Okay, now that I’ve got your attention, allow me to more eloquently elaborate:
Okay, never mind. I tried to come up with a better title, I really did. Unfortunately, there are no better words to describe my feelings towards a company that has brainwashed so many families into believing that high-priced investment managers are the devil, and their low-cost mutual fund and ETF (exchange-traded fund) investment options are their savior.
Earlier this year, Vanguard released an article discussing how its funds “deliver peer-beating returns.” In fact, over the last 10 years, Vanguard funds have outperformed 89% of their peers.
Great. Good for you.
What they DON’T mention is that the large majority of mutual funds do not beat their respective benchmarks (upwards of 90%, according to some studies). So basically, they beat 89% of crap.
I conducted a significantly more comprehensive analysis to make a better comparison.
First, to verify the articles findings, I ran a similar analysis comparing Vanguard’s fund performance to that of the average mutual fund over the last 10 years. Not surprisingly, I found very similar results.
What was surprising were the results when I compared Vanguard’s funds to the top 10% of mutual funds over the past 10 years.
On average, the top 10% of mutual fund managers outperformed Vanguard’s fund options by 1.12%, AFTER adjusting for fees.
Let me repeat that.
THE TOP 10% OF MUTUAL FUND MANAGERS OUTPERFORMED VANGUARD’S FUNDS OPTIONS BY 1.12% OVER THE PAST 10 YEARS, AFTER ADJUSTING FOR FEES.
So WHY would anyone want to invest with Vanguard?
WHY would you consciously make that decision? To save a few dollars in fees that you lose on investment performance? Ridiculous.
With investing, as with most things in life, you get what you pay for. That philosophy holds true with Vanguard.
But wait, doesn’t Vanguard also offer wealth management and financial planning services? That’s an added benefit, right?
For its wealthier clients (i.e. clients that have the most money housed at Vanguard, in this case $1,000,000), they offer something they call “flagship services.” All this means is that you have access to a dedicated representative (who more times than not is not available when you call), and that you get a free consultation with a Vanguard advisor to help create a plan.
However, having clients who worked with Vanguards flagship services in the past, I can assure you that these services are mediocre at best.
While you will have the opportunity to create a plan, once, is it monitored on a regular basis? No.
If your accountant has a question about your investments, will a Vanguard representative pick up the phone and call him/her? No.
Will a Vanguard representative work with you and your estate attorney to assist in implementing a charitable remainder trust? No again.
At the end of the day, by choosing to invest your money with Vanguard, you are paying very little, and receiving performance and service commensurate with that cost.
Personal wealth management is not about paying as little as possible in fees. That’s easy, and anyone can do that. Go to E*Trade, open up a brokerage account and pay your $10 per trade (or whatever the number is). Problem solved.
On the contrary, wealth and investment management is about getting the best bang for your buck. It’s about ensuring that if you do incur an additional expense, that you are more than compensated for it through either increased investment performance, peace of mind, or time. And if you are not receiving a large enough benefit, then you don’t incur the cost.
Simple as that. THAT is what financial planning is all about, and THAT is what you receive by working with a firm such as Apple Tree Wealth Management.
Still want to work with Vanguard? Best of luck. We’ll be here ready to help when you need us.