Vanguard Robo-Advisor Expert Review
*Disclosure: Please note that this article contains affiliate links which means that – at zero cost to you – I might earn a commission if you sign up through the affiliate link. (That said, we’re committed to providing honest reviews.)
The first Vanguard robo-advisor wins the size prize! The Vanguard Personal Advisor Services is the largest robo-advisor with $112 billion assets under management. And now there’s a new all-digital investment option – Vanguard Digital Advisor!
The Vanguard robo-advisor now offers 2 investment options:
- Vanguard Personal Advisor Services – A robo-advisor that integrates computerized investment management with human financial advisor guidance.
- Vanguard Digital Advisor – This new offering is smilar to the traditional robo-advisors and provides investors with low-fee investment management driven by your risk level and goals.
If size isn’t enough, Vanguard is known for popularizing index fund investing. So, you don’t have to worry about the reputation of the firm if you choose the Vanguard robo-advisor. And, if you want hand-holding, the entire Vanguard Personal Advisor Services is driven by your relationship with a financial advisor. This robo-advisor begins with human assistance first and follows with digital investment advice.
- Vanguard Robo-Advisor Expert Review
- Vanguard Robo Advising Features at a Glance
- What Differentiates the Vanguard Robo-Advisors From Competitors
- Who Benefits from the Vanguard Robo-Advisor?
- Vanguard Personal Advisor Services Drill Down
- Vanguard Digital Advisor Drill Down
- Vanguard Personal Advisor Services and Vanguard Digital Advisor Pros and Cons
- Vanguard Robo-Advisor Review Wrap Up
Vanguard Personal Advisor Services is part of the Vanguard Group, which is the world’s largest mutual fund company, and the second largest provider of exchange-traded funds (ETFs). The Vanguard Group has over $5.1 trillion in assets under management (AUM). The company was founded by John C. Bogle, who developed the first index fund.
As robo-advisor fever sweeps the investment universe, the large investment houses are diving in. The Vanguard Personal Advisor Services Robo-Advisor is in the club with Schwab, Fidelity, Merrill, TD Ameritrade and countless other big players.
If you’re looking for big, Vanguard robo-advisor’s closest competitor in size is Schwab Intelligent Portfolios with Betterment claiming the third largest robo spot.
With $50,000 in assets, you can use the financial advisor driven Vanguard robo-advisor. If not, Betterment is a good alternative with financial advisors and no minimum balance required. If the $3,000 minimum works for you, check out the new Vanguard Digital Advisors.
Vanguard Robo Advising Features at a Glance
|Overview||Two robo-advisors. Vanguard Personal Advisor Services with digital and human advice. Vanguard Digital offers a computerized investment manager.|
|Minimum Investment Amount||Vanguard Personal Advisor Services-$50,000|
Vanguard Digital Advisor-$3,000
|Fee Structure||Personal Advisor Services-Sliding Fees:|
0.30% AUM on assets up to $5 million
0.20% AUM on assets between $5-10 million
0.10% AUM on assets between $10-25 million
0.05% AUM on assets over $25 million.
Digital Advisor-0.15% of AUM
|Top Features||Personal Advisor-The human financial advisor drives the entire process. Together, you & the advisor create a customized investment plan. |
Digital-Low-fee Vanguard ETFs.
Rebalancing available in both.
|Contact & Investing Advice||Available by phone Monday - Friday from 8:00 am to 7:00 pm EST|
For Personal Advisor Services- Human financial advisor guides the process. Helps build portfolio with low fee funds & serves as investing coach.
Accounts below $500,000 get team of advisors & those above $500,000 get a dedicated personal financial advisor.
No financial advisors for Digital clients.
|Investment Funds||Low fee stock & bond mutual funds and ETFs selected from among the scores of Vanguard funds.|
|Accounts Available||Individual & joint investment accounts. Roth, traditional, SEP, Simple & rollover IRAs. Trusts.|
What Differentiates the Vanguard Robo-Advisors From Competitors
Vanguard Personal Advisor Services
Robo-advising With a Human Touch
The Vanguard robo uses basic portfolio allocation methods that are typical of robo-advisors. A computer algorithm creates a portfolio for each client, based your goals and risk tolerance. But here’s where Vangaurd is distinct from many competitors. Vanguard’s robo-advisor adds direct human financial advisors to the process. Your Vanguard Advisor is at the helm of your portfolio and is the point person in establishing your account and portfolio.
