Vanguard, approaching $5 trillion, corrects account reports

Vanguard Group is having its busiest year ever. Clients are pumping a billion dollars a day into Vanguard exchange-traded index funds, mutual funds, actively-managed funds, and other institutional and individual accounts. If this keeps up, Vanguard will soon manage $5 trillion, trailing only BlackRock among big U.S. money managers, and closing fast.

The Malvern-based fund giant continues to sign up clients for its Personal Advisory Services (PAS) and other programs designed to generate fees, amid price competition with Charles Schwab, Fidelity, BlackRock, and other big fund managers. Advisory services, once limited to clients with half a million dollars, are being extended toward investors with as little as $50,000.

As my colleague Erin Arvedlund has noted, all that growth can come with growing pains. People familiar with the situation tell me there were issues with some of the third-quarter reports sent at the beginning of October to some of the tens of thousands of PAS customers.

Some outside assets, which the advisory service was supposed to include in reports to clients alongside their Vanguard fund performance, weren’t properly “earmarked” for inclusion in the reports, making these clients look poorer than they actually are. For example, assets in revocable trusts, using a taxpayer ID that is not a Social Security number, weren’t automatically identified and reported as client assets.

Vanguard saw the omissions, and by Oct. 5 contacted clients to let them know. “We uncovered an issue with our quarterly progress reports for a small number of Personal Advisor Services clients. The issue was immediately reported to clients and promptly corrected on each client’s online account view,” spokesman John Woerth told me. And the paper reports some investors prefer? “Corrected reports will be sent at the discretion of the [Vanguard] adviser or provided upon client request.”