Vanguard Personal Financial Planning Service


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Vanguard Personal Financial Planning Service

  1. 1. Online Kit Contents Click the links below to move quickly through this document. Vanguard® Personal Financial Planning Service • Overview Letter • Service Features Brochure • Your Personal Profile (To request the assistance of a Vanguard financial planner, complete and send us Your Personal Profile. Please send your completed profile to The Vanguard Group, P.O. Box 709, Valley Forge, PA 19482-0709.) • Service Agreement and Disclosure Statement (Please read and keep for your records.) To print this kit: You can print selected pages by clicking your browser’s printer icon and entering the appropriate PDF page numbers. You can also print this kit in its entirety by clicking the printer icon and selecting “All.”
  2. 2. Vanguard Personal Financial Planning Service Dear Investor: Thank you for considering Vanguard Personal Financial Planning Service to help you reach your financial goals. You will find that our advisory service operates with the same integrity, candor, and client focus that have made Vanguard a leader in the investment management industry for more than a quarter century. When you consult a Vanguard® financial planner, you will receive practical solutions, customized to your financial concerns. Your dedicated planner will develop an investment strategy that will serve as the foundation for your financial plan. Your planner also may address retirement plans, education savings, and estate planning, based on your priorities and objectives. Once you are comfortable with our recommendations, you can count on us to help you put them into action. We think you will agree that Vanguard Personal Financial Planning Service is an unmatchable value, especially when Vanguard’s high-quality service and low-cost investment products are added to the customized solutions provided by your experienced financial planner. It is easy to get started. Complete Your Personal Profile, which is located in the back pocket of the enclosed brochure. Or —if you are currently a Vanguard shareholder —you can visit www. to complete the profile online. Please read the Service Agreement and Disclosure Statement and keep it for your records. If you have questions, call us at 1-800-567-5162, Monday to Friday, 8:30 a.m. to 6 p.m., Eastern time. We welcome the opportunity to help you plan your financial future. Sincerely, Duane D. Cabrera Principal Vanguard Personal Financial Planning Service is provided by Vanguard Advisers, Inc., a registered investment advisor. Vanguard® Personal Financial Planning Service Post Office Box 709, Valley Forge, Pennsylvania 19482-0709 © 2004 The Vanguard Group, Inc. All rights reserved. LCPF2 082004
  3. 3. Vanguard Personal Financial ® Planning Service approach The right M A K E S A L L T H E D I F F E R E N C E
  4. 4. “I could use some help with my investments from someone I can trust.”
  5. 5. What’s standing between you and financial peace of mind? 1 Every day, we hear from investors who have all sorts of financial concerns that don’t have easy answers: • What strategy can I follow that doesn’t involve performance-chasing or market- timing? • How can I find a mix of investments that will help me reach my goals without taking on more risk than I’m comfortable with? • How should I reposition my investments as I approach retirement? • What steps can I take to help ensure that my savings last for a lifetime? There’s no need to go it alone In addressing these kinds of questions, you and your family have so much to lose if you make the wrong decisions—or fail to make any decisions at all. That’s why it’s important to consider getting professional assistance. When it comes to financial advice, you likely know what you don’t want. You don’t want high-pressured sales pitches. You don’t want superficial advice. And you don’t want to spend a lot of money. But you know you could benefit by talking to an expert who is trustworthy and experienced . . . someone who knows the right questions to ask and listens to your answers. And you want the advice at a reasonable price. At Vanguard, you can get just the help you need.
  6. 6. A proven approach you can trust 2 You want at least these three things when you seek financial guidance: proven solutions, personal attention, and peace of mind knowing that you can completely trust the advice you’re receiving. You can count on us to provide you with all three. Using a time-tested approach There’s no lack of “advice” about how you can get in on the next hot trend or investment. The noise from the media, salespeople, and friends can be deafening. But here’s what really works: disciplined, long-term strategies; prudent risk control; diversity of thought; and consistent cost efficiency. And these are what Vanguard excels in. Every day, people come to us looking for sensible solutions to their financial needs… and that’s exactly what they find at Vanguard. Over the years, this proven approach to investing has earned the loyalty of millions of investors. Providing personal attention When you come to us for help, you’ll discover that key to our service is the dedicated attention you’ll receive from a Vanguard® financial planner, who will learn about you and your concerns. Your planner will take the time to discuss your priorities, whether you need assistance with a specific situation or a comprehensive evaluation of your entire financial picture. Whatever your needs, your Vanguard planner will carefully apply our time-tested principles to your specific situation and develop solutions that will address exactly what you need to do, and why. These recommendations will give you a personalized and valuable road map to follow in seeking financial security. Serving only your interests You’ll naturally want to be sure the advice you get is trustworthy. We prize the long- standing reputation we’ve earned for consistently putting investors’ interests first. One way we ensure that the focus remains solely on you is by employing salaried, not commissioned, financial planners. That means our planners do not derive any benefit from their recommendations—they have only your best interests at heart.
  7. 7. Your Vanguard planner’s invaluable assistance 3 Your planner’s first order of business is getting to know you and your specific needs, and discussing the particular concerns that are on your mind. You’ll be asked to share detailed information about your current assets, including your assets invested outside Vanguard, to give your planner an accurate picture of your financial situation. You and your planner will also discuss assumptions about important factors such as investment performance, expenses, and inflation. Developing and implementing your plan Only after thoroughly understanding and analyzing your situation will your planner begin to develop a plan specifically tailored to your circumstances and goals. You and your planner will discuss the recommendations in detail, spending as much time as you need to make sure you have a good understanding of the course of action that will follow. Next, your financial planner will help you carry out the recommendations. After all, the success of a good plan depends not just on how skillfully it’s designed, but how faithfully it’s carried out. And you’ll find that our recommendations will be not only immediately useful, but a valuable resource as you weigh future investment decisions. Providing experience you can count on Of course, you want to be sure the people helping you know “I want an expert what they’re talking about. Vanguard financial planners have opinion on how I’m considerable practical experience, backed by years of training. In addition, they are licensed under federal and state investing my regulatory authorities and maintain various professional savings.” designations.
