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

“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.”