Along the way, and depending on the size of your portfolio, you will have access to a dedicated or group of human financial advisors at all times.
Vanguard Financial Advisor Investment Minimums and Service Levels
The Vanguard Personal Advisor Services requires a $50,000 minimum investment.
If this amount doesn’t work for you, then skip to the sections discussing the Vanguard Digital investment Advisor.
For investors with at least $500,000 under management, you’re appointed an individual advisor. Much as is the case with traditional full-service investment brokers, the advisor assists you with all matters concerning your account. This gives larger investors similar investment management as they would get at traditional higher cost firms, but at a fraction of the cost.
If you have an account balance between $50,000 and $500,000, you won’t have access to a dedicated personal advisor, but you’ll have regular access to Vanguard’s large staff of professional advisors. In general, this is sufficient human financial advisory help for most investors.
While accounts valued at less than $500,000 don’t have a dedicated financial advisor, this may not be the disadvantage that it seems. Vanguard is known for excellent customer service, and each advisor is thoroughly trained in Vanguard’s systems and methods of investing in low-cost index funds. As well, any advisor who you contact has full access to your account profile.
Vanguard Robo-advisor Video Chat Capability
The obvious advantage of this method of advisor contact is that you can have a remote, but face-to-face meeting. It also helps if either you or the advisor needs to bring visual aids into the discussion.
Unlike other robo-advisors, Vanguard provides tax-loss harvesting on a case-by-case basis. However, Vanguard still engages in tax-advantaged investing with your account. In doing so, they allocate assets based on the taxability of that account. For example, interest and dividend bearing investments, with higher tax obligations might be held in tax-advantaged retirement plans. Growth type investments would be held in taxable accounts, where they can take advantage of favorable long-term capital gains tax rates.
Personally, as tax loss harvesting can create tax time nightmares (in taxable brokerage accounts), I believe that it is best performed with human advisor oversight.
The Vanguard Financial Advisor Services Low Fee Advantage
The low management fee of 0.30% can make a real difference over the long-term. Compared to the industry average of traditional full-service investment managers of 1.02%, Vanguard’s robo-advisor fees can improve your performance by nearly $100,000 on an initial investment of $250,000 invested at an average rate of return of 6% over a 20 year period.
Vanguard Digital Advisor
The Vanguard Digital Advisor is entering the crowded “basic” robo-advisor arena.
LIke many of its robo-advisor competitors the digital advisor creates a well-balanced investment portfolio that reflects your goals, age, and risk level. At present, it’s best differentiating features are:
- Low 0.15% investment management fee.
- Use of low-fee Vanguard ETFs (exchange traded funds).
- Access to the well-estblished Vanguard brand.
- New features coming soon: emergency fund and debt management assistance.
Who Benefits from the Vanguard Robo-Advisor?
Vanguard Personal Advisor Services
Naturally, the whole concept of robo-advisors is tailor-made for investors who prefer hands off management. But one major area where the Vanguard robo-advisor , specifically the Vanguard Personal Advisor Services stands out is the fact that the service includes a human advisor. Many robo-advisors lack human advisors in order to keep investment management fees low. But Vanguard gives you access to a human advisor whenever you feel the need in their Advisory Services option.
That can be especially comforting during those times when the financial markets are not cooperating with your long-term plans. In other words, when maket’s crash, it’s helpful to have someone to talk you off a ledge. Sometimes just having a coach letting you know to stay the course is just what you need during those difficult times.
The other major group who can benefit from this service are larger investors. The basic fee structure of 0.30% is competitive, but it gets even better as your portfolio gets bigger. With the tiered pricing structure, a person with at least $10 million will pay a fee of just 0.10%. That means that the entire portfolio can be managed for just $10,000. That fee level can’t be beat by traditional financial advisors, in most cases.
