Vanguard's website snafu -- perhaps an unforced error, a CTO says -- has no ETA for a fix but it led to CEO Tim Buckley to read the automated message script to desperate callers
The Malvern, Pa., giant's mistake may have been chancing a code change in notoriously hazardous December, an IT expert says, though Vanguard points to a third party
Vanguard's clients have been locked out of statements, confirmations and other forms at a critical point in the year due to website problems that have persisted for six days with no end in sight.
Company CEO Tim Buckley has personally stepped into the fray--that's his voice on a recorded message that frustrated clients hear when the call with questions.
At the start of 2021, Buckley promised his firm would invest $1 billion to improve the firm's website and technology.
But that's just a drop in the bucket compared to the resources other firms spend, says Dan Wiener, chairman of Newton, Mass., RIA Adviser Investments which has $7 billion AUM.
"First of all, Fidelity spends more than that. I know $1 billion sounds like a lot, but it isn't when you're the size of Vanguard."
The Malvern, Pa., mutual fund giant, with $8 trillion in assets, is pointing the finger at a third-party vendor.
It declined to disclose the name of the firm and also stopped short of offering a timeline when the tech snafu will be resolved.
The technology failure may be third party and it may be the kind of thing that happens to virtually all firms, yet the timing -- just before Christmas and lasting so far, through Dec. 29 -- looks like an unforced error, says Doug Fritz, president of F2 Strategy and former chief technology officer of First Republic Bank.
Tim Buckley's Recorded Message to Clients
"This is Tim Buckley, president, and CEO of Vanguard. Thank you for calling. We are receiving an exceptionally high number of calls right now. Your call is very important to us and we will be with you as soon as we can. You can get immediate access to account and fund information at vanguard.com We appreciate your patience. A vanguard associate will be with you as soon as possible.”
"There are Holy Grails in big financial technology land. Number one is don't touch any code from early December to late January.
People need access to year-end information and if it breaks you can't get anybody to fix it. You have to have a year-end code freeze or this invariably happens. You have to change the code for this to happen," he says. See: Why Vanguard Group has proved impervious to a '$34.6 billion' whistleblower suit and why nobody's suggesting Vanguard execs should breathe easy
The timing is a challenge because many investors often check account confirmations before the end of the year, says Wiener.
"People might be wanting to make sure their transaction was completed before year-end and want to see the statement. But they're in the dark."
Many investors attempting to sign up for accounts or check confirmations online are told to call the main number.
The next thing they hear is CEO Buckley's voice delivering the stultifying boilerplate script of firms with low phone capacity for dealing with IT breakdowns.
"This is Tim Buckley, president, and CEO of Vanguard. Thank you for calling. We are receiving an exceptionally high number of calls right now. Your call is very important to us and we will be with you as soon as we can. You can get immediate access to account and fund information at vanguard.com We appreciate your patience. A Vanguard associate will be with you as soon as possible.”
The snafu impacts access to certain statements, confirmations or forms on the website. Clients can log in to accounts and make transactions "as usual," said spokesman Charles Kurtz, in a statement.
"Vanguard clients and retirement plan participants may experience delayed mailings or be unable to access certain statements, confirmations, or forms via our website," he explained.
RIAs, in general, appear to be dodging problems, with the exception of those who custody with Vanguard. See: What exactly is an RIA?
Wiener says Vanguard may have miscalculated when it hired a third-party to manage the routine delivery of services that clients expect as a matter of routine.
"The thing that blows me away is Vanguard clearly has all of the data. They send it to a third party. How come they don't have the capacity to print the PDF and get it back on their website?" he questions.
Fritz says handling those services in-house can be "a cyber-security nightmare."
"Vanguard's technology is good. They're not a cutting corners kind of company. Somebody obviously screwed up," he noted.
They're not handling this well, and that's going to hurt them. These guys are talking about launching emerging RIA custody."
Wiener says his firm has about $2 billion in Vanguard funds but uses Fidelity as its custodian.
As a result, his clients accounts are fine and he can see all confirmations. But he says when he looks at his own personal Vanguard account, he, too, is unable to see any confirmations.
"This is bad. They've got to be freaking out," he said.
On Twitter, clients are grousing and wondering if the website will be functional by the end of year. The markets are open Thursday, Dec. 30 but bond markets close at 2 p.m. EST on Friday, Dec. 31. Stocks close at the usual 4 p.m. hour.
"Our teams have been working on this issue around-the-clock and our client service representatives are available to help clients who require immediate assistance," Kurtz said.
"While our teams are actively working towards a resolution, Vanguard is taking steps to minimize disruptions for clients such as working with our other vendors. We apologize for the inconvenience," he added.
Wiener, who also writes for the Independent Adviser for Vanguard Investors, says phones are ringing off the hook from anxious investors calling to confirm information.
Other major companies have had similar technology shortfalls. Schwab, consumer investing app Robinhood and even consumer-focused Facebook have all suffered outages this year.
An outage prevented Vanguard clients from making certain types of trades in March, according to Ignites.
In January, outsized trading volume of GameStop stock caused problems at various firms including Robinhood and Schwab.
Longer term, there is hope for Vanguard's broader software systems challenges after hiring AirbNb's operations chief, Tara Bunch, to its board. See: Vanguard makes mockery of 'digital' myth by reporting $1.3 trillion after its new mobile app's panned debut -- then makes Tara Bunch a director
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