Welcome to Vanguard Motors, you’ve found the low-cost leader in autos and auto advice. My name’s Jack, what can I help you with today?
Hi. I’m looking for just a little advice. I’ve got a Vanguard from an old employer that seems to be running well, and I was just wondering if you would recommend any upkeep or maintenance. It’s very low-cost and runs well.
Well, of course it is… it’s a Vanguard! But, let me see here, you have the Target Care package, so this car was made for you to keep for a very, very long time.
Yes, I remember the representative of the account said it would last a lifetime. I just want to see if there’s anything I may want to add to it to help myself out.
Certainly, certainly. In order to help though, I’ll need to know a little bit more. Here’s a questionnaire if you wouldn’t mind filling out and getting back to me, I’ll start filling out your contract.
Contract? I’m not sure what you mean.
I provide Certified Vanguard Fiduciary services for a fee, and I’ll need to sign you up for an annual maintenance program for me to begin.
Do you think I need that? The car is really working just fine.
Everyone needs advice! You said it yourself.
I guess, if it doesn’t cost a lot.
Oh, it’s much less than independent auto advisors since all we recommend is our own models.
It’s well worth it, and the annual advice cost is only a little more than the cost of a brand new car.
Wait, so I’m getting a new car?
Oh no, I didn’t say that, I said the advice costs more than the car. We have to start with advice of course.
OK, for the cost what sort of upgrades or service will I get, can you show me?
Well, I don’t know if it will be right for you, but if you look behind you then you’ll see four of the cars in my typical advice package.
Isn’t that just your lowest cost model with slightly different paint schemes?
Yes, but keep in mind we offer annual wheel rebalancing for free. Other places may charge $100 a year for that alone.
But don’t you include wheel rebalancing in the car price in your Target Care package that I have now?
Well, yes but…
But, now I have to pay the full cost of the car, and then again every year for your advice, but I don’t get anything for it that I can’t get for free?
Well, you, now you pay for me.
So, you'll be servicing my car? Are you qualified?
No, ma'am, I mean you'll get to call me if you have any needs at all. And, we can even meet once a year or so if you need to.
I see. And, your recommendation is the exact same car and service as the Target Care package that I have today?
But, it’s different you see, I’ve narrowed down all of the car and service selections just for you. It’s far more personal.
It’s only a coincidence it looks the same, I’m sure. Tell me about what it means to be an ‘auto fiduciary’ when you are just selling your own product.
Well ma’am, it means we provide the very best service. You see the Department of Labor requires all auto advisors to be ‘fiduciaries’ which means we put your interests first.
How is it you are paid?
A percent of the annual advice fee.
No ma’am! It’s a salary and bonus paid based on production.
Sounds a lot like a commission.
Well, it’s not.
What happened to the other auto firms on the street?
They closed. They were offering ‘conflicted advice’ you see, they were not charging for advice and then sometimes selling cars from companies that may have paid a commission for them to service your car on an ongoing basis.
OK. So, I used to get independent advice on cars, and ongoing service, and maybe paid a little, but now I pay more than double for Vanguard to recommend Vanguard cars. And, that’s better for me, how?
We are the best!
So, you would advise me to buy other firms cars as well?
No, just Vanguard.
And just these few options? What about all of those?
Never mind those.
You keep using the word ‘fiduciary’… I think that means you have to give me the best advice, but you’ve already apparently ruled out hundreds – if not thousands – of options in favor of a few Vanguard models. What happens if Vanguard isn’t all that great in the future? As a fiduciary, will you recommend another model?
Ma’am… that isn’t likely to happen.
How is any of this less ‘conflicted advice’ than anywhere else, again?
Well, I’m giving you the best advice that I can.
But, you’re charging for something I used to get for free. How aren’t you putting your own interests first?
I wrote earlier about how silly it would be to consider someone a fiduciary simply because they turned away your business and charged you the lowest cost on the market.
It’s equally silly that firms think that mutual fund firms can be a fiduciary in charging for recommending their own investment products, while they offer products that should replicate that advice for free, thereby charging more.
Jack Bogle says it isn't worthwhile to challenge the conflicts in the Fiduciary Rule. I can understand why. If I was as conflicted I wouldn't want to be challenged either.
(Hi, I work for Vanguard and recommend Vanguard, and will accept your rollover from Vanguard so that I can charge you for my advice, but I’m not conflicted at all… because I don’t make a commission!)