Vanguard has admitted to sending clients inaccurate data regarding income for nearly a year.
The Pennsylvania-based asset manager oversees $6.3 trillion for over 30 million investors around the world. On 31 August, clients reported difficulties logging in their accounts and conducting trades. On the same day Apple and Tesla announced stock splits.
These and other disruptions led clients and observers to believe that Vanguard has under invested in client service capability in its determination to reduce fees and charges. The company has denied these accusations.
The Financial Times reported that the asset manager has admitted to the financial gaff and that its clients were sent statements with inaccurate information regarding estimated yields and estimated annual income across most of its money market fund scope. These estimates usual aim at showing investors what they might earn and are usually different from the actual returns from the money market funds.
The company stated that clients lost no money as a result from these errors.
Vanguard stated:
Importantly, there was no impact to clients’ fund holdings, distributions, or account balances.
The first to highlight the error was Daniel Wiener, the editor of the Independent Adviser for Vanguard Investors newsletter. He noted that his monthly brokerage statements revealed the estimated yield on Vanguard’s New York Municipal Money Market fund (VYFXX) to be unchanged at 1.27% between October 2019 and September 2020. But Vanguard’s website had reported the fund’s SEC yield, a metric required by US regulators, as varying between 0.05% and 2.88% over the same period.
Wiener, chairman and co-founder of Adviser Investments commented:
What a mess. It is a good thing I wasn’t relying on Vanguard to tell me what kind of income to expect. Otherwise, I would have been sorely disappointed with the reality.
Wiener also complained that Vanguard had withdrawn a facility allowing investors to request details on formulas used to calculate information provided in client statements.
An anonymous analyst shared with the Financial Times:
Short-term interest rates have been bouncing all over the place. No one is investing in money market funds and expecting to earn a yield much above zero. They [money market funds] are being used as home for cash when investors want to escape volatility.
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