MFOHome About Commentary Discussions Funds The Best Resources Support Us!

Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

Sign In Register

Categories

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Vanguard's Irritating Perch On Moral High Ground

TedTed
in Fund Discussions
FYI: The folks at Wealthfront posted an entry on their blog a while back about why they were going to use Vanguard's exchange-traded funds going forward rather than those offered by BlackRock. As you may know, Wealthfront is a “robo-advisor” that uses algorithms to diversify the money it manages for people across a number of ETFs. Wealthfront is not large, but it has the potential be large someday, so whose ETFs they use is a matter of some importance.
Regards,
Ted
http://www.fa-mag.com/news/vanguard-s-irritating-perch-on-moral-high-ground-32858.html?print

Comments

  • MarkMark
    "Vanguard is essentially a non-profit, because it is owned by the investors in its funds. Therefore any profits it earns are returned to the investors in its fund in the form of lower fees. In contrast, Blackrock is a for-profit publicly traded company. It remains highly dependent on management fees from ETFs, which were the source of roughly a third of its $11.1 billion in revenue in 2016. Cutting fees on all their ETFs to Vanguard prices (not just their new “core” share classes) would cost Blackrock over $500 million in profits, which would be an almost 20% hit to their earnings …"

    Wow! I knew running a fund firm could be lucrative, I just didn't realize how lucrative.
  • CharlesCharles
    Curious if folks on board see any benefit to shops like Betterment and Wealthfront versus say a simple a target date fund like LifePath series or balanced allocation fund like BBLAX.
  • Sven
    For one reason or another there are those who don't want to manage their finance and retirement. In these situations, robo-advisors would serve their purpose. Personally I would choose a well run balanced fund such as Vanguard Wellington or TRP Capital Appreciation.
  • VintageFreakVintageFreak
    @Sven. I really think Balanced, Target funds is all the "robo" advising that's needed. I'm frankly not sure why we need "robo" advisors. Sounds like marketing gimmick to me. Targeted toward investors who feel they are doing something more substantial than investing in a balanced/target date fund. If one feels the need to do something more "active" I don't see why that cannot be done individually.

    I'm trying to imagine situation where investor answers questions and robot comes out with answer, you should be invested 9.4% in Asia out of which 1.6% should be in India. I don't get it.
  • msf
    ISTM that the advantage of robo advising is the ability to segregate fixed income and cash from equity. So you're able to draw from more stable investments for cash and wait out downdrafts in the market. (Think three bucket strategy.)

    You can't do this with a hybrid fund unless its income component alone is sufficient for your cash flow needs. Otherwise, you'll be selling shares (representing equity as well as fixed income securities) regardless of the state of the market.
  • Sven
    @msf, Your point is well taken. A separate bucket of cash or ultra-short term bond would be added during retirement.
  • jerry
    The article in my opinion makes accusations about how Vanguard seizes the high moral ground but I don't see it. There is certainly no evidence of phoney Vanguard quotes in the article. Its the Robo company which is arguing for Vanguard not Vanguard
Sign In or Register to comment.