  8. 8. A plan built on a secure foundation 4 Regardless of how broad or narrow your financial concerns are today, you need to be sure you have the right foundation in place for tomorrow. That’s why we first undertake a careful review of your current investments. Once your planner has finished this step, he or she will help you prepare and then carry out a personalized investment plan based on your goals, financial circumstances, time frame, risk tolerance, and tax situation. Taking the right approach When investing, people tend to use a “bottom-up” approach. This means that they first choose their investments and consider the resulting mix of assets only after the fact, if at all. At Vanguard, we employ a “top-down” approach, which research has shown is the best way to build a successful long-term investment program. That’s why your planner will focus first on developing the best overall allocation of stock, bond, and short-term reserves to meet your needs. Your planner will then determine the best mix of investments within that allocation by recommending specific Vanguard funds. Our impressive roster of more than 100 funds— which covers a complete array of investment Key Questions strategies—allows us to build a comprehensive, We Can Answer diversified, and personalized investment Can I reduce program for each of our clients. Am I saving the taxes enough for on my An indexing leader, Vanguard offers one of the retirement? investments? broadest selections of indexed stock and bond mutual funds available. And Vanguard’s actively managed funds, highly regarded as What should I well, are run either by our experienced internal What’s the do with my managers or by leading investment advisors best way to employer- from around the world. This arrangement transfer assets sponsored plan offers one-stop access to an exceptionally wide to my heirs? when I retire? range of investment viewpoints—and prevents the overlap of investment themes and holdings in our clients’ portfolios.
  9. 9. 5 Minimizing your taxes Minimizing taxes on your investment returns is one of the cornerstones of our investment approach. Your planner will tailor strategies to the tax status of your different accounts, including tax-advantaged assets such as IRAs and 401(k) plans. More good news for you: Your planner will be choosing from one of the largest selections of tax- advantaged and tax-managed mutual funds available anywhere. Answering more complicated questions Beyond the specific holdings in your portfolio, there may be other aspects of your investment program that you’d like assistance with. After all, sound financial planning is not just about what you invest in, but the additional strategies that can be applied to give you an added level of financial security. Your planner can guide you through a variety of financial planning issues to address specific retirement, education, or estate-planning issues. Depending on your needs, you’ll be able to: • Evaluate the suitability of different types of accounts, such as comparing Roth and traditional IRAs, or determining which education savings program is best for you. • Determine the most appropriate method for taking distributions from your retirement plans. • Compare your spending habits to your saving needs to make sure you’re on track to reach your goals. • Consider how beneficiary designations can help you better position your estate to minimize transfer taxes. Your planner’s focus will be on designing solutions that address your specific financial concerns. In the end, you’ll walk away with sensible recommendations that are both objective and easy to implement—and that are based on a proven philosophy that’s made Vanguard one of the premier providers of investment services.
  10. 10. Take advantage of the Vanguard Difference® 6 Vanguard has never been a typical investment company. Since 1975, we have led the way in serving investors’ long-term interests, and we take pride in our reputation for candor, integrity, and cost efficiency. When you receive financial guidance from us, you’ll enjoy the many aspects of the Vanguard Difference. A powerful combination. With more than 17 million shareholder accounts and some $650 billion in assets under management, Vanguard is one of the world’s leading investment management companies. So many clients entrust their financial future to us “I need advice because they believe they receive the best combination of investment performance, service, and value in the industry. that won’t be quickly outdated.” No conflicts of interest. The Vanguard Group is owned completely by its member funds, each of which is owned entirely by its shareholders. Because Vanguard’s investors are, in essence, our owners, you’ll receive an extraordinary level of personalized attention. We put our clients’ interests first in everything we do. Continuity. Another benefit of our corporate structure is that we are immune to the ownership changes common in the financial services industry today. You don’t have to worry about a takeover or merger leaving your assets in the hands of a company that no longer seems familiar. Low costs. Since we have no obligation to generate profits for outside owners, we’ve consistently kept our fund expenses among the lowest in the industry.* That means our clients have been able to keep more of their investment returns, year after year. *Source: Lipper Inc.
  11. 11. Outstanding service at an outstanding value 7 While the value of your overall experience with your Vanguard financial planner may be immeasurable, what is measurable is the very real effect our low costs have on your bottom line. Consider the following example of the cost of our services versus what you’d pay other types of professionals (based on a $1 million portfolio). When you add to these savings the expertise and level of personal attention you’ll get from your Vanguard financial planner, you can see why we’re convinced that we offer an unmatchable value. Savings Too Large to Ignore An example based on a $1 million portfolio Vanguard Traditional Planner Traditional Broker Initial cost for advice $1,000* $1,500–$4,500 $0 Typical cost to implement $10,000–$20,000 recommendations $0 $0 (1%–2%)** Typical ongoing management expenses $2,500 a year $5,000–$20,000 $13,200 a year (0.25%)*** a year (0.5%–2%) † (1.32%) †† *.The cost for clients who have at least one Vanguard mutual fund account. Substantial discounts apply for clients who maintain certain asset levels at Vanguard. **.Sales charge for a $1 million purchase of Class A or C shares. ***.Vanguard fund average expense ratio in 2003. †.Includes mutual fund industry average expense ratio for 2002 (according to Lipper Inc.) and typical advisory fees. ††.Source: Morningstar, Inc.
  12. 12. Take the first step 8 After reading about the scope of our services, you’re probably already thinking about the many ways we can help you. It’s easy to get started. Simply complete Your Personal Profile, and return it in the enclosed postage-paid envelope. Your planner will then contact you to discuss your situation in detail. Of course, if you’d like more information, you can call us at 1-800-567-5162 on business days from 8:30 a.m. to 6 p.m., “I need some Eastern time. We’d be happy to discuss our services with you. reassurance that I’m doing the right things.” 1-800-567-5162
  13. 13. To request the assistance of a Vanguard financial planner, complete and send us Your Personal Profile. (The Service Agreement and Disclosure Statement is yours to keep.) Use the enclosed postage-paid envelope to return these items, or mail them to The Vanguard Group, P.O. Box 709, Valley Forge, PA 19482-0709. Call us at 1-800-567-5162 if you have any questions.
