Vanguard's Website Problems Are Mostly Fixed. Will They Be Forgotten?

The website issues that have plagued Vanguard over the past week or so appear to be broadly   resolved as of Thursday morning.

Investors using the Bogleheads website and others report that they once again have access to their PDF statements and trade confirmations on the Vanguard site, though some confirmations for trades occurring during the outage may still not be available.

In addition, the company’s online notice to clients apologizing for its website problems has been taken down, according to Dan Wiener, editor of The Independent Adviser for Vanguard Investors newsletter.

But the trouble may not be over for the giant asset manager.

“Looks like Vanguard still has some clean-up work to do,” wrote one investor, called “Homestretch” on the Bogleheads site, noting no confirmations for trades that took place after Dec. 20. The company also has explaining to do, wrote a user with the alias ronsc1.

Vanguard has attributed the problem to a “third-party service provider interruption” that made “certain statements, confirmations, and tax forms” unavailable on its website and mobile app. It has not identified the provider.

Vanguard has had technical problems with the website over the years, but this one, coming just before year-end — a crucial time for investors given year-end deadlines for account contributions, required minimum distributions and financial planning for the new year — could be the most consequential.

“This one could potentially cause more reputational damage due to the length and severity,” said Craig Iskowitz, founder and CEO of Ezra Group, a consultancy focused on technology and wealth management. “However, the odds are that it is only affecting a small and vocal group out of their 30 million customers, so I think the long-term fallout will be minimal.”

Vanguard investors tend to be very loyal to a company that has built its reputation on serving them. But the asset manager now has strong competition from other firms who also charge extremely low fees but spend more on technology, such as Fidelity, according to Wiener.

Vanguard’s CEO, Tim Buckley, has said the company spends $1 billion on technology annually. Fidelity reports spending $2.5 billion.

Iskowitz notes that website issues have plagued multiple asset managers, sometimes at the same time, as happened in November 2020 when service issues hit Fidelity, Ameritrade, Vanguard, Merrill and Schwab.

“Unfortunately, this is part of the deal when everyone relies on a small group of cloud providers,” he said. “When one goes down, it impacts dozens or even hundreds of firms simultaneously.”

Timothy Welsh, CEO, president and founder of consulting firm Nexus Strategy, also weighed in on the website woes Thursday, telling ThinkAdvisor: “This is very bad, particularly for a firm with a brand as well known as Vanguard. Clients trust Vanguard for its approach to low-cost investing, so having a dysfunctional website will definitely eat away at some of that trust.”

However, predicting it would only be a “short-term” issue, Welsh said: “They’ll get it fixed, they’ll weather the storm and, ultimately, most clients will forget it happened a couple of months from now. In the meantime, from a technology perspective, you are only as strong as your weakest link, so look for them to take drastic measures with their vendors to make sure it doesn’t happen again.”