What You Need to Know
- Rekenthaler criticizes Vanguard's Personal Advisor Services for its exclusive funds and private equity plans.
- Client service has been declining at Vanguard, he writes.
- Costly, complex and illiquid private equity funds directly contract Vanguard’s brand, he says.
The fund giant built on serving any and all investors with well-run, low-cost passive mutual funds may have lost its way, according to John Rekenthaler, vice president of research at Morningstar.
Client service has been declining at Vanguard, and even more disturbing, writes Rekenthaler, are recent developments at the firm’s Personal Advisor Services platform, which provides online and phone-based advice from a financial advisor for a 0.30% annual fee and requires a $50,000 minimum.
PAS recently introduced three actively managed “Advice Select” funds for PAS clients, not to all Vanguard clients, and the platform has plans to expand access to private equity funds to accredited investors and qualified purchasers early next year. Currently only a small group of PAS clients have access to private equity.
“Private equity funds directly contradict Vanguard’s existing brand, being costly, complex and illiquid rather than cheap, simple and easily traded,” Rekenthaler says.
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He’s even more surprised by the Advice Select funds, which remind him of the exclusive offerings sold by Wall Street wirehouses around 1990, when these firms marketed their in-house funds only to their advisors’ clients.