If you’re seeking a Vanguard alternative with a zero investment minimum, Betterment provides human financial advisors to all account holders (visit theBetterment website now).
Vanguard Digital Advisor
These investors will benefit from the Vanguard Digital Advisor:
- Existing Vanguard clients seeking low-fee, well-researched investment management.
- Investors with debt seeking integration with debt payoff strategies.
- Investors interested in building an emergency fund.
Vanguard Personal Advisor Services Drill Down
Unlike other robo-advisors, Vanguard does not limit your investment choices strictly to ETF’s. Instead, they are comprised primarily of index funds, but may also include actively managed funds. The core holdings include Vanguard’s low-cost Admiral Shares, including:
- Total Stock Market Index Fund (VTSMX)
- Total International Stock Index Fund (VTIAX)
- Total Bond Market Index Fund (VBTLX)
- Total International Bond Index Fund (VTABX)
- Intermediate-Term Investment Grade Fund (VFIDX)
- Short-term Investment Grade Fund (VFSUX)
- Intermediate-Term Tax-Exempt Fund (VWIUX) (for taxable accounts only)
Vanguard Personal Advisors Rebalancing
Vanguard Personal Advisor Services performs rebalancing on a quarterly basis. Your investments will be rebalanced when your portfolio deviates from the target allocation by more than 5% in any position. This is less frequent rebalancing than many other robo-advisors provide.
Vanguard Personal Advisor Service Sign-up Process
The Vanguard personal advisor services has a simple online sign-up process that you can complete in about 10 to 15 minutes.
It flows something like this:
- Step 1: General information. This includes providing your name, address and contact information. They also ask if you are retired, or if you plan to retire.
- Step 2: Your spouse’s information, if you’re married.
- Step 3: Investment strategy. This is where they ask you questions that are designed to determine your risk tolerance (more detail below).
- Step 4: Income and tax status. This is where you indicate both your sources of income, the amount of income, including pensions and other sources. This is also where you provide your tax filing status.
- Step 5: Accounts and savings. Here Vanguard is looking to determine potential assets under management.
In regard to Step 3, risk tolerance questions include:
- ”Generally, I prefer investments with little or no fluctuation in value…?” To which you can indicate strongly disagree, disagree, somewhat agree, agree, or strongly disagree.
- ”How stable are your current and future income sources?” To which you can indicate the degree between very unstable and very stable.
- ”What other concerns do you have about market risks?” This is an essay type question, where you are free to record any concerns that you have.
Naturally, these questions are geared toward determining how comfortable you are with taking losses on your investment portfolio. Your portfolio will be constructed with these considerations in mind.
Choose a robo-advisor in under one minute: ROBO-ADVISOR SELECTION WIZARD
Once you have completed the initial questionnaire, you will have a telephone conference call with a Vanguard Advisor. After that, the service will take several days to set up another conference call – which can be done either by telephone or by video. The second conference call is where they provide your customized investment plan.
Vanguard Personal Advisor Services Performance
You know the drill, “Past performance is no indication of future performance.”
Because every portolio is individually crafted, in line with your age, goals, and risk level, it’s not possible to give an overall account of the Vanguard Personal Advisor Services Performance.
One way to understand how your portfolio might perform, consider the returns of the underlying funds. For example, if your entire portfolio was invested in two funds: the Vanguard 500 Index Fund and the Vanguard Total Bond Market Index Fund in a 50% – 50% mix, then your returns would correspond to the returns of the investment funds. So, if the stock fund gained 10% in one year and the bond fund returned 3%, then your annual return would be a bit less than 6.5%, to account for the management fee.
Vanguard Digital Investments – Low Fee ETFs
Vanguard Digital Advisor Drill Down
The Vanguard Digital Advisor is similar to it’s robo-advisor peers.
The basic process and features of the Digital Advisor include:
- Initial questionaire drives the investment process. You’re asked questions about your goals and risk tolerance levels.
- Your questionnaire responses direct the robo-advisor computer algorithm to create an investment portfolio ranging from conservative to aggressive. Although you’re able to change your asset allocation.
