Sad news, that's a very convenient and innovative service
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Vanguard Group is shutting down a service for larger customers that paired a debit card with tools to help them manage cash.
The feature let clients write checks and pay bills out of a Vanguard account. The service was launched as a way for the money-management behemoth to press deeper into the financial lives of individual investors. Vanguard is ending the service July 31, an acknowledgment the offering couldn't rival what banks provide.
The firm told customers that VanguardAdvantage "is no longer meeting the range of needs articulated by our clients," according to a Feb. 28 letter reviewed by The Wall Street Journal.
The closure of VanguardAdvantage is a backpedal for the Malvern, Pa., firm.Vanguard has been at the forefront of an industry revolution that has continually cut the costs of investing.
Vanguard's success has forced its competitors to match its ultralow prices, a trend often called "the Vanguard effect."
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The service being cut launched in 2002. It linked banklike features with Vanguard's brokerage accounts for bigger clients. Those customers could write checks, pay bills and use a debit card to draw cash from an account with Vanguard in addition to tapping other services.
Vanguard offered the service for an annual fee to those with between $500,000 and below $1 million invested with the firm. It was free for those with at least $1 million invested with Vanguard.
Less than 2% of eligible clients are using it, according to the firm. Of those people, only about half were active in the past three to six months.
Vanguard decided to pull the plug recently after reviewing the service, said a person familiar with the matter. The firm is exploring other ways it can make cash-management services available to clients, the person said, but no decision is in the works.
Vanguard notified investors of the change the same week it disclosed it trimmed costs on a number of funds, including exchange-traded funds.
Some disciples of the firm -- called Bogleheads, after Vanguard's founder John C. Bogle -- said they were disappointed by the change. Mr. Bogle died earlier this year.
"It is not a simple problem to lose your online banking," said William Bernstein, a 70-year-old author and retired physician who has used the service for over a decade.
He said all his income has been directed into VanguardAdvantage and all bills are paid through that service. "My major concern is not the time and effort required from me, but its effect on folks who have with age become increasingly unable to navigate the system."
A self-professed Boglehead, he has considered turning to Vanguard competitor Fidelity Investments for cash-management services.
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