Vanguard is the company that first created index funds as a way to spread investment exposure and save on expense ratios. Today, they have over 20 million clients with $5 trillion assets under management. While investing with a traditional Vanguard financial advisor initially required a $500,000 investment, it’s now a much more accessible opportunity with their version of a robo-advisor that also combines access to a real advisor.
How It Works
Vanguard Personal Advisor Services incorporate low-cost funds into your portfolio. You get access to an investing coach while working to minimize your tax responsibility. The process starts by providing some basic information about yourself, either online or on the phone. Then you’ll schedule a discussion with your financial advisor, where you’ll talk about your goals and individual financial situation. Together you’ll start creating a customized financial plan over the phone or through a video conference.
Within a few weeks, you’ll receive your advisor’s proposed investment strategy based on your goals and current finances. At this point, you can discuss the details and ask any questions you have about their recommendations. If it feels like a good fit, you can get started with the service, or you can decline with no obligation whatsoever.
Assuming you approve of the proposed plan, your advisor then executes on your strategy, including building and managing your portfolio. You can be as involved or hands-off as you choose. You’ll then continue to track your progress over time, with an advisor rebalancing your portfolio as needed. Together you’ll also revise your overall strategy as major life changes occur, such as marriage, having kids, or preparing your estate planning needs.
These less frequent event-based conversations are in addition to regularly-scheduled check-ins to make sure your portfolio is progressing as planned. Automatic rebalancing occurs quarterly but your advisor can also make changes to your portfolio at any point.
Types of Accounts Available
Vanguard allows you to select from both taxable and tax-advantaged investment accounts. You can open a non-retirement account for taxable, general investments. Vanguard also offers three types of tax-advantaged IRAs: traditional IRA, Roth IRA and SEP IRA. For estate planning needs, you can also add trust accounts to your portfolio.
Your advisor will walk you through which accounts you’re eligible for, particularly when it comes to the tax-advantaged IRAs, which do come with income and annual contribution limits.
While Vanguard requires a minimum of $50,000 in managed assets to even open an account, you can qualify for a lower management fee if your assets exceed $5 million. Here are the fee levels based on those higher assets:
- $5 million up to $10 million: 0.20%
- $10 million up to $25 million: 0.05%
On top of your annual management fee, you’ll also pay expense ratios based on the funds in your portfolio. The weighted average of Vanguard’s expense ratios is 0.08%.
Vanguard offers more than 100 mutual funds and ETFs to choose from, so you can create a truly diversified portfolio based on your specific goals.
Clients of Vanguard Personal Advisor services also get access to comprehensive education tools online. These include resources such as investment calculators. Your online dashboard for your account with Vanguard also lets you run simulations to see the likelihood of reaching your financial goals.
With this tool, you can adjust different variables to explore potential outcomes, such as retiring at different ages or adjusting your save and spend rates. Also review your portfolio by looking at your current asset mix, balances and activity, performance, and your overall outlook.
In addition to ongoing monitoring, you’ll receive quarterly progress reports from an advisor, updating you on your investment portfolio. If you have a question or concern at any point, simply schedule an appointment with a team advisor through a number of platforms, including phone, video conferencing, or email.
One of the biggest advantages of choosing Vanguard is the large variety of investment options available. Vanguard funds are particularly popular because there’s a huge amount of diversity to suit your needs at every stage of your investment planning. You can incorporate a range of investment types, including target-date mutual funds, index mutual funds, and ETFs. Additionally, research shows that Vanguard’s funds have historically outperformed other similar funds from competitors.
In addition to top-notch fund selections, you also get a full suite of advisory services and access to financial advisors whenever you have a question or want to change something in your portfolio. In fact, there’s no limit on how often you can communicate with them. Opt for a phone call or do a videoconference for a face-to-face chat. With the latter option, your advisor can share their screen with you to visually walk you through different investment options so you fully understand your choices.
Another plus is that Vanguard’s advisors are salaried, rather than being commission-based so they don’t have incentives to push some investment recommendations over others.
While Vanguard is known for low expense ratios using their own index funds, you can also incorporate non-Vanguard accounts into your financial planning. You can ultimately make your own decisions about your investment strategy so you can incorporate different vehicles to diversify your portfolio according to your own wishes.
Getting started with Vanguard’s Personal Advisor Services is much slower than simply signing up online with a straightforward robo-advisor. Of course, there’s a much higher degree of service and personalization, but you could easily end up waiting weeks from the time you sign up to speak to an advisor to the time you receive your customized plan. For quick entry into investments, you may want to look elsewhere. But as Vanguard is one of the premier investment firms, it may be worth the wait.
Another weak point with this service is that you only get a dedicated financial advisor if your account reaches the $500,000 threshold; otherwise, you get access to a team of advisors, not one specific individual. That means you’ll likely speak to a different person every time you seek advice. Also, advisors are only available during weekdays.
Vanguard also doesn’t offer automated tax-harvesting as you’d receive with a robo-advisor. They say this is purposeful because of the risks involved, so it’s up to you whether you think it’s a value-added feature that needs to be incorporated into your investment strategy. Vanguard does incorporate tax planning in your strategy, however, so you can still take advantage of tax efficiencies in a different way. This is most commonly done by spreading out your investments in both taxable and tax-advantaged accounts.
Who It’s Best For
At a minimum, Vanguard’s Personal Advisor Services is best for Individuals with a large balance to invest who want low management fees alongside personalized service. If you have the minimum amount of money to invest, Vanguard is one of the most competitive options out there, considering the management fee compared to the level of access you get to a human advisor.
This service isn’t designed for an overtly hands-on investor. You’re a good candidate if you want professional advice to help inform your decision-making process. You should also prefer structured index funds over frequent trades of individual stocks.
Vanguard Personal Advisor Services assists people with more complex financials to navigate strategies for various life events, as well as create a tax-efficient strategy. Your advisor can even assist you with broader issues such as Social Security, health care, and retirement withdrawals.
The Bottom Line
Vanguard’s Personal Advisor Services doesn’t offer the automation that comes with robo-advisors, but it does come with some of the most well-known index funds in the industry. If you can meet the minimum balance threshold, you can take advantage of smart investment strategies with ongoing access to a team of financial advisors.