in this thread. I appreciate you taking the time to post.
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Re: Vanguard Customer Service Mega-thread

Post by aspiringboglehead »

nisiprius wrote: Wed Nov 23, 2022 8:32 pm As a single data point, reported in another thread: I had a problem with my RMD.

I would grade Vanguard's handling "grudgingly adequate" or "irritating but satisfactory" or "not infuriating,"
For what it's worth, this is probably where I ended up with my own situation that I complained about earlier. Vanguard did eventually put me in touch with someone who could coordinate and fix the problem; that person was very helpful; and the problem was eventually fixed. It took a long time, and part of the reason is just that ACATS takes a long time in general - so if their processing teams make ACATS errors (which to be clear I still regard as egregious, and which should never have been made!), the delays compound.

Vanguard even compensated me slightly for the problem. I joke that their approach to compensation is a lot like the Social Security Administration's might be: they'll calculate exactly what their errors cost me and send me an $8 check (or whatever), instead of giving a "goodwill credit" the way that any of the for-profit broker-dealers would do. But while I lose a small amount of money from that over the years, I have to admit their approach is the correct one; the policies that favor me at (say) American Express are essentially transfers of wealth from the general population to customers who are more skilled or persistent at dealing with customer-service organizations.

So in the end I consider Vanguard's resolution acceptable. I would hope not to have to go through a process like it again, but I take others' points that probably the same sort of thing could happen at any broker. And maybe Vanguard is still building its internal systems in a way that will yield improvements over the long term.
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Re: Vanguard Customer Service Mega-thread

Post by Tubes »

I'd like to make a partial ACATS transfer to Fidelity. Should I take any precautions?

This thread has me nervous.
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Re: Vanguard Customer Service Mega-thread

Post by jebmke »

Tubes wrote: Fri Nov 25, 2022 2:41 pm I'd like to make a partial ACATS transfer to Fidelity. Should I take any precautions?

This thread has me nervous.
Keep good records of all lots including cost basis.
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Re: Vanguard Customer Service Mega-thread

Post by Tubes »

jebmke wrote: Fri Nov 25, 2022 2:47 pm
Tubes wrote: Fri Nov 25, 2022 2:41 pm I'd like to make a partial ACATS transfer to Fidelity. Should I take any precautions?

This thread has me nervous.
Keep good records of all lots including cost basis.
Ah, good point. I'm only going to transfer my post 2012 holdings which have good basis info. Sounds like I should record the others that I want to keep at Vanguard in case they accidentally get swept up wrongly?
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Re: Vanguard Customer Service Mega-thread

Post by aspiringboglehead »

Tubes wrote: Fri Nov 25, 2022 2:50 pm
jebmke wrote: Fri Nov 25, 2022 2:47 pm
Tubes wrote: Fri Nov 25, 2022 2:41 pm I'd like to make a partial ACATS transfer to Fidelity. Should I take any precautions?

This thread has me nervous.
Keep good records of all lots including cost basis.
Ah, good point. I'm only going to transfer my post 2012 holdings which have good basis info. Sounds like I should record the others that I want to keep at Vanguard in case they accidentally get swept up wrongly?
They did assure me that I was correct that the error they made is quite unusual.
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