Are Vanguard’s tech issues costing it customers?

When former financial services executive Mark Hayes needed to transfer money to pay bills while on the road late last year, he noticed his Vanguard Group Inc. mobile app had suddenly changed. 

Some of the functionality on the company’s Beacon app, like the ability to analyze portfolio performance, was gone, and he couldn’t access half of his funded accounts. When he reached out for help, a representative said the company was aware of the problem, but there was no timeline available for a fix.

“It looked like it had not been quality tested, because there were numbers overlapping other numbers, and it wasn’t perfectly clear what I was seeing,” Hayes said. 

“It’s just frustrating because it’s my money. You have my money. You’re supposed to give me my money,” the former executive vice president at U.S. Bancorp said.

Hayes is not alone. Thousands of other disgruntled Vanguard customers are wondering what happened to the useful tools available on the Beacon app and why the issues still haven’t been resolved months after the reported update. 

“Shakes my confidence in Vanguard services that they can't fix this and treat it as a priority,” commented online reviewer and app user Tim Correia. “What other infrastructure technology are they having issues with?”

The unexpected update removed many features that customers used daily, according to online reviews. Two notable omissions were the ability to research investments as well as to review detailed performance information. The Beacon app, which helps customers with account balances, makes trades online and directly deposits checks, now has an average two-star rating out of more than 7,000 reviews in the Google app store.

“It’s actually the worst financial app I’ve ever used, and I’ve told reps that and written a letter to the CEO,” one disgruntled user tweeted.

Hayes said his email to CEO Tim Buckley did not receive a response.

According to the company, the update helped streamline all navigation and transaction flows to make it easier to review portfolio performance, place trades and manage accounts.

“As a part of our multi-phase, comprehensive strategy, we introduced a new mobile application and improved our online resources to assist clients who overwhelmingly prefer to transact online,” a Vanguard spokesperson said in an email. “Our new mobile application launched last year with a refreshed user experience that made the most-used features even easier for clients to use.”

There are additional features on the way. One notable example is the coming introduction of additional research capabilities, including holdings tables, cost-basis data and account details.

“Our team is continuously gathering feedback from clients and making enhancements to evolve along with client needs and preferences,” the spokesperson said. “We’ve come a long way, but we recognize we still have room for improvement.”

The Malvern, Pennsylvania-based company will be pushing through fixes to restore some functionality, according to a customer email from a representative shared with InvestmentNews. “I just spoke with the Web Technical Support Team and they let me know the app is going through weekly rollouts to improve the functionality,” according to the email.

BAD TIMING

While customers were still seeking answers about their mobile app, another glitch, this time on the website, blocked users from accessing important documents just weeks later. Right as investors were looking for year-end reports, some weren’t able to download PDFs or tax forms online for roughly six days. 

For Vanguard, the hiccup couldn’t have come at a worse time. 

After learning about the malfunction, some customers questioned whether they can trust their investments to a company that’s subject to major tech failures. “I’ve been a Vanguard client for 25+ years. On hold for an hour and 40+ minutes. Worst customer service experience EVER. Why would anyone trust their money to this infrastructure?” investor Rob Kaufmann posted on Twitter.

It’s feedback that’s likely not lost on the $8 trillion mutual fund giant. 

The leading ethos in Malvern is, of course, low costs. Unnecessary expenses and high fees can eat into investment returns over the long term, and it's a mantra that has catapulted founder John Bogle into the pantheon of investing giants.

It’s why Vanguard uses all of its own exchange-traded funds in its robo-advisers, precisely because they are some of the cheapest available on the market. It’s also why its robo-adviser Digital Advisor is one of the least expensive investment services available at only 20 basis points, or an annual cost of just $6 on the minimum investment of $3,000.

Digital Advisor, with its human-hybrid option Personal Advisor Services, outpaces competitors in terms of sheer assets under management at more than $200 billion, and besides the mobile app, generally fares well in overall customer satisfaction surveys by consulting firm J.D. Power.

The company also touts an impeccable reputation with some of the most loyal customers in financial services. Those are all impressive accomplishments for any financial services firm.

But it might be time to loosen the purse strings and invest in technology that can stand up to the demand of modern investing — even if that means raising costs. 

“This is not an isolated incident,” said Michael Foy, head of wealth management at J.D. Power. “Our research supports what we’ve heard anecdotally with the mobile app. The new Beacon app has gotten a lot of bad press, but we saw even before the launch that Vanguard’s mobile app experience was below average for the industry.”

BOTTOM OF THE HEAP

According to the J.D. Power study, the mobile app ranked second to last out of the 16 companies reviewed and well below the industry average. 

“Vanguard has a very strong brand and customer loyalty,” Foy said. “But with the explosion of new investors on mobile apps, keeping new clients might become a challenge.”

Technical glitches were cited as one of the most important indicators in determining customer satisfaction, Foy said. Of investors who experienced issues in the past year, 15% said they would probably or definitely switch providers, compared to only 4% who did not, according to the data.

“We appreciate the thoughtful feedback we’ve received to date, and encourage clients to share feedback with us directly,” the Vanguard spokesperson said.

Hayes, who had considered himself a Vanguard lifer, is now currently considering competing products from Fidelity Investments Inc. and Charles Schwab & Co. “I don’t want to change, I just want to go back to having a useful tool,” he said. “The company has done well with me and my family. This is the last thing I want.”

GOOD NEWS

The good news is the number of customers using wealth apps every day has increased four percentage points year over year, according to a report by Bloomberg last year. Overall, hours spent on finance apps were up 90% year over year in 2021, while downloads of online apps jumped 20%, which means there is plenty of room for improvement.

Vanguard is coming into its own in terms of technology and likely realizing the importance and the power that mobile apps and online tools will have with investors moving forward. The industry overall will need to come to grips with growing client expectations for mobile technology, and provide experiences that are easy and useful.

With a stalwart reputation and track record, once resolved, these tech glitches will likely become just a minor speed bump in its technology journey. Vanguard's story could even serve as a case study someday.

“Over time, this could turn into a risk,” Foy said. “But they’ve got a lot of goodwill with investors.”