Vanguard’s customer service woes grow
Some loyalists decry lost checks, service lapses as the investment giant hits $8T in assets
Garrett O’Hara wanted to keep his retirement money at Vanguard.
But after a series of technical glitches — trouble accessing the Vanguard website, not receiving text messages for log-in authentication, and long waits on the phone — the Texas-based long-haul truck driver said he took his money elsewhere at the end of 2020.
Mr. O’Hara has lots of company in his irritation with Vanguard.
The firm still ranks at the top of surveys by J.D. Power and others, yet complaints about Vanguard’s customer service are growing anecdotally, according to online reviews, financial advisers and company loyalists.
It’s in part because Vanguard and many of its peers are being slammed with new clients. But Vanguard also has led the race in cutting costs for clients’ funds. And that may mean scrimping on service, investors say, leading some like Mr. O’Hara to make this choice: continuing to buy Vanguard funds while moving their brokerage accounts to a different firm.
Vanguard added to the furor in July when it said it is phasing out secure messaging on its website by the end of August for clients under $1 million in assets. Those with $1 million or more, known as Flagship investors, will still have secure message access on the company’s website.
The company plans “to introduce new ways to more efficiently and effectively communicate with Vanguard digitally,” said spokesperson Charles Kurtz. Some clients, like those with accessibility needs and who often write secure messages, as well as Flagship clients, “will retain access,” he said, until new ways to communicate are introduced.
The reaction has been mixed: Some fiercely loyal Bogleheads, the longtime Vanguard investors who adhere to founder John Bogle’s low-cost investment philosophy, took to their website — www. bogleheads.org/forum/ — to both support and decry Vanguard’s secure-messaging change.
Some say they rarely use it. Others think Vanguard has fallen behind competitors for complex trust and administrative tasks.
“Why does Fidelity get me my monthly statements sooner than Vanguard?” said Dan Wiener, editor of the Advisors Investments newsletter, which tracks the performance of Vanguard funds. His clients still like to purchase Vanguard funds, but prefer to buy and sell them through a Fidelity account so they can avoid Vanguard’s service problems.
“We don’t want to [maintain] custody at Vanguard, because of service issues,” Mr. Wiener said.
So “we hold Vanguard funds at Fidelity,” he said. “The issue is when I have something that needs to be done, I can’t get it done at Vanguard, whether settling an estate, moving assets, making a gift. It’s fine until it’s not.”
“I’m a huge fan of Vanguard,” added financial planner Allan S. Roth, based in Colorado.
However, in March, he wrote a column about how he experienced Vanguard returning hundred-thousanddollar- plus checks, making mistakes in trust accounts and messing up the distribution in his mother’s inherited IRA account.
Mr. Roth still promotes and uses Vanguard mutual funds and Exchange Traded Funds for himself and his clients.
“I love that they’re not defensive about improving customer service. But now they have to actually do it,” he said in an interview.
Vanguard is justly famous for its low-cost investment funds, enabling clients to save more money over time than competitors’ products with higher fees. Like Amazon or Southwest Airlines, “Vanguard is still the low-cost provider. But will they be the lowest service provider?” Mr. Roth wonders.
Asked about these complaints, spokesperson Emily Farrell said Vanguard continues to improve processes and introduce new online resources. “While we are pleased with our progress thus far, this is only the beginning,” she said. “Vanguard will continue to evolve as we strive to meet the changing needs of our clients.”
Changes for some retail investors
Vanguard’s reach is vast. And whatever the level of complaints, they haven’t stopped its juggernaut growth. In 2016, the company had $4 trillion in assets. And those have doubled to $8 trillion as of June 30.
The three largest asset managers — BlackRock, Vanguard and State Street — collectively manage $19 trillion for millions of investors, with Vanguard accounting for the largest slice: 42% of the total.
In recent years, young investors have flocked to open brokerage accounts and are trading meme stocks like GameStop along with such cryptocurrencies as bitcoin. Last fall, many firms fueled the influx by offering commission-free stock trades to compete with up-and-coming firms like Robinhood. A rising stock market has also spurred more investors to open trading accounts.
Amid all this, Vanguard boasts 30 million customers globally. The company is at a point where its longtime customers need more services, say industry observers. Its older, wealthier clients, mainly baby boomers, are drawing down, cashing out assets or leaving money to their heirs. That requires more hand-holding, complicated rollovers, and transactions and phone calls to Vanguard.
Vanguard doesn’t encourage day trading, unlike Robinhood or other newer apps. And yet Vanguard is competing for younger, millennial clients who can choose among a bevy of competitors such as Fidelity, Schwab, Personal Capital, Wealthfront or Betterment.
All legacy brokers need to maintain service while pushing down costs, said H. Adam Holt, CEO of AssetMap Holdings, which makes software for advisers to work with investors.
“When you don’t care about personal advisers or humans, you just want speed,” Mr. Holt said. “But once you have more money, the higher-value accounts want a human for comfort. How do you support those people and keep costs down?”
Telephone wait times to reach a human representative at Vanguard during the pandemic can be lengthy, pushing clients to the website, according to Bogleheads and other customers.
Vanguard employee reviews on Indeed.com and Glassdoor.com offer a window into the frustration on both sides — customer-service reps and clients.
“They don’t have nearly enough help, so you get back-to-back calls for 7.5+ hours a day with no real training,” wrote one former employee on Glassdoor.
Despite the glitches, Vanguard took the top spot in the J.D. Power annual survey of customer satisfaction in 2021.
However, the rankings came with a caveat for all the brokerages.
The influx of new investors, coupled with rising trades and needier clients, “clearly put a strain on the system,” said Michael Foy, head of wealth intelligence at J.D. Power.
“With virtually every firm now offering free trading and new investors showing lower levels of brand loyalty, firms that get the customer satisfaction formula right have a chance to set themselves apart.”