  14. 14. Vanguard Personal Financial Planning Service Post Office Box 709 Valley Forge, PA 19482-0709 World Wide Web Toll-Free Information 1-800-567-5162 Vanguard Personal Financial Planning Service is provided by Vanguard Advisers, Inc., a registered investment advisor. For more information about Vanguard funds, visit, or call 800-567-5162, to obtain a prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read it carefully before investing. © 2004 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corporation, Distributor. FPFP 112003
  15. 15. Your Personal Profile Vanguard ® Personal Financial Planning Service Thank you for your interest in Vanguard’s Personal Financial We look forward to working with you as you take Planning Service. this important step in securing your financial future. Throughout the planning process, we will ask you a number of questions to learn about your personal circumstances. Many of these questions are in this Profile, which you can complete and return to us in the enclosed business reply envelope. Or, if you are a Vanguard shareholder, you can easily complete Your Personal Profile at Answering these initial questions will be time well spent because it helps us to begin developing a financial plan tailored to your specific needs. If you don’t know how to answer particular questions in Your Personal Profile, you will have ample opportunity to review those issues in further detail with your planner. You can be assured, of course, that we hold the information you share with us throughout the planning process in strict confidence. If you have any questions as you’re completing each section, call us at 800-567-5162. A Vanguard representative will be happy to discuss the service with you in further detail.
  16. 16. Overview A four-step financial planning process Our goal is to learn about you, your specific needs, and your concerns. It’s this understanding that is the cornerstone of a sound, practical, effective financial plan. That’s why your thoughtful completion of this Personal Profile, while a critical starting point, is only the beginning step. Step 1. You complete and mail your Profile to us along with any requested documentation and payment. Based on your needs and your financial situation, Vanguard assigns a planner with the appropriate level of expertise. Your planner carefully reviews your materials in preparation for future conversations. You can expect this assignment and review process to take several business days. (Also, please allow additional time for your Profile to arrive in the mail.) Step 2. Your planner calls you to begin a series of more detailed conversations about your current financial situation, goals, and concerns. Together, you weigh alternative courses of action. Depending on the complexity of your financial situation, this step may be completed quickly in one or two telephone conversations or may require additional discussions over several weeks. Step 3. You receive an in-depth report explaining your planner’s recommendations. You and your planner review those recommendations together, address any remaining issues, and agree on the next steps to take. Step 4. In this final step, your planner will help you complete any paperwork required to make the transition to your new financial strategy. Your planner remains involved until the agreed-upon recommendations are carried out and all of your questions are answered.
  17. 17. Section 1: Enrollment Page 1 1 Name Please print all information clearly, preferably in black ink. Your Name (hereafter referred to as “Client A”) Name of Your Spouse / Domestic Partner (hereafter referred to as “Client B”) 2 Fees The standard fee for this service is $1,500. Depending on your existing relationship with Vanguard and the total amount of the retirement and nonretirement assets you have invested (or plan to invest) at Vanguard, you may be eligible for one of the following discounts. The enrollment section Please select the option that best applies to your current situation: of this form—including ■ $1,500—Full payment if you are not a Vanguard shareholder. the signatures required on page 2—must be ■ $1,000—Reflects an automatic 33% discount for all Vanguard shareholders, including completed in its entirety retirement plan participants. before we can proceed ■ $500—Reflects an additional 50% discount for clients with at least $250,000 invested with your recommendations. DO NOT DETACH with Vanguard. Any information left blank or incomplete will result in ■ $250—Reflects an additional 75% discount for clients with at least $1 million invested with a delayed start for your plan. Vanguard. ■ $0—One complimentary plan for any investor who brings an additional $250,000 or more in new assets to Vanguard mutual funds. (Skip to Step 4 on the next page.) 3 Payment Method ■ I have enclosed a check made payable to The Vanguard Group, Inc. ■ Please deduct my payment from the Vanguard nonretirement account listed below: Fund Name Fund Number Account Number Name of Account Owner Name of Joint Account Owner If the account owner(s) listed above are not the same as Client A or Client B, please indicate the relationship between each account owner and Client A and Client B and obtain their signatures for approval to process the fee deduction as instructed above. Signature of Account Owner Relationship to Clients A and B Signature of Joint Account Owner Relationship to Clients A and B
  18. 18. Section 1: Enrollment (cont.) Page 2 4 Authorization By signing below, I agree that I have received and read—and will be bound by the provisions of— the accompanying Service Agreement and Disclosure Statement (VPFSA2 052005). I represent that I have full legal authority and capacity to retain Vanguard Personal Financial Planning Service (VPFPS). I understand that I can terminate this contract for any reason and without penalty within five business days of the date indicated below and receive a full refund for any fees paid. If I have chosen the fee deduction option, I authorize Vanguard to deduct a fee in the amount— and from the fund—indicated on page 1 of the form. I verify that the account is not an IRA or other type of retirement plan account. I understand that this authorization is a one-time allowance and that subsequent requests for planning services will require a new enrollment form and applicable payment for service. If the fund I have indicated is not a money market fund, I acknowledge that I may realize a capital gain or loss as the result of the redemption. DO NOT DETACH I understand that if, through Vanguard, I have invested $250,000 or more of new assets in Vanguard mutual funds in the past six months, or agree to do so within one year of the date on this form, I qualify for this service at no cost. If I have not invested new assets of $250,000 or more in the past six months, or if I do not invest an additional $250,000 or more within a one- year period of the date on this form, I agree that Vanguard Personal Financial Planning Service may deduct the appropriate fee from any nonretirement assets I currently own through Vanguard, including a redemption of mutual fund shares. If the redemption is made from a fund that is not a money market fund, I acknowledge that I may realize a capital gain or loss as a result of the redemption. 5 Signatures: My signature below represents my authorization for VPFPS to begin my financial plan. I REQUIRED understand that VPFPS may provide advice regarding all accounts held at Vanguard (or at any other financial institution) of which I am an owner or a joint owner, or on which I have been authorized by Vanguard to transact (collectively, an “Authorized Person”). I also understand that Vanguard requires the signature(s) of the Authorized Person(s) of additional accounts to be considered in this financial plan, but of which I am not an Authorized Person. For example, in order for VPFPS to include my spouse’s or partner’s IRA in this financial plan, I must obtain my spouse’s or partner’s signature, since I am not an owner of that IRA and thus cannot authorize the inclusion of that IRA in the plan. Signature of Client A Date Signature of Client B Date
