As much as I think the article makes great points (tax-loss harvesting seems oversold, and Vanguard is a much cheaper way to get a target date fund than Wealthfront), I gotta raise my hand here and point out the absurdity of this argument against proportional fees. Wealth management is like any business-- a combination of fixed and variable costs. And like many businesses, it amortizes those fixed costs against basically a variable fee structure because the value of the service to the customer (debatable as it may be for some investment products) is proportional to the account size.
It's not an SV vs WS thing. Nobody charges according to the marginal cost of the service. Why does Airbnb charge a percentage of the rental cost? Why does Uber get a percentage of the fare? Why does the restaurant charge me the same for a burger at 10pm as a burger at 7pm (after all, the staff are already being paid for the day and ingredients already purchased)?
It might sound good to say "hey, the software's not working any harder so the marginal cost is zero", but that doesn't work in almost any business.
> Why does the restaurant charge me the same for a burger at 10pm as a burger at 7pm (after all, the staff are already being paid for the day and ingredients already purchased)?
Actually, it's not uncommon for a food vendor to drop its prices at the end of the day, e.g. https://www.itsu.com/about/sale
That doesn't invalidate your point, though.
I'd also suggest that the risk associated with a transaction should also be factored in. The cost of processing small (e.g. $100) and large ($100,000) transactions may be the same but the potential cost to me if I drop the ball is several orders of magnitude larger.
Additionally, Vanguard is making money through securities lending which is also proportional and can offset much or all of the expense ratio.
"In 2012 securities lending enhanced annual fund returns by more than 1 basis point for over 60% of Vanguard's participating funds, by more than 5 basis points for nearly a third of funds, and by more than 10 basis points for over 15% of funds."
tax-loss harvesting is particularly valuable when combined with charitable giving.. the usual harvesting dynamic is that you are trading a deduction now for a larger gain-liability later, but in the case of charitable giving of appreciated stock there is no liability down the road but you get to keep the deduction-now.
