Phil Blumenkrantz of South Philadelphia is a longtime Vanguard customer, with well over six figures invested at the firm, including an account his wife inherited from her mother.

He’s been unable to reach anyone at Vanguard by phone since Christmas.

“If I’m calling, it’s because I really need someone,” said Blumenkrantz, a 68-year-old retiree of the Internal Revenue Service. He needed help finding the correct amount for a required minimum distribution from an IRA. After posting on Vanguard’s Facebook account, “I got a boilerplate response directing me to the same phone number I’ve been unsuccessfully using.”

Loyal Vanguard clients, such as Blumenkrantz, are coming out publicly — in interviews, on social media, and in letters to the company — saying they’re fed up with what they see as declining customer service. Technology glitches and customer-service delays have frustrated loyal clients. In December, for example, some U.S. customers couldn’t access trade confirmations and monthly statements.

Some have transferred their money, while others hope public complaints will shame the company into change. The social media complaints fly in the face of the company’s high ranking in industry customer service surveys, although a recent survey identified call support as a weak spot. The mounting dissatisfaction could nonetheless prove damaging for a company with an almost populist philosophy to investment.

In a written statement, a Vanguard spokesperson said the company is making progress, and “we also recognize that we still have room to improve. We take our clients’ feedback seriously, aspire to deliver an exceptional experience, and are making significant capital investments to get there.”

Vanguard said 2021 phone wait times averaged just a few minutes for retail clients. Even during high call volumes in December and January, the average wait time was only a “handful of minutes,” the spokesperson said.

Vanguard said it’s hiring at a record pace to meet customer service demands, with more than 2,700 new employees added to its Retail Investor Group in 2021. The current total is about 7,000 staff serving 8 million retail investors in the U.S.

Vanguard now has more than 200 product teams — up from just four in 2017 — developing and redesigning everything from the opening of accounts online to transferring assets to tax information and trading, the company said.

It’s been an up-and-down year for Vanguard. The company suddenly left its investments in China in 2021. Management slashed a retirement medical benefit for former Vanguard employees and later reversed course after an outcry. Some Vanguard customers are suing over a decision to saddle investors in some target date funds with big tax bills.

That hasn’t stopped investors from pouring assets into the firm. As of end of March 2022, Vanguard globally managed $8.1 trillion in assets, up from $7.5 trillion in March 2021 and $5.3 trillion in March 2020.

Advisers also wait

It’s not just mom-and-pop investors who wait on the phones.

To transfer client assets, money manager Keith Akre said he was on hold with Vanguard for more than an hour — with his client sitting in the office.

“We were on hold for an hour and five minutes. Every 10 minutes, a voice would break in and say, ‘Thank you, please continue to hold. Your wait time is 20 minutes,’” said Akre, vice president of trusts and wealth management at Stillman Bank in Rockford, Ill.

“Even with brokers I don’t enjoy dealing with, to be on hold for more than 10 minutes is unheard of,” Akre said. “It’s epically long for Vanguard.”

No one in the industry has built up more trust with investors than Vanguard, said Bloomberg Intelligence senior ETF analyst Eric Balchunas, author of a new book on Vanguard’s late founder John Bogle titled The Bogle Effect.

Vanguard customers benefit from Bogle’s ethos of extremely low costs, now widely imitated on Wall Street. And the company’s low-cost goodwill banked over the years provides a strong buffer against complaints on Facebook and other social media sites, Balchunas said.

“But the customer service is hurting that a bit. Even their biggest fans on the Bogleheads fan website have complained about service. It’s a legit concern.”

Vanguard 2nd overall in J.D. Power’s latest 2022 survey

In March, the J.D. Power rankings firm completed its annual report on full-service financial institutions, with Vanguard finishing second overall out of 18 firms in overall satisfaction. The top-ranking firm was UBS in J.D. Power’s 2022 U.S. Full-Service Investor Satisfaction survey.