  19. 19. Section 2: Your Personal Information Page 3 1 Primary Contact Please provide the following information for the person who will be considered the primary contact as we develop your recommendations. The primary contact may engage in discussions with Name a Vanguard financial planner regarding the plan and the Street Address various accounts identified to receive advice, and will receive Apartment or Suite Number the Personal Financial Report at the end of the planning process. City State Zip However, the primary contact will not be permitted to Primary Phone Number ■ Home ■ Work implement the financial plan recommendations, or to Secondary Phone Number ■ Home ■ Work otherwise transact on any account identified in the plan, Best Time to Call ■ Morning ■ Midday ■ Afternoon unless the primary contact is an Authorized Person. E-Mail Address 2 Your Family Please provide the following information for both you and your immediate family members, including your spouse or domestic partner, all minor and adult children, and anyone else who is financially dependent on you. U.S. Legal Social Security Date of Gender Citizen State of Name (first, middle, last) Number Birth (M/F) (Y/N) Residence Relationship Client A Client B 3 Other Tax Identification Please list all other tax identification numbers under which you have additional Vanguard Numbers accounts registered (e.g., trust accounts, etc.).
  20. 20. Section 2: Your Personal Information (cont.) Page 4 4 Marital Status ■ Single (or widowed) ■ Married ■ Domestic Partners 5 Employment Information Please provide the following employment information: Employer’s Name Occupation Projected Retirement Date Client A Client B Are you—or anyone else in your household—an officer or director of a publicly traded company? ■ No ■ Yes If yes, provide the name of the family member and the name and ticker symbol of the company with which he or she is affiliated: 6 Current Income Tax Please provide the following information from your most recent returns for federal, state, and local Status income tax (please select one): ■ I have enclosed photocopies of my most recent tax returns. ■ Details provided below are for tax year _________: Adjusted Gross Income (AGI) $ Taxable Income $ Federal Income Tax Liability $ State Income Tax Liability $ Local Income Tax Liability $ Do you have any carryover losses from prior tax years? ■ No ■ Yes If yes, indicate the amount: $
  21. 21. Section 3: Your Financial Planning Concerns Page 5 Your Financial Planning Your financial planner will tailor his or her recommendations to your unique concerns and Concerns financial objectives. While the centerpiece of your financial plan will involve asset allocation and the selection of specific investments, you may have other concerns that may be as specific as whether to invest in a 529 savings plan or as broad as an evaluation of your retirement outlook. For example, many of our clients have asked questions such as: • Will I have enough money to maintain my lifestyle after retirement? • What’s the best way for me to take distributions from my retirement plan? • How would an unexpected expense or loss of income affect my financial situation? • Are my accounts set up to minimize the impact of estate transfer taxes? Please take a moment to write down the issues that are of most concern to you. The information you provide here will give your planner a starting point for further discussion.
  22. 22. Section 4: Your Investment Objectives and Experience Page 6 1 Risk Tolerance Profile The following questions are designed to help your planner select the most appropriate allocation for you based on your personal circumstances. Please do not include objectives that will be covered by your normal salary, pension, or Social Security income; only include those that will require assets from your investment portfolio. How Much Is Needed From Investments How Many Years How Long Will Description of Each Year Before Withdrawals Withdrawals Need Objective (before taxes)? Will Begin? to Last? My primary objectives are Example: Retirement $15,000 5 years 15+ years (for example, retirement, education, wedding, Objective #1 etc.). . . Objective #2 Objective #3 2 When making a long-term ■ 1 to 2 years ■ 3 to 4 years ■ 5 to 6 years ■ 7 to 8 years ■ 9 years or longer investment, I plan to hold the investment for. . . 3 From August 31, 2000, If you owned stocks during this period, check the answer that corresponds to your actual behavior. through March 31, 2001, stocks lost more than ■ Sell all of the remaining investment ■ Hold the investment and sell nothing 25%. If I owned a stock ■ Sell a portion of the remaining investment ■ Buy more of the investment investment that fell more than 25% in seven months, I would. . . 4 Generally, I prefer ■ Strongly disagree ■ Disagree ■ Somewhat agree ■ Agree ■ Strongly agree investments with little or no fluctuation in value, and I am willing to accept the lower returns associated with these investments.
  23. 23. Section 4: Your Investment Objectives and Experience (cont.) Page 7 5 When the market goes ■ Strongly disagree ■ Disagree ■ Somewhat agree ■ Agree ■ Strongly agree down, I tend to sell some of my riskier assets and put the money in safer assets. 6 I would invest in a mutual ■ Strongly disagree ■ Disagree ■ Somewhat agree ■ Agree ■ Strongly agree fund based solely on a brief conversation with a friend, coworker, or relative. 7 10 From January 31, 1999, If you owned bonds during this period, check the answer that corresponds to your actual through December 31, behavior. 1999, some bonds lost almost 9%. If I owned a ■ Sell all of the remaining investment ■ Hold the investment and sell nothing bond investment that lost ■ Sell a portion of the remaining investment ■ Buy more of the investment 9% in 11 months, I would. . . 8 11 This chart shows the ■ Fund A ■ Fund B ■ Fund C greatest one-year loss $4,229 and the highest one-year gain on three different $1,921 hypothetical investments $593 of $10,000.* Given the potential gain or loss in –$164 any one year, I would –$1,020 invest my money in. . . –$3,639 *The maximum gain or loss on an investment is impossible to predict. The ranges shown in this chart are hypothetical and are designed solely to gauge an investor’s risk tolerance.
