Weekend Reading: The Vanguard Effect Edition

The investment giant and indexing pioneer Vanguard has made a lot of noise in Canada this year. Already a big player in the ETF space since entering the Canadian market in 2011, Vanguard added four mutual funds to its line-up this year, plus introduced its new asset-allocation ETFs, a one-ticket solution for investors.

They’ve also added two ultra low cost sustainability ETFs (ESGV and ESGX) to a growing niche in which socially conscious investors typically had to pay a premium.

Now Vanguard is set to launch a robo-advisor service in Canada sometime in the next 18 months. This is sure to have an impact on an already crowded robo-landscape. Indeed, Vanguard has a long track record of lowering investment costs in the spaces they operate. That’s why Morningstar coined the term, the Vanguard Effect, describing “Vanguard’s sizeable influence on new markets it enters where competitors feel the need to reduce fees in order to remain competitive.”

Already we’ve seen the online discount brokerage firm Questrade revamp its robo-advisor service and slash management fees to just 0.25 percent.

The Vanguard Effect

The Vanguard Effect is great news for investors as the continued commoditization of investment management allows investors to capture market returns in a globally diversified portfolio at rock-bottom prices. That beats paying an active manager 2 percent a year for the vanishingly small chance of outperforming the market.

This Week’s Recap:

Earlier this week I shared my financial goals for 2019.

Later I listed 10 financial lessons to share with friends.

The $100,000 a year waitress elicited strong reactions from our Facebook readers. Is it time to rethink our tipping culture?

Weekend Reading:

The investment industry, led by lobbyist group Advocis, continues to push back against adopting investor-friendly reforms such as banning embedded commissions, banning deferred sales charges, and imposing a higher standard of care. As usual, their arguments are fear-based and lacking any evidence. These changes are long overdue.

Why do so many people fall for financial scams? Fraudsters play on different emotions, from greed to kindness.

Maclean’s published its fifth annual bonanza of more than 70 charts to help make sense of the economy in 2019. Of note, Canada’s savings rate reached its lowest level in more than a decade:

Canada's savings rate

Speaking of 2019 forecasts: Every year, the prognosticators come out of hiding. You have to wonder why they bother, given their record.

CPP improvements start in 2019. Here’s how much more you’ll pay, and how much more you’ll get.

Million Dollar Journey’s Frugal Trader shares some year-end tax tips for investors.

Mark Seed from My Own Advisor shares my same skepticism for aged-based annual savings targets.

This frugal retiree could teach a master class on how to live well in retirement without a huge budget.

Financial independence doesn’t mean free time forever. Here’s why early retirement comes with one big clause:

Rob Carrick asks, What if today’s economy is as good as it gets for your personal finances?

The Blunt Bean Counter Mark Goodfield warns of the income tax issues of renting your property as an Airbnb.

Finally, a must read, The New York Times’ Ron Lieber tagged along with his 80-year-old aunt to a steak dinner / annuity pitch to ask some tough questions. The salesman wasn’t pleased.

Have a great weekend, everyone!

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1 Comment

  1. Dale Roberts on December 8, 2018 at 1:07 pm

    Thanks Robb. Perhaps Vanguard is going to zero fees, just the fees on their ETFs? Questwealth already goes as low as .20%, Nest Wealth tops out at $80 per month, capped per client. Not much meat left on the bone.


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