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Vanguard to Implement New Online Tools

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Vanguard's online brokerage service is set to include "Consolidated View," a one-stop simple approach where shareholders can manage all their
financial assets online. The account aggregation tool was developed by CashEdge, and allows investors to view all their key financial information in one place - regardless of the number of financial institutions they work with, where they are located, or the number of individual accounts they have.

"It will allow clients to see an overview of their entire financial picture and to manage their assets from one single location," said Vanguard spokesman John Demming. "When the full service is up and running, clients will have the ability to point, click, and drag money from one account to another, regardless if those accounts are Vanguard funds or other accounts."

With $539.9 billion under management, Vanguard CEO Jack Brennan is banking on the convenience of this new service to roll even more dollars into their funds. So what if the mouse does roll in both directions? There is little concern about investors rolling money back out. The record seems to indicate that Vanguard, with its emphasis on index funds, thrives through good times and bad. Over the past 10 years, assets under management have grown 760%.

The technology that will drive this new service is a hybrid of "Dashboard," CashEdge's proprietary Web-based technology."We have multiple levels of service for our financial partners. Vanguard is implementing our aggregation platform," said Mary Jane Brennan of CashEdge. "The technology allows them to build on top of that platform and add features such as investment advice services."

Predictably, offering these add-on services is in Vanguard's game plan. They recently announced an arrangement to offer Financial Engine's Investment Advisor, which will be bundled into the Consolidated View services. Financial Engines is an Internet-based investment advisor founded in 1996 by William F. Sharpe, winner of the 1990 Nobel Prize in Economic Sciences.

We took a preview tour of coming attractions at Vanguard's website. Basically, shareholders can expect to:

  • See a Consolidated View of portfolios on one screen, including online account information from other institutions.
  • Get personalized performance data for their investments.
  • Obtain detailed analysis of their investments, including asset allocation
    and industry weightings.
  • Gather comprehensive fund and stock research.
  • Perform financial transactions on a single screen.
  • Create multiple watch lists of funds and securities.

To set up an account using Consolidated View, investors must give Vanguard the passwords to all their accounts - those might include bank checking accounts, savings accounts, money management accounts, mutual funds, etc.

Providing passwords calls for maximum protection of shareholder privacy and security. Vanguard considers security to be of the utmost importance and believes the CashEdge technology will deliver on that pledge.

Shareholders will have three levels of control over how their account information is gathered:

1. They must enter a Personal Identification Number (PIN) for each online
account each time they log onto the service.

2. They give a single permission to Vanguard to have their online accounts
instantly updated.

3. Vanguard periodically and automatically obtains updated account information on behalf of the shareholders.

Vanguard and CashEdge pledge to guard the confidentiality of all data collected and never sell or pass it on to any persons outside of Vanguard.

Once access is granted, the Vanguard server imports the account data into the Consolidated View account, using the CashEdge "dashboard" to view
and control what you see.

Vanguard claims to use the Internet to make things more efficient so shareholders can enjoy lower expense ratios. How is online technology
benefiting the bottom line for Vanguard shareholders? Kate Nelson, Vanguard spokeswoman, points out that 50% of shareholders currently use Web transactions, up from 10% in 1996.

"Our clients can go online and turn off the option to have their statements mailed out quarterly or monthly," said Nelson. "When even a portion of
our 15 million shareholders opt to forgo the mailing of statements, that adds up to savings that go back to our shareholders."

Stay tuned to see how this new service plays out in the next few months.
Consolidated View will initially be offered to the high net worth investors in Vanguard's Flagship and Voyager services. Later in the year it is expected to be available to all Vanguard shareholders.