Two upfront disclaimers:
1. Nothing in this post or on this blog should be construed as financial advice or a recommendation to take any action of any kind. Financial decisions should be made only after a careful review of your personal situation and in consultation with your tax and financial advisor.
2. I have a great deal of respect and admiration for the Vanguard organization. Across my base of individual and institutional clients I use a number of Vanguard mutual funds and ETFs.
That said Vanguard recently made a decision to lower the investment minimums on its Admiral Share class of funds for investors in these funds who hold their shares at Vanguard. The Admiral shares offer an even lower expense ratio than Vanguard’s Investor Share class which already has very low expenses. This is a great gesture on Vanguard’s part because they are essentially earning less by doing this. Other than the expense ratios, the fund portfolios are the same across all Vanguard share classes.
However, Vanguard did not initially extend this opportunity to Vanguard fund shareholders at other custodians such as Schwab or Fidelity. Though this did not impact a large number of my clients, I viewed this as unfair to clients of many financial advisors. Like many advisors, I use Schwab as my primary custodian for most of my individual clients and one of my larger retirement plan clients. There we hold mutual funds and ETFs from a variety of fund companies, including Vanguard.
The idea of Vanguard treating the clients of financial advisors holding their funds elsewhere differently (and worse) than shareholders who dealt directly with Vanguard really bothered me. This seemed very “un-Vanguard-like.” Most of my institutional clients are already in lower cost share classes; additionally I have tended to use Vanguard’s ETFs for most of my individual clients which carry a very low expense ratio that is generally comparable to Vanguard’s lowest expense mutual fund share class.
None-the-less I sent several Twitter messages to Vanguard saying in effect that it was wrong to treat our clients as second class shareholders and also asking them why they were anti-advisor. Evidently so did a number of my fellow advisors and consultants because a short time later I received an email saying that a similar opportunity would be made available to advisor clients at other custodians. The social media activity was mentioned to me in a conversation with a Vanguard rep.
The point is that Twitter and social media can be a powerful communications tool for financial advisors. In this case it proved to be an excellent vehicle for us to pressure Vanguard to do the right thing for our clients. Many mutual fund companies are using social media as a vehicle to engage advisors and shareholders. That’s great, the more we know the better able we are to make intelligent investment choices for our clients. The flip side is that the fund companies should expect to be called out when they do something as short-sighted as what Vanguard did recently.
Roger,
This is a great example of an established brand "growing bigger ears" and hopefully we begin to see more of this.
Don thanks for visiting the site and for your comment. Vanguard deserves kudos for listening and for fixing this situation in a timely fashion.
Roger, first off, that's a really interesting angle on the situation I never would have considered. Thanks for highlighting that (since I often act as though Vanguard can do no wrong). Next, congrats on your use of Twitter to drive results. I've had a few decent examples of having things resolve by companies that have a presence on twitter; Comcast comes to mind.
Thanks for visiting and for your comment. As I said in the post I'm a huge Vanguard fan and between their funds and ETFs they comprise a significant portion of my client's assets.
I'm not sure if it was their intent to do this only for their direct clients, but when I initially contacted one of their reps he gave no indication that the lower share class minimums would be extended to shareholders at other custodians, including funds held in 401(k) plans.
I am in the process of converting the few clients who are eligible, even a few extra basis points helps.
Roger, great post and thanks for the work keeping us updated. Another valuable benefit of social media in this situation was your and others contributions on blogs, LI, twitter, and message boards, which in today's world also means we were in the loop via emails and RSS feeds, etc. It was great to see the updates and comments from many advisors on the NAPFA boards regarding their communications with representatives. Perhaps in the future as a community we should also remember to call on each other to make these types of 'tweets' together to be sure our concerns are heard. Rob
Robert thanks for your comment and the kind words. You are absolutely right in that many of us NAPFA members do blog and write and we should pool these resources on issues that are key to our clients and the investing public.
Roger, I liked this on so many levels. First as a reminder to see if my shares in total return have been transferred to the Admiral shares. Second, the power of social media and it's impact.
Barbara thanks for your comment. If you hold the shares directly with Vanguard they may well have already been converted but it is a good idea to check. I've been involved in social media for less than two years and I never cease to be amazed by its power and impact.
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Thanks for your comment, Happy New Year.
Happy New Year to you too!!!
Media tool or a story about the innovative ways people were using these tools, such as in the aftermath of the earthquake in Chile. While it has been tempting for public relations professionals and their clients to jump on the.Rachael Siefert posted this on October 22nd, 2010 TweetIn March, I wrote about the phenomenon of people using Twitter during natural disasters to share updates and insights from the ground and let the world know that they are okay.
Jamie thank you for your comment.