- The investments within your portfolio are diversified, low-fee Vanguard ETFs including US and International Stock ETFs and US and International Bond ETFs.
- New features coming to help manage debt, emergency fund, and integrate your entire finances.
- $3,000 minimum investment amount and 0.15% management fee (plus low underlying fees for Vanguard ETF management).
- Many taxable and retirement acounts available
The Vanguard Digital Advisor is a standard robo-advisor with a reasonable fee. Although if you’re seeking a robo-advisor with zero management fees you might consider M1 Finance, Axos Invest, or SoFi Invest. (Disclosure, I have accounts with M1 Finance and Axos Invest)
Vanguard Personal Advisor Services and Vanguard Digital Advisor Pros and Cons
Both the Vanguard Personal Advisors and the Digital Advisors are part of the low-fee and well-respected Vanguard family. This gives each robo-advisor immediate credibility as demonstrated by the wide adoption of the Vanguard robos.
Vanguard Robo-Advisor Pros
- The Vanguard Advisory Services management fee of 0.30% is well below the 1.00 – 1.50% charged by traditional investment managers.
- The Vanguard Digital fee of 0.15% is reasonable when compared with the digital investment robos.
- The Personal Advisor Services account is managed by live advisors, using robo-advisor tools.
- For very large advisory investors, the sliding fee scale is generous.
- Your account is invested primarily in Vanguard funds, which are some of the best funds available (Vanguard’s average expense ratio is 0.12%, compared with the industry average of 0.62% for mutual funds and even lower for the digital ETF investments).
- The Vanguard Advisor clients have a financial professional to speak with which is helpful, especially during market downturns and can save you from selling or buying into the market at the wrong times.
Vanguard Robo-Advisor Cons
- The Vanguard Digital robo-advisor fees are not the lowest.
- The Vanguard Digital Advisor lacks a wide range of services that are currently available at competitors like loans, cash managment, and the extensive digital-line financial advisor available at Wealthfront.
- Your account is invested primarily in Vanguard funds, which may or may not be a problem.
- The initial investment minimum is higher than most competitors in both the Advisor and Digital offers and excludes smaller investors. Wealthfront has a $500 minimum, while Betterment has no minimum.
- Vanguard’s robo-advisor doesn’t offer an automatic tax-harvesting feature.
- The service is not for self-directed investors (which of course is not its purpose).
- Rebalancing is less frequent than it is with other robo-advisor services. This may or may not be a disadvantage, depending upon your preferences.
Vanguard Robo-Advisor Review Wrap Up
Vanguard is among the most trusted names in mutual funds, and they have brought their expertise to robo-advising through Vanguard Personal Advisor Services and Vanguard Digital. The Vanguard advisor offers professional management at a reasonable fee, although it is more advantageous for larger investors who can take advantage of the lower Vanguard management fees.
But even for investors who have less than $500,000 to invest, Vanguard Personal Advisor Services offers all of the advantages that people seek from robo-advisors, but with the added benefit of having regular contact with a live advisor.
Vanguard Personal Advisor Services has a lot going for it in an increasingly competitive industry. Vanguard is well-positioned with their new Digital robo-advisor service to meet the needs of an even larger number of investors than they already have.
We like the Vanguard Personal Advisor Services for wealthier investors, but the Vanguard Digital Advisor doesn’t bring any outstanding features to the table at present.
Although, if you’re interested in a robo-advisor with human financial advisors, a unique free investment management dashboard, tax-loss harvesting and the opportunity to invest in individual stocks as well, check out Personal Capital (Even if you don’t hire this investment manager, their free financial management tools are outstanding.).
Ultimately, your robo-advisor choice depends on your own personal financial situation as well as your goals and preferences. To help make your robo-advisor choice easier, please enjoy our complimentary robo-advisor comparison chart. (sign up below)
Click here to visit the Vanguard Personal Advisor robo site.
Click here to visit the Vanguard Digital Advisor site.
*Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link. That said, I never recommend anything I don’t believe is valuable.
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