However, “satisfaction with the phone support channel was a relative weakness” for Vanguard, said Michael Foy, senior director, wealth management at J.D. Power.

Fewer of Vanguard’s clients were able to speak to a live representative without a wait compared with key competitors and the industry overall, he said. Vanguard also had a longer average wait time and a lower overall satisfaction score with the phone customer service channel, Foy added.

In order to get larger sample sizes of investors who used the phone, J.D. Power combined 2021 and 2022 results, which were fairly similar, he added. The results show Vanguard had longer wait times than competitors Charles Schwab and Fidelity.

The survey found that financial services firms across the industry are struggling with long hold times on phones. Customers of financial services wait the longest — with hold times an average of 11.45 minutes, followed by telecommunications customers, averaging 10.4 minutes, J.D. Power’s survey found. In 2021, customer wait times for at financial services increased 21.80%, compared with 2020.

The phone wait times haven’t slowed money flowing into Vanguard.

“People absolutely like [Vanguard’s] product overall, especially the value for fees, where they are the top performer in this study,” Foy said. “They also have a lot of brand equity, and are among the most trusted brands in the study.”

So, although negative experiences over time will erode those strengths, he said, “trusted brands are definitely less susceptible to attrition in the short term when problems do occur.”

Victim of success?

The Malvern-based mutual fund giant has been flooded with new customers. And the inflow of money has ballooned service requests of every stripe: opening new accounts, updating beneficiary information, cash disbursements, and trade confirmations.

To be fair, Vanguard isn’t alone. Investors over the last decade have shifted over to the passively managed investment products that Vanguard is known for, the Wall Street Journal has reported. Investors poured $1.2 trillion into U.S. funds in 2021, nearly double the previous annual record of $689 billion set in 2017. Vanguard was the major beneficiary, and the 2021 leader according to Morningstar data.

The behemoth raked in a net $338.9 billion last year — over $150 billion more than iShares, its next-closest competitor with $204.6 billion, Morningstar said. More than 93% of the new money Vanguard collected streamed into index fund products.

A popular financial advice podcaster, Clark Howard, issued a call to Vanguard to improve its customer service.

Vanguard’s focus on low costs “means that completing even common tasks on its website or app, like buying and selling individual stocks, isn’t easy. The Vanguard app has a rating below 2.0 on Android, for example,” he noted. Late last year and earlier this year, Vanguard’s website experienced regular outages.

On a recent podcast, Howard described Vanguard as going through a midlife crisis.

“I love Vanguard. I’ve been a customer of Vanguard for decades. But the customer service has got to become a focus,” Clark said. “If you’re looking for something specific, such as a target date fund … it’s great. But if you also plan to do anything else, including investing in individual stocks, you’ll probably need to consider a second brokerage firm.”

On Twitter, customers including finance professionals such as Akre have taken to posting their wait times and frustrations.

Internally, Vanguard customer service reps say that they’re overwhelmed.

“I never thought I’d have to tell a client looking to transfer $1 million to call back because of call volumes,” said one person currently working at Vanguard, who didn’t want to be identified because of fear of losing a job. “The only way to fix the issue is by mass hiring.”

Blumenkrantz and his wife needed help to find the amount of their required minimum distributions for retirement accounts. Eventually, he spent enough time on the website to figure out the amount himself. While on hold on the phone, he said, he heard a recording from Vanguard CEO Tim Buckley apologizing for the wait times.

Mardi Katz, from Indiana, was a Vanguard customer since the 1980s. For the first time ever, this year she wrote and sent a certified letter to CEO Buckley about customer service. In 2021 and then again in 2022, she didn’t get her IRA withdrawal checks by the January tax deadline.

“I tried calling a lot of times,” she said. “I went through all these prompts. I asked for a callback. I waited a few hours. Many times I called and got transferred or switched to different places, like account maintenance. I have waited on hold, when I’m angry enough, a good 45 minutes at least.”

Katz switched all funds to a local bank’s wealth management arm. “Vanguard cannot seem to correct their service issues,” she said.