Vanguard Group Found To Be Leader In Client Loyalty

I know I haven’t finished my 401k rollover series yet, but whenever a family friend asks where they should put their old retirement plan assets, I always say Vanguard. They certainly aren’t the only good company out there, but they do have a lot of things going for them:

  • They are not a for-profit company, so their interests are better aligned with the common investor. For example, this way there are no shareholders who might want to raise mutual fund fees in order to increase profits.
  • They don’t pay advisors to sell their funds through load commissions or 12b-1 fees.
  • They offer a wide selection of low cost mutual funds that track many different asset classes.
  • I also put my money where my mouth is, as I have all of my IRAs there. I am always pleased at the high level of customer service that I get from them.
  • In the end, I feel they offer the best chance at superior performance and low-stress ownership over the long haul.

According to this Wall Street Journal article, Few Firms Earn Loyalty of the Wealthy, I am far from alone. Some excerpts:

Affluent investors say they’re increasingly dissatisfied with their mutual funds’ long-term performance and inconsistent returns. In fact, only 11 of 38 top fund families manage to create meaningful customer loyalty, according to a report released by Cogent Research LLC. The Cambridge, Mass., market researcher surveyed 4,000 mutual-fund investors with at least $100,000 in investable assets.

The study showed Vanguard Group with a wide lead in investor loyalty.

The average score was minus-12. The high was Vanguard’s plus-44. Second place went to Dodge & Cox with a plus-29. Schwab came in with 26 points, and T. Rowe Price had 21.


  1. Can someone explain to me how such a company can be not-for-profit?

    Who provided the capital to start the company?

    What happens to its assets and liabilities if it were to dissolve?

    Could a company such as say Fidelity acquire them?

    As a NFP, what is their objective? Why would they not want to be a for profit business?

  2. I have most of my funds there as well. While their customer service may not be the best of the best, they certainly are good. Their philosophies are aligned with mine as well.

  3. From Vanguard Group, Wikipedia

    “Vanguard is unusual among mutual-fund companies since it is owned by the funds themselves. In this structure, each fund contributes a set amount of capital towards shared management, marketing, and distribution services. The company claims that this structure better orients management towards shareholder interests. Other mutual-fund sponsors are expected simultaneously to make a profit for their outside owners and provide the most cost-effective service to funds for their shareholders.”

    I’m not here to say that they are angelic or infallible, I’m sure all the workers want to get paid a market wage like everywhere else, just that they have less pure-profit motive on top of that.

  4. heather says:

    Thanks for that explanation Jonathan… so when performance goes up, management gets paid more. Very cool.

    I was reading my semiannual reports recently, and it really struck me how much better Vanguards are than any others I read. They are so well organized, and well written. It’s like getting a free financial education with your interest. Example:

    Vanguard: “The Money Market and High-Yield Funds produced the highest returns, an unusual pairing in most market environments. This similarity of returns reflected the striking compresion of yields across most fixed income securities”

    Fidelity simply listed the yields of all their money market funds, without any additional comment. Thanks, I could have gotten that info from the highlights table.

    Barry, look at the previous post titled “what if Vanguard or Fidelity went bankrupt”:

  5. Looking Forward says:

    Here’s what I don’t like about Vanguard.

    I’m ready to roll out my 401k. I called TDAmeritrade, Vanguard, and Fidelity. Vanguard had no interest in talking to me about asset allocation until they had my money! TD was a young arrogant kid talking down to me.

    Fidelity – whole different story. A financial planner answered the phone. He took his time with me. Answered all my question re: fees, loads, asset allocation. He spoke slowly and clearly, not above me. They sent me a workbook to detail my current asset and my plans for retirment. I returned it and expect a call this week to discuss it. He will be my single point of contact. I can meet with him by phone or any advisor at any branch every 6 months to analyze and re-balance. With my balance, over 200k, there will be no fees of any kind.

    I think that they are trying to be competitive and ready for the boomers to retire. I was very impressed and plan to invest with Fidelity.


  1. Boiling Frogs says:

    Dear Vanguard, remember present value.

    This is the second in my Present Value series, and the first in which I’ll be looking at other’s claims which seem to make sense at first glance, but are terribly misleading under closer examination. I pick these examples not to prove other…

  2. […] My mom is trying to organize and simplify her financial accounts, which I applaud. A major part of this is to finally move her orphaned 401(k)s and IRAs into one location. I recommended Vanguard, since that’s where all my IRAs are. She was okay with sticking with low-cost and passive index funds, which is Vanguard’s specialty. They are also known to be investor-oriented and have high client loyalty. […]

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