  24. 24. Section 4: Your Investment Objectives and Experience (cont.) Page 8 9 My current and future ■ Very unstable ■ Unstable ■ Somewhat stable ■ Stable ■ Very stable income sources (such as salary, Social Security, and pension plans) are. . . 10 Please provide us with Investment Type Level of Experience Level of Satisfaction (both individual securities With the Investment With the Investment a snapshot of your and mutual funds invested experience and level of Very Very in these categories) Low Medium High None Low Low Medium High High NA satisfaction with various types of investments. Short-term securities ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ (cash / money market) High-grade U.S. ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ bonds (government / corporate / municipal) Lower-grade U.S. ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ bonds (high-yield / junk) Large-cap U.S. ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ stocks Mid- / small-cap U.S. ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ stocks International stocks / ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ bonds
  25. 25. Section 5: Your Financial Information Page 9 1 Your Current Investment List and provide information for all investment accounts that you currently hold outside Vanguard. Accounts Be sure to include information for all types of retirement and nonretirement accounts, such as brokerage accounts, mutual fund accounts, IRAs, annuities, company retirement plans, and bank accounts. When possible, please enclose copies of your most recent account statements that you’ve received from your other financial provider(s). Do not send spreadsheets or other personal recordkeeping documents. A special note about cost basis You do not need to enclose copies of your Vanguard account statements. Your planner will obtain If cost-basis information that information using the Social Security and other tax identification numbers you provided in is not displayed on the Section 2 for you and other members of your household. statements you provide, please begin gathering Approximate Additional Statement Account Type Owner (Name) Account Balance Annual Savings Enclosed? those details from the other financial institutions. Cost Ex. Brokerage Account Joe $ 145,000 $ 2,500 ✔ ■ basis—that is, the original price paid for each 1 $ $ ■ investment, including any reinvested dividends— 2 $ $ ■ is a key component of the data you provide for 3 $ $ ■ assets you hold outside of Vanguard. 4 $ $ ■ 5 $ $ ■ 6 $ $ ■ 7 $ $ ■ 8 $ $ ■ 9 $ $ ■ 10 $ $ ■ 11 $ $ ■ 12 $ $ ■ 13 $ $ ■ 14 $ $ ■ 15 $ $ ■ 16 $ $ ■
  26. 26. Section 5: Your Financial Information (cont.) Page 10 2 Stock Options ■ Check here if you have been granted stock options (that is, a formal written offer from your employer to buy or sell company stock at a specified price within a stated time period) or if you currently own restricted stock (that is, company stock that you own but that is subject to conditions regarding sale, forfeiture, and transferability). Please provide a copy of the offer and be prepared to discuss this in more detail with your planner. 3 Income Please provide information on the income you are receiving now and expect to receive in future years. In addition to the sources we’ve identified, be sure to include others such as bonuses, alimony, and income from trusts. Report the information separately for Client A and Client B. Client A: Annual Starting Ending Annual % Continued Source of Income Amount Year Year Increase Beneficiaries at Death Salary $ % NA NA Part-time income $ % NA NA (we Social Security $ calculate) NA NA Current pension $ % % Future pension $ % % Net rental income $ % % Other $ % % Client B: Annual Starting Ending Annual % Continued Source of Income Amount Year Year Increase Beneficiaries at Death Salary $ % NA NA Part-time income $ % NA NA (we Social Security $ calculate) NA NA Current pension $ % % Future pension $ % % Net rental income $ % % Other $ % %
  27. 27. Section 5: Your Financial Information (cont.) Page 11 4 Current Living Expenses Please provide an estimate for the total amount that you spend annually on your everyday living expenses, such as food, clothing, utilities, entertainment, and charitable giving. You should exclude the following items, which are covered elsewhere within this Profile: • Income tax payments (previously supplied on page 4). • Mortgage payments (to be supplied below). • Liability payments, such as student loans, home equity loans, personal loans, or credit card debt (to be supplied on page 13). • Life, long-term care, and disability insurance premiums (to be supplied on pages 12 and 13). • Future expenses, such as the purchase of a home or car, an extended vacation, or education expenses (to be supplied on page 14). • Savings directed into your investment and retirement accounts (previously supplied on page 9). Estimated Total Annual Living Expenses $ 5 Current Real Estate Please provide information on your primary residence, vacation homes, rental properties, and Expenses the like. Current Original Beginning Market Mortgage Mortgage Mortgage Monthly Current Interest Property Description Owner Value Amount Date Term Payment Balance Rate Ex.: Primary Residence Joint $ 120,000 $100,000 1/1990 30 yrs P&I: $ 805 $ 55,000 9 % Ins.: $ 40 Tax: $ 130 Total: $ 975 $ $ P&I: $ $ % Ins.: $ Tax: $ Total: $ $ $ P&I: $ $ % Ins.: $ Tax: $ Total: $ P&I = Principal and interest; Ins. = Insurance (for example, homeowners or mortgage)
  28. 28. Section 5: Your Financial Information (cont.) Page 12 6 Current Education Please indicate current education expenses—including private school or other tuition or Expenses expenses—that are a significant part of your typical expenses but will be ending at a specific time. Any student loans that you carry will be addressed in Current Liability Expenses on page 13. Payment Frequency Student’s Name Payment Amount (Monthly / Quarterly / Annually) Ending Date (MM / YY) $ $ $ $ $ 7 Current Insurance In the “Benefit Amount” column, provide the amount the beneficiary or insured will receive. Expenses If you have a whole life (permanent) policy, provide the current cash value in the “Total Cash / Investment Value” column without taking any outstanding loans into consideration. If you have a variable life policy, enter the investment value in that column and—in the “Additional Personal Commentary” section on page 15—provide us with information on the investment options offered by the policy. Do not include accidental death policies, travel insurance benefits, or business insurance. Life Insurance Total Cash / Benefit Investment Loan Annual Policy Type Owner Insured Beneficiaries Amount Value Balance Premium Ex.: Term Insurance Trust Client A Client B $ 250,000 $ NA $ NA $ 800 $ $ $ $ $ $ $ $ $ $ $ $
