Vanguard, one of the largest mutual fund companies, is a pioneer for having introduced the first index mutual fund to the world in 1975. That, and the company's unwavering commitment to reducing fees, established its storied reputation.
Vanguard, itself, is legally organized as a co-op - so the firm is owned by its funds and fund shareholders. This means there also are no separate, outside owners who demand profits. Therefore, the firm operates at cost under the organizational imperative that it must provide optimal services while reducing expenses.
Under the leadership of founder John Bogle, Vanguard built this cost-savings philosophy into all of its products. This same philosophy is built into Vanguard Financial Advisor Services, and it naturally adheres to it with a laser focus. Its popular service offering combines the firm's extensive stable of low-cost products with comprehensive financial and estate planning for individuals regardless of their level of investment experience.
- Fee-free fund investing
- Passive, long-term investing
- Investors who want access to a wide variety of low-cost products
- Investors who need coaching and guidance
- Investors looking for quality, low-cost advice
Vanguard at a Glance
|Minimum balance needed to access your advisory services:||$50,000|
|Cost per stock trade:||There is commission-free online trading for stocks, ETFs, options, Vanguard mutual funds, and more than 3,100 non-Vanguard mutual funds|
|Cost per options trade:||$0|
|Promotions:||90 days of no fees, no commitment for new Digital Advisory Clients|
|What securities are used in portfolios (options, stocks, mutual funds, ETFs, derivatives)?||All portfolios use low-cost Vanguard mutual funds and ETFs. Additionally, the service allows clients to bring outside investments into the service. For some clients, there may be a reason to keep outside investments, such as embedded capital gains.|
|The number of commission-free mutual funds or ETFs:||Clients do not pay transaction fees for any Vanguard mutual funds or ETFs.|
|The number of no-transaction-fee mutual funds:||Clients do not pay transaction fees for any Vanguard mutual funds.|
|Customer service hours:||Clients have unlimited access to their advisors and can interact via phone, email, or videoconference. Conversations with advisors are appointment-based.|
|Account fees:||Personal Advisor fees start at 30 basis points (0.30%) with a tiered fee schedule based on account size. There are no additional fees beyond the advisory fee and the funds' cost (expense ratios) in the underlying managed portfolio. Digital Advisor clients pay a target net advisory fee of 0.15% of their invested assets.|
|Mobile applications:||Mobile apps are available on the Apple Store and Google Play.|
Are Vanguard Personal Advisor and Digital Advisor Services Right for You?
Vanguard provides financial advice to individuals via personal interactions and online access. The advice and planning services available to you depends on your portfolio's size.
Those with portfolio assets over $50,000 can become advisory clients through the Vanguard Personal Advisor Services (PAS) program while investors with smaller portfolios have access to a Robo-advisory service, the Vanguard Digital Advisor (DA).
|Personal Advisor Services has one of the lowest management fees for an online planning service.||High account minimum for Personal Advisor Services ($50,000).|
|Digital Advisor clients pay an amazingly low target net advisory fee of 0.15% of invested assets.||The website offers less of a guiding hand than some competitors.|
|Large investment selection, including Vanguard funds and ETFs.||No tax-loss harvesting feature.|
|Comprehensive management.||Funds transferred into Fidelity need to be in cash and deposited into Vanguard's Settlement Account. No In-Kind transfers.|
|Access to financial advisors.|
|Vanguard is a co-op and has no outside investors, so expenses are kept at a minimum.|
|Investors only need $3,000 in a taxable or IRA brokerage account needed to get started in the Digital Advisor program.|
|Advisors are Registered Investment Advisors (RIAs) who have a fiduciary duty to clients|
Vanguard Personal Advisor Services
Vanguard, the world's second-largest mutual fund company (as of August 2020) with $6.20 trillion in assets under management, offers 425 low-cost traditional mutual funds and Exchange Traded Funds (ETFs), in addition to retail and institutional investor services for all types of retirement and individual financial plans.
Vanguard Personal Advisor Services include asset allocation, tax-efficient investing, portfolio rebalancing, and personal investment coaching.
Given its extensive product line-up, advisors build customized portfolios using in-house products that match a client's financial goals, risk tolerances, and investment time frame. These can include Vanguard funds and ETFs, individual stocks and bonds, and exposure to the appropriate asset classes and market sectors.
How Vanguard Personal Advisor Services Invests Your Money
When a client signs up for an advisory service, they will be assigned a dedicated advisor if their portfolio is greater than $500,000. Investors with $50,000 to $500,000 portfolios are assigned to a team, so they may not speak to the same individual every time they call.
In the initial screening, clients will be asked about their current assets, future and current income needs, and investment goals. Clients are then asked to complete an online questionnaire, after which the advisor creates a low-cost portfolio comprised of ETFs and low-cost mutual funds. Ongoing performance is tracked to maintain allocations and risk tolerances, and portfolios are rebalanced back to the target benchmark when they vary by more than 5%.
