As investment technology becomes more easily available, even big-name brokerages are looking for ways to get into the robo-advisor space. The goal is to offer personalized investment management at a lower cost to customers, and that’s where Vanguard is looking to expand their services with their new Personal Advisor Services platform.
Vanguard Personal Advisor Services Features
|Account Fees||0.30% Annually|
|Accounts Available||Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, Trusts, Individual and Joint|
|Automatic Deposits||Yes — Weekly, Every Other Week, Monthly and Bi-monthly|
|Mobile App||Yes — Apple’s iOS and Google’s Android mobile devices|
|Customer Service||Phone — M-F 8A-8P ET, Email — M-F 8A-8P ET|
What is Vanguard Personal Advisor Services?
With approximately $3 trillion dollars in assets under management, Vanguard is the largest mutual fund manager in the world and the second largest provider of exchange-traded funds (ETFs). Their mutual funds and ETFs are known in the financial services industry as having some of the lowest management fees and expenses.
Vanguard Personal Advisor Services brings these low-cost investment choices to clients that want a personally managed investment portfolio.
How Does Vanguard Personal Advisor Services Work?
For new clients, a Vanguard advisor will develop a financial plan that includes life goals, review of current investments, and determination of future income needs. The financial plan will be customized to the client’s unique financial situation.
After developing an initial plan, the advisor puts the plan into action by building a portfolio with a mix of low-cost diversified stock and bond investments based on the client’s individual goals.
Using Vanguard’s online interface or mobile apps, the client can view all portfolio holdings, investment performance, and keep track of goals.
A Vanguard advisor reviews and rebalances the client’s portfolio on a regular basis to keep the portfolio on course to meet investment goals and objectives. Vanguard portfolio management software does most of the grunt work of tracking asset allocation and keeping the portfolio on track.
Vanguard advisors select funds from the roughly 100 Vanguard mutual funds and ETFs based on the individual investment objectives of the client. Typical investments could include the Vanguard Total Stock Market Index fund (VTSAX), Total International Stock Index fund, (VTIAX), and the Total Bond Market Index fund (VBTLX). Those three funds come with expense ratios ranging from 0.05% to 0.14%.
Personal Advisor Services clients get access to Admiral class shares of all Vanguard mutual funds without the normal $10,000 per fund minimum. Admiral funds tend to come with about 0.10% lower expense ratios than the comparable Investor class shares, thereby offsetting part of the 0.30% account management fee for those clients not otherwise able to meet the $10,000 per fund minimum for Admiral class shares.
Vanguard advisors can recommend any Vanguard fund but they tend to recommend low cost Vanguard index funds.
The top 7 funds held in their clients’ portfolios are:
- Vanguard Total Stock Market Index Fund Admiral Shares
- Vanguard Total International Stock Index Fund Admiral Shares
- Vanguard Total Bond Market Index Fund Admiral Shares
- Vanguard Total International Bond Index Fund Admiral Shares
- Vanguard Intermediate-Term Investment-Grade Fund Admiral Shares
- Vanguard Short-Term Investment-Grade Fund Admiral Shares
- Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares
For clients transferring in non-Vanguard funds with significant capital gains, Vanguard’s advisors may keep those non-Vanguard funds in the portfolio to avoid taxation on the gains.
However, Vanguard’s offering differs from other “robo-advisors” like Betterment and Wealthfront in that there is a live human in charge of reviewing your account periodically. The advisor also provides financial planning advice in addition to portfolio management. If anything they are really a “tech-assisted” financial services firm than a true robo-advisor. Vanguard’s new service is more similar to Personal Capital’s paid advisor service but at a much lower fee.
Progress reports are sent out quarterly, however clients can contact their advisor at any time they would like and as often as they would like. Advisors are available by phone, email and videoconference from 8:00 AM to 8:00 PM.
- Covered by SIPC insurance — accounts at Vanguard are covered up to $500,000 and by excess coverage from Lloyd’s of London up to $50,000,000 per account.
- Services are self-clearing — Vanguard uses self-clearing through Vanguard Brokerage Services for all trades and transactions.
Vanguard Personal Advisor Services has an annual fee based on the amount of assets being managed. The fee is a flat 0.30% of all assets under management. That amounts to $150 per year on a $50,000 managed account or $1,500 per year on a half million dollar portfolio. Unlike some wealth managers, Vanguard does not offer a discount for larger accounts.
In addition to the 0.30% management fee, the underlying mutual funds and ETFs in a client’s portfolio carry expense ratios varying from as low as 0.05% for index funds up to 0.40% or more for a few actively managed funds. Other possible fees include brokerage commissions for ETF purchases, though Vanguard advisors only use Vanguard ETFs which do not incur brokerage commissions at Vanguard.
- Personal Advice — Unlike some robo-advisors, you actually get a live person managing your account and in charge of your investments.
- Multiple Methods of Access — Access your account online and via a mobile device.
- Low Fees — At 0.30%, Vanguard's annual management fee is much lower than a traditional financial advisor.
- Access to Vanguard Funds — Vanguard offers some of the lowest expense funds in the mutual fund and ETF universe, and all Personal Advisor Services clients get access to the very low fee Admiral class mutual funds with no per-fund minimums.
- High Minimum Deposit — Beginning investors will have to look at other robo-advisors since the minimum is $50,000.
- Not The Cheapest Robo-Advisor — Firms like Betterment and Wealthfront are cheaper especially at higher deposit amounts.
- No Tax-Loss Harvesting — Unlike some of the other robo-advisors they lack this functionality. Though they do allocate most efficiently between taxable and tax-deferred accounts within the service.
- No In-person Meetings — You'll have to deal with your advisor by phone, email or video chat since Vanguard doesn't have physical offices.
Vanguard is my favorite investment company, so I might be a little biased in this review. I trust them with over a half million of my own dollars. It’s nearly impossible to beat their low investment fees in their mutual fund and ETF line up.
Vanguard Personal Advisor Services builds on the Vanguard reputation of delivering low fee investment products by offering a full service investment management relationship for a bargain of 0.30% in annual fees. Given the low cost of the underlying Vanguard funds in their recommended portfolios, the full service Personal Advisor Services total management fees will come in around 0.50% or less.
That’s an amazingly low total fee that compares favorably against most actively managed mutual funds that don’t come with a personal advisor or investment management services.
Would I recommend this service to others? Yes! If you need hand holding with your investments, Vanguard Personal Advisor Services is a compelling new entry in the money management field. The fees are straightforward and advisors don’t have vested interests in upselling you on expensive and unnecessary financial products just to make a few more bucks on commissions.
Because of this, I give Vanguard Personal Advisor Services 4 out of 5 stars. That missing star comes down to the fact that you are still paying a 0.30% fee for advice each year, other robo-advisors are somewhat cheaper, and lack of tax-loss harvesting. For professional money management, a 0.30% annual fee is still very competitive, the Vanguard name is trusted, and the service offering looks solid, hence the 4 star rating.
Disclaimer: I own many Vanguard mutual funds and ETFs, some of which are mentioned in this article.