  29. 29. Section 5: Your Financial Information (cont.) Page 13 Long-Term Care Insurance Daily Maximum Maximum Annual Benefit Coverage Benefit Inflation Policy Name Insured Premium Amount Period Amount Adjustment Ex.: ABC Co. Client A $ 800 $ 100/day 4 years $unlimited 5 % $ $ $ % $ $ $ % Disability Insurance Annual Maximum Maximum Pre-Tax or Annual Benefit Coverage Benefit Policy Type After-Tax Insured Premium (% of Salary) Period Amount Ex.: Employer-Provided After-Tax Client A $ 800 60 % 5 years $ 250,000 $ % $ $ % $ 8 Current Liability Expenses Include items such as student loans, home equity loans, personal loans, and credit card debt that you carry on an ongoing basis. Current Current Loan Monthly Interest Loan Loan Liability Description Owner Market Value Balance Payment Rate Start Date End Date Ex.: Car Loan Client A&B $ 20,000 $ 18,000 $ 396 7 % 1 / 2004 12 / 2009 $ $ $ % $ $ $ % $ $ $ %
  30. 30. Section 5: Your Financial Information (cont.) Page 14 9 Future Expenses List any expenses that you expect to incur that aren’t part of your ordinary living expenses (for example, the purchase of a car or home, an extended vacation, a wedding, or educational expenses). If you will incur the expense over multiple years, indicate what you’ll be spending each year in the “Annual Amount in Today’s Dollars” column. Annual Amount in Starting Ending How Often Will the Expense Description Today’s Dollars Year Year Expense Occur? Ex.: New Car $ 25,000 2007 2037 Every 5 years Ex.: Janie’s College $ 20,000 2009 2012 Annually $ $ $ $ $ $ 10 Estate Planning Give your planner an indication of what types of estate planning strategies you’ve considered to Considerations this point (check the appropriate boxes): Client A Client B Yes No Yes No Have you ever met with an estate planning attorney or other estate specialist? ■ ■ ■ ■ Do you have a will? ■ ■ ■ ■ Do you have a revocable living trust? ■ ■ ■ ■ Does your will or revocable living trust attempt to take advantage of applicable credits? ■ ■ ■ ■ Do you have any of the following documents: Power-of-attorney for assets? ■ ■ ■ ■ Letter of direction? ■ ■ ■ ■ Living will? ■ ■ ■ ■
  31. 31. Section 6: Additional Personal Commentary Page 15 Please use the space provided on the next two pages to continue a response to a previous question or to provide us with additional information that would help your planner better understand your objectives, situation, or concerns.
  32. 32. Section 6: Additional Personal Commentary (cont.) Page 16 Thank you for the The information you have provided here will be valuable in the development of your personal time you have taken financial plan. You will hear from your planner shortly after Vanguard receives this information. to complete this profile.
  33. 33. Vanguard Personal Financial Planning Service Post Office Box 709 Valley Forge, PA 19482-0709 World Wide Web Toll-Free Information 800-567-5162 Vanguard Personal Financial Planning Service is provided by Vanguard Advisers, Inc., a registered investment advisor. © 2005 The Vanguard Group, Inc. All rights reserved. PFPPP 052005
  34. 34. Service Agreement and Disclosure Statement Vanguard ® Personal Financial Planning Service Read this Service Agreement and Disclosure Statement carefully, and keep it for your records.
  35. 35. Service Agreement and Disclosure Statement Page 2 1 Overview Vanguard Advisers, Inc. (VAI), a Pennsylvania corporation and a registered investment advisor, through its Vanguard Personal Financial Planning Service (VPFPS) division, will provide financial planning services to you as described below, according to the terms of this Agreement. None of the fees for such services are commission-based. 2 Services VPFPS will assign a financial planner to work with you throughout the financial planning process. Your financial planner will discuss your financial goals with you and provide advice designed to help you meet your goals. Your planner will prepare a detailed, written explanation of the advice and the steps you’ll need to take to act on that advice. The investment advice VPFPS provides to you will be based on an asset allocation strategy that is appropriate for your financial circumstances at the time the planning process is conducted. We will recommend the allocation of your financial assets across different asset classes (stocks, bonds, short-term reserves) and, within a particular asset class, across different market sectors (e.g., growth versus value stocks, domestic versus international stocks, long-term versus short- term bonds). Once we have determined an asset allocation for you, we will recommend a combination of mutual funds that is appropriate for your situation. After you’ve reviewed the recommendations, you and your planner will discuss them in detail. VPFPS will then assist with activities required to put the approved recommendations into place and to ensure that all remaining questions are answered to your satisfaction. The following are key features of this service: • Goals-based methodology. All of VPFPS’s investment and asset allocation strategies are driven by your long-term financial goals, not by short-term investment performance. The advice that you receive is customized for you based on our evaluation of your objectives, risk tolerance, time horizon, tax status, and other factors. • Broad diversification of assets. Rather than attempting to predict which investments will provide superior performance at any given time, VPFPS seeks to control risk by maintaining broad diversification among investments from a variety of market sectors and asset classes. • Flexible planning approach. VPFPS will take your entire portfolio into account with a top- down approach that focuses on the best allocation of stocks, bonds, and short-term reserves for you. This approach will help ensure that our advice meshes with your overall investment strategy—even if you ask your financial planner to focus on just a segment of your assets.
