David Fuller's view -
Vanguard's legacy was set by founder John Bogle, now retired, whose revolutionary idea was a low-cost index fund that kept fees low and returns higher -- as much as 0.50 percent higher annually over time.
That consumer-friendly concept has drawn in more than 20 million investors since its founding in 1975, and it's an edge that Vanguard is keen to maintain.
When Fidelity Investments recently ran full-page ads in the Wall Street Journal and the New York Times touting its "lower-than-Vanguard" expense ratios on several funds and ETFs, Vanguard hit back and lowered those of several funds, said Dan Wiener, editor of the Independent Adviser for Vanguard Investors. “What we’re talking about here is bragging rights.”
Indeed, Vanguard says its fee cuts this year alone have created $143 million in savings across 124 funds.
So much money has poured into Vanguard’s largest funds – the $465 billion Total Stock Market Index and S&P 500 – that the team that runs those along with 200 more index funds has grown to 80 people today, led by Portfolio Manager Gerry O’Reilly and co-heads of trading Mike Buek and Ryan Ludt, from just a small team two decades ago.
Online, Vanguard fans are giving the firm the benefit of the doubt — for now.
After all, Vanguard’s assets have tripled in a decade, rising by $1 trillion to $4.2 trillion in just the last five years. Costs have fallen from 0.68 percent to 0.13 percent on average since 1975, McIsaac added.
“Until recently the quality of customer and operational service, and Technology was always superb. Virtually error free,” wrote a client named Larry Mariasis on the Wall Street Journal’s comment pages. “But the pace of recent growth has impacted negatively the quality of service. ... Vanguard needs to seriously consider slowing down its growth ... to catch up with staff hiring and training. Otherwise Vanguard risks tarnishing an amazing reputation.”
David L. Zalles, a Blue Bell accountant, says his peers complain about mistakes in record-keeping at Vanguard. He said he personally had been "disappointed" about the tax cost basis record-keeping. "No one at Vanguard apparently understands the actual reporting requirements."
Vanguard spokeswoman Arianna Stefanoni Sherlock said that the company had seen "an uptick in service-related complaints in sporadic months of last year," but that the stress "has all but abated," due in part to hiring here and for its Arizona and North Carolina locations.
I saw a somewhat different version of this article on Bloomberg Intelligence last night but it cannot be taken off the terminal. So I asked Eoin, who joined FTM from Bloomberg over a decade ago, and he forwarded this related article above.
Vanguard’s biggest fan is Warren Buffett, who has long been a critic of fund management fees, because they mostly underperform stock market indices. I think it was about two years ago that Buffett announced that most of the money for his wife would be placed in Vanguard’s S&P 500 tracker.
The hero of Vanguard’s low fees is founder Jack Bogle, now retired. His success has inevitably attracted competition, so Vanguard has continued to lower fees, to currently 0.13% for the S&P tracker. It can do this because of all the money it holds.
What about the current problems with customer service delays?
This item continues in the Subscriber’s Area.
This section continues in the Subscriber's Area. Back to top