Vanguard: Consolidating the View for Shareholders
by Sharon Rockey, Contributing Writer
Financial giant The Vanguard Group is about to raise the bar on Internet
investment services. In May, 2001, the nation's second largest mutual fund
company will merge the newest generation of Web technology with their
over quarter-century investment management know-how.
Vanguard's on-line brokerage services is set to include "Consolidated
View", a one-stop simple approach where shareholders can manage all
their financial assets on-line. Consolidated View, an account aggregation
tool created by CashEdge, lets investors view all their key financial
information in one place -- regardless of the number of financial institutions
they work with, where they are located, or the number of individual accounts
they have.
John Demming, Communications Manager at Vanguard, described the
benefits of this service. "It will allow clients to see an overview of their entire
financial picture and to manage their assets from one single location. When
the full service is up and running, clients will have the ability to point, click,
and drag money from one account to another, regardless if those accounts
are Vanguard funds or other accounts."
With a gee-whiz $539.9 billion already under management, Vanguard CEO
Jack Brennan is banking on the convenience of this new service to roll even
more dollars into their funds. And, so what if the mouse does roll in both
directions? There is little concern about investors rolling money back out.
The record seems to indicate that Vanguard, with its emphasis on index
funds, thrives through good times and bad. Over the past 10 years, assets
under management have grown 760%.
To punctuate his confidence in the ability to attract and keep their
shareholders, in the April 30 issue of Fortune, Brennan was quoted as saying,
"We are the highest quality provider of services in the investment
management industry and the lowest-cost provider. We think you will see
that because of our service and products, Vanguard is where you will want
most of your money."
The technology that will drive this new service is a hybrid of "Dashboard",
CashEdge's proprietary Web-based technology. Mary Jane Brennan of
CashEdge explained their relationship with Vanguard and the services they
are offering. "We have multiple levels of service for our financial partners.
Vanguard is implementing our aggregation platform," she said. "The
technology allows them to build on top of that platform and add features
such as investment advice services."
Predictably, offering these add-on services is in Vanguard's game plan. They
recently announced an arrangement to offer Financial Engine's Investment
Advisor which will be bundled into the Consolidated View services.
Financial Engines¨ is an Internet-based investment advisor founded in 1996
by William F. Sharpe, winner of the 1990 Nobel Prize in Economic Sciences.
With Financial Engine's capabilities in place, Vanguard can provide impartial
financial advice to people who are interested in long-term financial security.
Plus, to prove that a Web experience need not be an impersonal one, this
service will include live and real-time on-line assistance from a Vanguard
representative.
We took a preview tour of coming attractions at Vanguard's Website.
You are invited to check this out yourself at
www.vanguard.com/flash/HNW_demo/
Basically, shareholders can expect to:
- See a Consolidated View of portfolios on one screen -- including online
account information from other institutions.
- Get personalized performance data for their investments.
- Obtain detailed analysis of their investments, including asset allocation and
industry weightings.
- Gather comprehensive fund and stock research.
- Perform financial transactions on a single screen.
- Create multiple watch lists of funds and securities.
To set up an account using Consolidated View, investors must give
Vanguard the passwords to all their accounts - those might include bank
checking accounts, savings accounts, money management accounts, mutual
funds, etc.
Excuse me . . did somebody say "passwords?" . . . "to all accounts"? This calls
for maximum protection of shareholder privacy and security. Fortunately,
Vanguard considers this to be of utmost importance and the CashEdge
technology promises to deliver. Shareholders will have three levels of
control over how their account information is gathered:
- They must enter a Personal Identification Number (PIN) for each online
account each time they log onto the service.
- They give a single permission to Vanguard to have their online accounts
instantly updated.
- Vanguard periodically and automatically obtains updated account
information on behalf of the shareholders.
(Vanguard and CashEdge pledge to guard the confidentiality of all data collected and never
sell or it pass-on to any company outside of The Vanguard Group.)
Once access is granted, the Vanguard server imports the account data into
your Consolidated View account and using the CashEdge "dashboard" to
view and control what you see, you're in the driver's seat and ready to go.
Vanguard claims to use the Web to make things more efficient so
shareholders can enjoy lower expense ratios. How is online technology
benefiting the bottom line for Vanguard shareholders? Kate Nelson,
Communications Manager at Vanguard answered it this way, "When we first
went online with our transactions and statement capabilities in 1996, only
ten percent of our interaction with our shareholders was via the Web. Today,
it's fifty percent."
"Our clients can go-online and turn-off the option to have their statements
mailed out quarterly or monthly," she continued, "When even a portion of
our 15 million shareholders opt to forgo the mailing of statements, that adds
up to savings which go back to our shareholders."
Stay tuned to see how this new service plays out in the next few months.
Consolidated View will be initially offered to the high net worth investors
in Vanguard's Flagship and Voyager services. Later in the year it is expected
to be available to all Vanguard shareholders.
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