Vanguard tells advisors to separate election emotion from allocation decisions

Vanguard's midterm message to advisors arrived as a webcast last week, and the phone traffic is the part worth writing down. Rachel Aguirre, Vanguard's head of product and portfolio strategy, told advisors to expect an influx of clients wanting to make immediate portfolio changes after Election Day, according to Financial Advisor Magazine's account of the session, which the firm held with the midterms approaching.

Her colleague Ben Barasky, Vanguard's head of U.S. advocacy, opened the suggested response by telling advisors to "First, acknowledge the emotion. There's a human being on the other end of your call. But then take the emotion out of it and look at the data."

The data, as Barasky presented it, is a base rate: Vanguard research covering 50 years of midterm elections shows markets generally producing positive returns under Republican, Democratic and divided control of Washington, he said, while allowing that elections carry enormous policy consequences, generate short-term volatility and produce outsized effects on individual sectors. Politics, in his telling, has historically been a poor predictor of longer-term investment performance, which is why he finished with the founder's line that if the client's goals have not changed, they might do better to follow Jack Bogle's advice: "don't do something, just stand there."

Vanguard's five decades of midterm history does not tell an advisor which sectors will move after this election, and Barasky did not pretend otherwise, acknowledging that a single industry can take a hit; what it supplies is a defensible reason to hold a position when a client's conviction is running the other way, which is the thing an advisor actually needs on a call in the days after a vote.

The harder work starts with the client's actual complaint, because a client whose preferred party lost sounds on the phone much like one worried about a concrete proposal touching capital gains, income taxes, artificial intelligence, retirement accounts or another policy that could move their investments; the two calls point in different directions. "You have to unpack that and really understand what belies the frustration and the anxiety," Barasky said. "What's the policy? Is it real? Is it not?" In his description, the job makes advisors "part therapist, part advisor," with the emotional work and the technical work arriving in the same conversation, and skipping the first tends to cost the advisor the second.

There is a legitimate version of the worried client, and the framework leaves room for it: if a proposal is real, passes into law and touches a client's tax picture, the advisor should be revisiting the plan, because both the concern and the response are concrete. What Vanguard argues against is the trade that skips that step, selling first and identifying the policy second, or never; advisors with gains to realize or retirement-account decisions pending have a live reason to check whether a specific proposal changes the math, and that is a planning exercise, not a market call, and the two should not be sorted on the same morning.

Barasky compressed the gap between a stump speech and a statute into three words, "Headline, not reality," noting that previous proposals such as wealth taxes or limits on retirement savings contributions never became law. Affordability has dominated the campaign, he said, driven by gasoline, housing, groceries and healthcare, but Congress is only one force on prices; the Federal Reserve, global central banks, regulation, tariffs, government spending and international events all bear on the same number. His advice to "tune out the noise" sits a little awkwardly beside the instruction to find out precisely what is worrying the client: Vanguard wants advisors to take the emotion seriously and leave the allocation alone.

For an RIA principal, the useful part of the webcast is the reminder that the answer to a politically motivated client is a process question, and processes get built before the phones start ringing. Every firm will field some version of the post-election call, from a client who wants to move to cash because of who won. A firm with a written, pre-agreed answer can work from a script. A firm improvising is negotiating inside the client's frame, and the risk there is not that the advisor shares the client's politics but that the advisor looks like they are reacting to the same headline, which converts a planning relationship into a forecasting one, an expensive trade for a little temporary comfort.

Vanguard's interest in how advisors handle that conversation runs deeper than a one-off webcast: in August this publication reported that the firm hired Beverly Goodman, a former Barron's editor, to court RIAs, a role built to carry Vanguard's low-fee message into the advisor-sold channel. Handing advisors a script for the anxious client is the same courtship in a cheaper format, and it puts the firm in the room at the moment an advisor decides what a nervous client should own.

The test will be whether the call volume Aguirre anticipates actually shows up. If it does, the firms that hold allocations steady through the post-election weeks will likely be the ones whose rebalancing policy was already on paper when the first anxious client dialed. Barasky's two questions, asked in order and without a portfolio answer attached, do most of the work: What's the policy? Is it real?