Instead of telling you what it’s like to work at Vanguard I want to describe how it feels; a recent business decision helped sum it up for me. There has been quite a bit of turnover for financial planners and managers in PAS recently, and they are having a tough time hiring enough external candidates to handle the volume they are creating. After close to two years in the making, they finally adjusted planner salaries to be competitive in the market. There have been years of pleading from advisors about increasing compensation based on the added responsibilities under the new PAS model. Instead of understanding the considerations of the advisors, they doled out salary increases because of turnover. And that’s how it feels to work at Vanguard; you don’t feel like they want you to work there, you feel like they don’t want you to quit. They make decisions out of fear, not appreciation.
Big picture (or what useless managers call the 30,000-foot view), Vanguard gets it right. They have a pristine reputation, industry leading products, and quality services that have led them to over $3 trillion under management. At a very local level, they also get it right by micromanaging their call centers as bare bones and efficiently as possible. This has led to the lowest fees for their products in the industry. But it’s somewhere in the middle where they screw it up. Somewhere between the board’s dogmatic focus on mission and the entry-level turnstile positions. Positions that require highly skilled, intelligent employees; that’s where they struggle. I think a lot has to do with management in these positions. If the regulatory bodies didn’t require a certain amount of licensed managers, the people Vanguard hires to fill these middle management roles would barely have the skills to manage an Arby’s. Just imagine someone fresh out of college, or someone with no industry experience, with no experience doing your actual job, telling you what you are doing wrong. Not to make you better, but to make it look like they are making you better. This lack of experience and lack of empathy leads to bigger issues.
These managers need a consistent performance measure to show they aren’t discriminating, and a way to manage people that doesn’t expose their own lack of talent. There are some performance measures that are logical like retaining or enrolling clients. Then there are others they come up with that are confusing and illustrate their disconnect, like how many times you can get an 80-year-old client to go into a video conference room online. You know, because forcing people to use outdated technology is a good measure of financial success. Vanguard knows management is weak in the middle, that’s why they promote a management style called “Quiet Leadership”. Managers can’t actually make you better or solve any issues you have, so they try to make you do it by answering your questions with questions. “Quiet Leadership” means they literally ask you questions and give no answers. It’s brilliant from a business perspective. They can save money by hiring under-qualified managers that don’t mind treating adults like children.
More specific to Personal Advisor Services, the poor change management has turned a promising career path into just another job. The surveys they give to assess crew engagement have shown just how poorly management has mishandled the transition into PAS. Change is never easy, but the way Vanguard does it makes it so stressful on employees. They will make decisions that have ripple effects they never think through. They screw up fundamental elements of a financial service and refuse to fix it (ask an advisor to describe how the performance is measured, and how confident they are in the numbers). Whether it’s the lousy technology, overly conservative policy changes, or the cumbersome processes they roll out, none of it helps advisors or clients. All of the responsibility is on the advisor to apologize for mistakes, make clients aware of coming changes that will adversely affect them, and to be familiar with extremely complex processes that should not even be the advisor’s responsibility. For some reason, Vanguard has taken away all of the support advisors used to have under the AMS service model, and replaced it with technology that doesn’t work and contractors that can barely make trades for clients without a paragraph of instructions. If you think the technology doesn’t work, you should see the employees that are required to generate leads. The leads advisors get set the expectation that client's will have a free financial plan and consultation, but in reality we are going to try to sign them up for a paid service. It’s not a good experience for the client. With all of the known issues, nobody in management ever takes responsibility or even apologizes for the mistakes. They just make you feel like everyone else is dealing with it, so you should too.
The whole company lacks transparency. They tell you PAS is not a sales job, but you have to enroll 20% of the clients you speak with everyday. Just because advisors are salaried doesn’t mean it’s not a sales job, it just means Vanguard won’t compensate employees properly. We tell clients we are financial advisors and they should pay us for wholistic advice, but all we do is rebalance their portfolios (we also offer the same service for free). The problem is that Vanguard restricts our ability to plan for clients based on limited resources and strict standards for our discussions (like not being able to discuss capital gains, that is not a joke, we received a memo stating we could not estimate capital gains while telling clients to generate them). Vanguard had a research paper to help clients try to see the value of the service; in it, Vanguard estimated the value of an advisor was about 3%. Regulators have recently told Vanguard they can’t use that research with clients because it is misleading. It’s pretty telling when the seminal research paper used to justify the value of your service gets pulled by regulators. They pitch the service like it’s wealth management. They make employees and advisors tout the estate planning, tax planning and insurance planning we can do. In reality, we only have surface discussions. It would be like going to a mechanic, and the mechanic saying “I can change your oil, but I can only discuss all the other stuff wrong with your car. You will need to go somewhere else to get all the other stuff fixed.” He’s not a mechanic, he’s an oil changer. We are not financial advisors, we are portfolio managers. And that’s fine, just be honest about it.
There are a lot of talented employees at Vanguard, and PAS is a great opportunity to help clients manage their portfolios. Up to this point, Vanguard is wasting talent, and missing an opportunity to market and develop what could be a fantastic service, honestly.
It seems like Vanguard has a lot of satisfied clients, and very few satisfied employees. The main objective is keeping costs low, so maybe that’s the way they want it.
