Vanguard is not planning to follow in Fidelity Investments’ footsteps and develop a bitcoin offering for its 401(k) plan investors, the broker-dealer told Financial Advisor Magazine today.
“Vanguard has no plans to do so,” spokesperson Carolyn Wegemann said, when asked if the $8.1 trillion broker-dealer is moving toward a cryptocurrency 401(k) offering.
“Since cryptocurrencies are highly speculative in their current state, Vanguard believes their long-term investment case is weak,” the firm, which has $8.1 trillion in AUM, says on its website.
As of now, that leaves Fidelity, which has $11 trillion in assets under management, out in front with its 401(k) bitcoin offering. The giant investment management concern announced Tuesday that it will allow retirement investors to allocate up to a maximum of 20% of their nest eggs to bitcoin beginning in mid-2022.
The move comes despite a warning from the U.S. Department of Labor in March which advised 401(k) fiduciaries to “exercise extreme care before they consider adding a cryptocurrency option to a 401(k) plan’s investment menu.”
Retirement plan fiduciaries must “diversify the plan’s investments in order to minimize the risk of large losses” according to the Employee Retirement Income Security Act of 1974 (ERISA), the agency warned.
The U.S. Securities and Exchange Commission has also expounded on its concerns about bitcoin’s potential for fraud, manipulation and investor safety in the agency’s rejection of several bitcoin exchange-traded funds in the past year.
Vanguard said its “investing philosophy encourages staying the course and tuning out the noise. Our time-tested principles emphasize that investing for the long-term is essential and reacting to short-term trends can be costly for one’s portfolio.”
But never say never. “While we don’t currently offer cryptocurrencies as an investment option, we acknowledge the impact they’re making in the investing world. As cryptocurrencies and blockchain become increasingly mainstream, we’ll continue to monitor their development and discern the best path forward for our investors,” the asset manager said.
The National Association of Personal Financial Advisors (Napfa), Public Investors Advocate Bar Association (Piaba) and Consumer Federation of America (CFA) sent a letter to the DOL on Tuesday following Fidelity’s announcement, supporting the agency’s stance. The groups agree “that plan fiduciaries should exercise extreme care before they consider adding a cryptocurrency option or related product to a 401(k) plan’s investment menu for plan participants.”