Vanguard Review

Vanguard Personal Advisor Review: An Affordable Hybrid Service

Vanguard is a behemoth in the investment management business. With over $51 billion in assets under management, they revolutionised the investment business by offering low cost index funds that took a passive approach to growing wealth. One of their newest service offerings is the Vanguard Personal Advisor. They do not offer a pure robo advisor service, but provide clients with a hybrid human-robo platform that provides personalised advice to build a portfolio that is then managed by Vanguard using their technology platform.

The advisors add value by helping investors to build portfolios with low-cost funds, act as an investing coach to make sure the decisions made are the right ones, and help to minimise taxes.

Before getting into more detail about Vanguard Personal Advisor, here is a summary of their human-robo services:

• Assets Under Management: Vanguard has over $51 billion in assets under management.
  
• Minimum Deposit Amount: Of the robo advisors we follow, Vanguard has the highest minimum investment requirement. To use Vanguard Personal Advisor Services, investors must start with at least $50,000.
  
• Portfolio and Asset Allocation Details: Vanguard Personal Advisor Services chooses funds from the over 100 Vanguard mutual funds and ETFs based on the individual investment objectives of the client. Clients get access to Vanguard Admiral offerings, which are some of the lowest cost mutual funds and ETFs available in the industry.
  
• Fees: The fees charged by Vanguard Personal Advisor Services is 0.30% of assets under management. With the minimum $50,000 investment, this fee equates to at least $150 per year, which is much lower than traditional advisor services.
  
• Account Types Available: Vanguard offers a wide range of regular investment accounts as well as all the major retirement accounts available to U.S. investors.

Vanguard Personal Advisor Services’ Minimum Deposit Requirements

Vanguard has the highest minimum deposit requirements in the robo advisory industry. The reason for this is the personal touch and human advice provided through the service. Since Vanguard provides clients with a registered financial professional to help them build a financial plan and implement a portfolio to meet their needs, they need to keep a higher minimum to offset the additional costs of providing this service.

Vanguard Personal Advisor Services’ Portfolio and Asset Allocation Details

Vanguard does not sway from their belief that low-cost mutual and index funds are the key to building wealth. As a result, every portfolio build as part of the Vanguard Personal Advisor service is done with Vanguard’s own line of low-cost funds.

There was limited information on the website about the actual portfolios Vanguard builds for clients, however it can be assumed that they use portfolio best practices to create globally diversified and risk adjusted portfolios based on the client’s investment risk tolerance, time horizon, and investment goals.

Vanguard Personal Advisor Fees and Additional Pricing

Vanguard charges 0.30% of assets under management for Vanguard Personal Advisor. In addition to this fee, Vanguard also makes money from the management expense ratios for each of the ETFs the client is invested in. However, with expense ratios at the lowest in the industry the added costs are not large.

For example, the flagship Total Stock Market ETF (VTI) has a super low expense ratio of 0.04%. That is 96% lower than other funds that provide the same market access.

The impact on the low fees charged by Vanguard is substantial. On a $250,000 investment over 20 years, an investor can keep over $96,000 more than investing with a more traditional broker. Here is the image from their site that highlights this research:

How to Get Started with Vanguard Personal Advisor

The process to get started with Vanguard is a bit more involved than with other robo advisors. Since a financial consultant works with each client, the process takes a bit longer and is more involved. The outcome is a much more tailored financial plan than someone would receive from a pure robo advisor.

The steps, as outlined by Vanguard, are as follows:

1. Meet with an advisor in person or by phone/teleconference.

2. Discuss personal financial situation and goals.

3. Create personal and customized financial plan.

4. Put plan into action. (Your involvement at this point is up to you; Vanguard allows you as much or as little input as you wish.)

5. Advisor monitors and tracks portfolio’s progress and keeps you updated.

6. Rebalance portfolio regularly.

7. Adjust portfolio in response to life changes.

For investors who meet the minimum $50,000 investment requirement, having Vanguard’s human-robo hybrid service is one of the cheapest ways to get a portfolio managed for them.