  36. 36. Service Agreement and Disclosure Statement Page 3 2 Services (cont.) In addition to specific asset allocation strategies, your planner will also help you prioritize issues related to retirement, education, or estate planning. The advice you receive could encompass any of the following issues: • Identifying available financial resources and projecting your financial situation in retirement. • Evaluating your savings and spending habits as they relate to your financial objectives. • Considering the most appropriate retirement and education savings vehicles. • Determining the best way to withdraw assets from your investment portfolio. • Identifying opportunities to minimize estate transfer taxes. • Discussing how life, long-term care, and disability insurance can help you protect your family from an unexpected loss of income. 3 Financial Planners VPFPS assigns a financial planner to provide advice to you. Your financial planner will: • Have a minimum of two years of work experience with investments and/or the Vanguard funds. • Have an undergraduate college degree and will have completed or will be pursuing a program of related graduate education and/or a professional designation such as Certified Financial Planner™. • Be registered as a general securities representative (Series 7), a state securities representative (Series 63), and an investment advisor representative (Series 65 or 66). All VPFPS financial planners have completed an internal training program covering retirement, education, and estate planning; investment and asset allocation principles; VPFPS’s investment advisory methodology; client communications; ethics; and compliance issues. In addition, all financial planners are required to participate in ongoing seminars and training programs conducted by Vanguard and by external organizations. 4 Enrollment and You may enroll for this service by completing Your Personal Profile in writing or online at Online Accessibility You must be an existing Vanguard client and a registered user of® to access the online Profile. When completing the Profile online, any information that you save before final submission will remain stored for 90 days, after which it will be deleted from our system. Once you submit your completed Profile online, you will be able to view a copy of that Profile through the Statements page of your individually designated, password-protected account. You will also be given the option to access your completed Personal Financial Plan on our website through your Statements page. Each Personal Profile and Personal Financial Plan stored on your Statements page will be accessible to you for seven years from the date it was originally posted.
  37. 37. Service Agreement and Disclosure Statement Page 4 5 Fees The fee for our planning service described in Section 2 of this Agreement is $1,500. Discounts are available based on assets held at Vanguard, and one complimentary planning service is available to clients who invest new assets of $250,000 or more in Vanguard mutual funds. Additional discounts and fee waivers may also apply. 6 Methodology and Vanguard’s advice is based on our own fundamental research as well as research obtained from Leadership a wide variety of external sources, both public and private. All our investment recommendations are based on methodology that is approved and periodically reviewed by a committee composed of the following members. • John J. Brennan. Mr. Brennan is a director and the president of Vanguard Advisers, Inc. Mr. Brennan also serves as director and chairman of the board of The Vanguard Group, Inc. Associated with Vanguard since 1982, he holds an A.B. degree from Dartmouth College and an M.B.A. from Harvard Business School. • R. Gregory Barton. Mr. Barton is a director and the secretary of Vanguard Advisers, Inc., and is a managing director of The Vanguard Group, Inc. He holds a B.A. from Colgate University, a J.D. from Marshall-Wythe School of Law, and an L.L.M. from Temple University Law School. • James H. Gately. Mr. Gately is a director of Vanguard Advisers, Inc., and is a managing director of The Vanguard Group, Inc. He holds an A.B. degree from Wesleyan University and an M.B.A. from Harvard Business School. • F. William McNabb, III. Mr. McNabb is a director of Vanguard Advisers, Inc., and is a managing director of The Vanguard Group, Inc. He holds an A.B. from Dartmouth College and an M.B.A. from The Wharton School, University of Pennsylvania. • Michael S. Miller. Mr. Miller is a director of Vanguard Advisers, Inc., and is a managing director of The Vanguard Group, Inc. He holds a B.A. from the University of Virginia and a J.D. from the University of Virginia School of Law. • Ralph K. Packard. Mr. Packard is a director of Vanguard Advisers, Inc., and is chief financial officer of The Vanguard Group, Inc. He holds a B.A. from Holy Cross College and an M.B.A. from Cornell University. • George U. Sauter. Mr. Sauter is a director of Vanguard Advisers, Inc., and is chief investment officer of The Vanguard Group, Inc. He holds an A.B. from Dartmouth College and an M.B.A. from the University of Chicago.
  38. 38. Service Agreement and Disclosure Statement Page 5 7 Your Responsibilities You are responsible for providing VPFPS with all necessary information about your financial circumstances and with any other facts or information that might affect the manner in which the services described in this Agreement are provided to you. Also, since this process requires open communication between you and your financial planner, you are responsible for being available for conversations with your planner. VPFPS strategies and recommendations will be made based on these conversations and the information that you provide. If VPFPS receives incomplete or inaccurate information, or if you are unable to fully participate in the financial planning process, VPFPS will not be responsible for the completeness or accuracy of the recommendations. It is your responsibility to decide whether to act on the advice provided by VPFPS. It is also up to you to determine that the recommendations you take action on, with or without the assistance of VPFPS, have been carried out correctly. If you transfer assets from another financial institution to Vanguard, it is your responsibility to notify VPFPS when the assets have arrived at Vanguard. It is also your responsibility to subsequently initiate any remaining transactions. VPFPS reserves the right to terminate this Agreement if, in the opinion of VPFPS, you fail to provide complete and accurate information within a reasonable period of time, or if the services provided by VPFPS do not appear to be suitable for your particular situation. 8 Other Important Financial Planning Recommendations Disclosures During the financial planning process, you and your planner may discuss a variety of financial strategies, and your planner will present you with documentation of his or her recommendations. Within this document, your planner will suggest strategies that are specifically designed to help you achieve your financial goals. Any financial statements that may be included in the Report are unaudited and may not follow generally accepted accounting principles. Accordingly, they should not be relied upon by third parties to evaluate your creditworthiness and should not be used for any purpose other than to assist you in developing your financial strategy. In developing your recommendations, VPFPS will make certain assumptions, such as rates of return on investments, inflation rates, etc. All assumptions are estimates based on historical data that, in our opinion, serve as a useful and reasonable basis on which to develop financial strategies. Please keep in mind that past performance is not a guarantee of future results. Standard of Care VPFPS and its representatives will perform the services described in this Agreement in good faith and in accordance with applicable law. However, except for gross negligence, willful malfeasance, or bad faith, neither VPFPS nor any Vanguard affiliate will be held liable for any action performed or omitted, or for errors of judgment made within the scope of the performance of such services. Federal and state securities laws impose liabilities under certain circumstances on persons even when they act in good faith, and nothing contained in this Agreement shall constitute a waiver or limitation of rights that you may have under federal or state securities laws.
