You know about my concerns with Vanguard from my SPECIAL REPORT: The Trouble with BlackRo… er… ummm, Vanguard. And I’m not trying to be unfair to Vanguard. But, as I explain in this piece, I have legitimate concerns, and think you should move to Fidelity. Here’s what I wrote then:
First, the most important reason for moving to Fidelity Investments is because it is still a family run business. It’s run by the founder’s granddaughter, Abigail Johnson. It is not a publicly traded company like BlackRock, pressured to meet Wall Street’s quarterly earnings expectations.
Second, now that Vanguard is being run by a former prince of BlackRock, is it in play for a takeover? After all, when you’re in the business of growing assets under management, the easiest way is to buy them. But I remember the late great Jack Bogle vehemently disagreed with this approach. Bogle understood that this is a relationship business and always will be. In life, you don’t just buy your relationships. That’s ugly. The same is true with money. You can’t buy a personal connection. You can’t buy trust.
Third, my father-in-law Dick Young worked in Boston 50 years ago and remembers like it was yesterday calling on his client Fidelity Investments. That’s a lot of history. Don’t be fooled by investment advisers who add up their ages to tout their history. They probably weren’t even born yet when Dick was having lunch with Fidelity execs.
Fourth, when you move to Fidelity Investments on your own, you may be hounded like the new kid in school, befriended by them to use their investment adviser services. This is not my intent for you. My intent is self-serving. My intent is to be your classroom guide—to guide you through the process, to shepherd you through the rat’s nest of documents. I don’t want you picked on like a newbie.
Fifth, we will develop an investment plan to help you invest like a Prudent Man. In the September 2015 issue of Richard C. Young’s Intelligence Report, Dick Young wrote:
The Prudent Man Rule is based on common law stemming from the 1830 Massachusetts court formulation Harvard College v. Amory. The Prudent Man Rule directs trustees “to observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital invested.”
Since I started our family investment management firm in 1989, I have operated under the assumption that the Prudent Man Rule to this day carries as much weight as it did in 1830. Common sense and prudence just don’t go out of style—ever.
Sixth, there is no initial cost for my counsel. Yes, once you’re on board, the red carpet will be rolled out for you, and you’ll become a client, getting what you paid for—help investing at Fidelity. Nice move.
As Vanguard CEO Salim Ramji correctly pointed out in a recent interview with ETF.com’s Allan Roth, aging Baby Boomers are having a spending problem: How to do it effectively. As I point out here in Spending Warning: Caution, This Isn’t for Everyone, it can be scary to spend money. I wrote:
We spend a lifetime saving ‘til it hurts, working ‘til we almost drop, and now we have more money than we ever expected to have. Nice job. But here’s the issue, it’s wicked scary spending money. It’s hard to stop your habits. You’re used to doing without in order to have more down the road. But here’s a word of caution: you want to enjoy the road while you still can. I understand how psychologically painful it is to make the transition, but do it. I’ve got your back.
Ramji goes on to imply that a good way to help retirees with their spending is to get them to buy annuities (which are insurance products), saying, “If clients don’t spend as much as they want, because they are too anxious to spend, that’s a bad thing. This could involve partnering with other companies such as insurance companies.”
I do not like the idea of annuities, as you know from some of the posts linked below. The fees are high, and getting to your money isn’t always easy.
- Why Your Survival Guy Eschews Annuities
- ANNUITIES: Have I Got a DEAL for YOU
- New Wave of Annuities Likely to Fall Short of Investor Expectations
- Put On a Coat of Armor for Long Term Success
Action Line: Know what you’re getting into before you invest. When you’re ready to talk, let’s talk. But only if you’re serious.
Originally posted on Your Survival Guy.