Client reviews are held quarterly. Like some other firms, clients can contact their advisors on an as-needed basis as often as they like. Advisors can be contacted by phone, email, and video from 8:00 am to 8:00 pm Eastern Standard Time.
While these guidelines are important, the quality of services also determines your investment returns. Vanguard's advisors work on a salary, so they are not guided by commissions when recommending products. Some are Certified Financial Planners (CFPs). These advisors are fiduciaries and do not place their interests ahead of their clients.
How Vanguard Digital Advisor Invests Your Money
The Robo-advisory service creates diversified portfolios ranging from very conservative, conservative, moderate, aggressive, to very aggressive. The Digital Advisor delivers a free assessment, access to low-cost portfolios, and suggests ways to save money. Portfolios are evaluated twice annually and are managed throughout the investor's working career and into retirement.
The key difference between Vanguard Digital Advisor and Vanguard Personal Advisor is the amount of human fine-tuning between the two. The Digital Advisor places clients into pre-generated model portfolios based on the information provided by the online questionnaire. The Personal Advisor Services has access to a wider selection of funds, ETFs, and allocations.
Portfolios are designed to be risk-managed over time, so they incorporate your personal financial goals. The very important asset-allocation process uses Vanguard's low-cost funds and ETFs.
Digital Advisor clients pay a target net advisory fee of 0.15% of your invested assets.
Vanguard has historically focused on offering low-cost products, mainly index funds, low-cost mutual funds, and ETFs. Today, these products are the building blocks of client portfolios in both the Digital Advisor and Personal Advisor groups. This makes sense since the average asset-weighted average expense ratio (representing the average paid by investors) of Vanguard funds was 0.10% in 2019. This was far lower than the industry's corresponding average (excluding Vanguard) of 0.57%, or an 82% cost difference.
As one of the most cost-competitive, comprehensive advisory services available, this group should be at the top of anyone's list when looking for expert advice.
Getting Started with Vanguard
Clients start with Vanguard by filling out an online questionnaire that asks for basic financial information such as income, spending, investment experience, financial goals, and if you need a savings plan created.
For Personal Advisor Services, the questionnaire is followed up by a phone call with an advisor who goes over more details and gets a better idea of what you are looking for.
Client funds for the Personal Advisor and Digital Advisor have to be transferred to Vanguard before the account is opened.
To keep transaction costs low, new customers have to fund their accounts in cash. There are no in-kind transfers of stocks, funds and ETFs held at other firms. This means existing portfolios held at other institutions have to be liquidated first in order to be transferred into Vanguard's Settlement Fund, similar to a cash account. Vanguard helps new clients make this transition with their firms.
Fees at Vanguard
Choosing a broker should be a deliberate process that evaluates two key variables: services and costs. Of the two, costs and fees charged by the broker can be significant, especially over the long-term. Fees and expenses impact the bottom line for all investors since they reduce net portfolio returns.
Over time, the impact of even seemingly modest fees is dramatic. For instance, one study found that over 20 years, fund expenses that differed by only 1% can reduce an investor's returns by 17%. If an individual can reduce their fees, they have a risk-free avenue toward improving their investment returns.
According to Vanguard's website, if an investor pays 0.15% of assets in expenses annually versus an investor who pays 0.60% in expenses annually, after 30 years, the low-cost investor will save almost $70,000.
Vanguard Personal Advisor Services charges 0.30% of the assets under management (AUM), with a minimum account size of $50,000. This is well below the industry average ranging from 75 to 100 basis points (.75 to 1% of AUM.)
If your portfolio is smaller, they offer a Vanguard Digital Advisor™. These service charges drop even lower on larger portfolios and are available on a sliding scale ranging from 0.30% on portfolios up to $5 million to 0.20% for portfolios from $5 million to $10 million. The yearly fee is broken into four quarterly payments.
Vanguard's advisory service focuses on individual investors, regardless of their experience and investment goals. This includes people with individual accounts ranging from trusts and all types of IRAs (Roth, traditional, individual, or joint account taxable) to 401(k) assistance and taxable accounts.
The advisory service will also provide advice - but not direct management - of client assets in 401(k)s, college savings 529 accounts, Uniform Gift to Minors Act (UGMA), and Uniform Transfers to Minors Act (UTMA) accounts. In short, no matter what type of account you have, the advisory service will provide either direct management or advice.
Due to advances in technology, combined with a better understanding of Modern Portfolio Theory, advisors can construct personalized portfolios across all asset classes.
Given its extensive product line-up, advisors build customized portfolios using in-house products that match a client's financial goals, risk tolerances, and investment time frame. These can include Vanguard funds, ETFs, individual stocks and bonds, and exposure to appropriate asset classes and market sectors.