  39. 39. Service Agreement and Disclosure Statement Page 6 8 Other Important Taxes Disclosures (cont.) Recommendations made by VPFPS may result in taxable gains or losses, or the generation of taxable dividend income or tax-preference items for purposes of the alternative minimum tax. Although VPFPS may advise you with respect to the tax consequences of its investment recommendations, you agree and acknowledge that the payment of all taxes due on income or capital gains remains your sole obligation, and neither VPFPS, VAI, nor any affiliated or related party or person shall have any responsibility with respect to them. Nonresident aliens may be subject to withholding taxes on income or capital gains. Transaction and Redemption Fees Some Vanguard funds charge fees on the purchase of shares. These fees, designed to offset the cost of buying and selling securities, are paid directly to the fund and are not sales charges. Additionally, some Vanguard funds charge redemption fees in order to discourage short-term trading. VPFPS may recommend Vanguard funds with either or both of these types of fees. Should you incur such fees as a result of acting on VPFPS’s recommendations, you acknowledge that these fees will be assessed on your purchase or deducted from your redemption proceeds in accordance with the conditions set forth in the prospectus of the particular Vanguard fund you are buying or selling. Additionally, other financial institutions may impose certain fees or other charges on assets that you transfer to Vanguard. Be sure to consult your other financial providers to ensure your understanding of all fees that may result from carrying out our recommendations. Confidentiality Your personal and financial information will be held in strict confidence and will not be disclosed to any unaffiliated third party except as part of a regulatory examination or as set forth in the Vanguard privacy policy. Investment Results There is no assurance that you will achieve positive investment results by following the advice provided by VPFPS. Although VPFPS will recommend strategies that are designed to be prudent and diversified, all investments are subject to risks, as described in the prospectuses of the funds you invest in. As with any investment in stocks, bonds, or mutual funds, you could lose money. Vanguard Advisers, Inc. VPFPS is a division of VAI, which is a wholly owned subsidiary of The Vanguard Group, Inc. (Vanguard). Vanguard is owned by The Vanguard Group of Mutual Funds. VPFPS recommends Vanguard mutual funds and other Vanguard products and services. Vanguard funds are distributed by Vanguard Marketing Corporation, a registered broker-dealer affiliated with VAI and Vanguard. VAI has established and operates under a Code of Ethics that complies with the requirements of the federal securities laws. VAI will provide a free copy of its Code of Ethics to any client or prospective client upon request.
  40. 40. Service Agreement and Disclosure Statement Page 7 8 Other Important Arbitration Disclosures (cont.) All controversies arising out of or relating to any services provided by VAI, VPFPS, Vanguard, or any of their affiliates, directors, or employees with respect to transactions of any kind executed pursuant to this Agreement, with respect to any accounts serviced according to this Agreement, or which relate in any way to this Agreement will be resolved by arbitration and governed by the laws of the Commonwealth of Pennsylvania without reference to its conflicts of laws rule. Arbitration shall be conducted in accordance with and subject to the then-applicable Commercial Dispute Resolution Procedures of the American Arbitration Association (the AAA Rules). Unless otherwise mutually agreed upon by the parties, the arbitration hearings will be held in the City of Philadelphia, Pennsylvania. A panel of three arbitrators will be selected in accordance with the AAA Rules. The arbitrators will allow such discovery as is appropriate and consistent with the purposes of arbitration in accomplishing a fair, speedy, and cost-effective resolution of disputes. The arbitrators will reference the Federal Rules of Evidence and the Federal Rules of Civil Procedure then in effect in setting the scope of discovery. Judgment upon the award rendered in any such arbitration may be entered in any court having jurisdiction thereof, or application may be made to such court for a judicial acceptance of the award and an enforcement, as the law of such jurisdiction may require or allow. You consent to service of process by first-class mail to your addresses maintained on record at Vanguard. You should know that: (1) arbitration awards will be final and binding on all parties; (2) by signing the enrollment section of Your Personal Profile, all parties are waiving their right to seek remedies in court, including the right to a jury trial; (3) prearbitration discovery is generally more limited than and different from court proceedings; (4) the arbitrator’s decision is not required to include factual findings or legal reasoning; and (5) any party’s right to appeal or to seek modification of rulings by arbitrators is strictly limited. Note that the arbitration clause may not constitute a waiver of any right under federal or state securities laws, including the right to choose the forum in which to seek resolution of disputes. The arbitration clause may not apply to residents of all states. Effectiveness This Agreement will take effect once Vanguard receives a fully executed copy of Your Personal Profile and accepts it. All fees payable, as described in Your Personal Profile, must be submitted by check or deducted from one of your Vanguard nonretirement accounts in order for us to begin providing services. No services will be provided until such conditions have been met. Assignment, Amendment, and Termination of Services Neither party may assign or amend this Agreement without the consent of the other party. VPFPS can terminate this Agreement at any time by notifying you in writing and refunding the fees you paid. You can terminate this Agreement at any time by notifying Vanguard in writing. If you do so within five business days of the date you sign Your Personal Profile, you will receive a full refund of any fees paid. If you do so after the five days, the amount of your refund—if any—will depend on the amount of work performed by, and expenses incurred by, VPFPS prior to receipt of your termination notice. Written notice of termination should be sent to Vanguard Personal Financial Planning Service, Post Office Box 709, Valley Forge, PA 19482-0709.
  41. 41. Vanguard Personal Financial Planning Service Post Office Box 709 Valley Forge, PA 19482-0709 World Wide Web Toll-Free Information 800-567-5162 Vanguard Personal Financial Planning Service is provided by Vanguard Advisers, Inc., a registered investment advisor. Vanguard, The Vanguard Group,, and the ship logo are trademarks of The Vanguard Group, Inc. All other marks are the exclusive property of their respective owners. © 2005 The Vanguard Group, Inc. All rights reserved. VPFSA2 052005