Vanguard Personal Advisor Services Review 2017

vanguard personal advisor services
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Vanguard is best known as the largest mutual fund manager and second largest ETF provider in the world with over $3 trillion of assets under management. Low expense ratios are a hallmark of Vanguard, which is why many robo-advisors rely on Vanguard’s funds when constructing portfolios.

Vanguard Personal Advisor Services can be thought of as the robo-advisor arm of Vanguard, though in reality it is much more. Live financial advisors are accessible to clients with over $50,000 and dedicated financial advisors are assigned to investors with more than $500,000 – an amount that can be spread across multiple accounts. By combining live advisors with a technology-powered robo-advisory service, Vanguard offers the best of both worlds: human touch and advanced technology.

Vanguard Personal Advisor Services Spotlight

VANGUARD PERSONAL ADVISOR SERVICES
vanguard investments

InvestorMint Rating

4.5 out of 5 stars

  • Management Fee: 0.30%
  • Account Minimum: $50,000

via Vanguard secure site

Vanguard Personal Advisor Services Customers

Vanguard Personal Advisor Services is best for higher net worth individuals capable of meeting the $50,000 minimum account balance as well as fee-conscious investors who are keen to benefit from the low fees of a robo-advisor yet want access to live advisors too.

Vanguard Personal Advisor Services combines some of the best features of robo-advisors and human financial advisors into a compelling offering for higher net worth investors. With its account balance minimum of $50,000, beginner investors should consider robo-advisory services with lower minimums, such as WiseBanyan or Wealthfront.

Investors with $500,000 or more will be assigned a dedicated financial advisor but clients with investment amounts falling under that threshold get access to a team of advisors, so no single advisor is specifically assigned to any individual investor.

Investors with many account types are supported at Vanguard Personal Advisor Services, a benefit few robo-advisors offer. Many robo-advisors cater to IRA and individual/joint non-retirement accounts only but Vanguard will serve basic account types as well as Trusts and will advise in depth on accounts that it doesn’t directly manage, including 401(k)s and 529 Plans.

Vanguard Personal Advisor Services is best for:

  • Fee-conscious investors
  • Higher net worth investors
  • Hands-off investors
  • Investors seeking a more personal touch than a pure robo-advisory service
  • Investors with many account types: IRAs, 401(k)s, 529 Plans, qualified and taxable accounts

Vanguard Personal Advisor Services Management Fees

Vanguard Personal Advisor Services charges competitive management fees but, unlike other robo-advisory services, Vanguard also earns revenues from investment expenses of underlying funds as the provider of those funds.

  • 0.30% on amounts over $50,000
  • No sliding scale on amounts below $5,000,000 (above $5M, 0.20% is charged and 0.10% above $10M).

Most robo-advisory services charge a management fee and pass on the costs of investment expenses, the fees charged by funds, to clients. Vanguard Personal Advisor Services also passes on to clients these investment expenses but essentially gets to ‘double dip’ by earning revenues not just from management fees but also from those investment expenses as the provider of those funds.

Investment expense ratios range from 0.05% to 0.19% which means the gross fees incurred by clients for management and investment expenses combined are between 0.35% and 0.49%. Keep in mind that Vanguard also passes on transaction fees, such as trade commissions, sales charges and loads on mutual funds. These fees are typically small because ETFs and index funds are primarily used but Vanguard does include other, higher-cost funds from time to time and it’s worth noting that most robo-advisors do not pass these costs on to clients.

Vanguard Personal Advisor Services Investment Method

Vanguard offers a personalized financial planning experienced tailored to the needs of the client whereby portfolios are constructed in partnership with clients.

The Vanguard Personal Advisor Services investment method starts by getting to know you, your unique financial circumstances and your goals. Then a Vanguard financial advisor will create a custom-tailored financial plan in partnership with you. Unlike many other robo-advisory services, Vanguard allows you to be as involved or as hands-off as you wish and works with you to monitor and track your progress towards your goals. Portfolio rebalancing is typically done quarterly, which is less frequent than many robo-advisors who offer daily rebalancing.

The stated goal of Vanguard Personal Advisor Services is to build portfolios with low cost funds, serve as a client’s investing coach and minimize taxes. When it comes to taxes, Vanguard Personal Advisor Services falls somewhat short of the mark compared to other robo-advisory services. Vanguard does optimize for taxes by placing tax-efficient investments in non-qualified, taxable accounts and investments with tax consequences into qualified, retirement accounts that shield the tax impact. However, Vanguard does not offer an automated, one-size fits all tax-loss harvesting service as other robo-advisors do. Clients looking for daily tax-loss harvesting would be better served elsewhere, such as at Wealthfront.

Portfolio compositions at Vanguard typically include municipal bonds, domestic and international stock market index funds, international bond market index funds, tax-exempt funds, long-term funds, and intermediate-term funds.

Vanguard Personal Advisor Services Tools

Some robo-advisors, such as Personal Capital, offer extensive personal finance tools, similar to Mint.com, that are accessible via a mobile app linking bank, investment and credit card accounts to provide a holistic financial view but Vanguard Personal Advisor Services is more restricted in the scope of tools offered, which primarily focus on retirement goal setting.

Vanguard employs what it calls the Vanguard Capital Markets Model to forecast returns. This is a proprietary, financial simulation tool developed by the Vanguard Investment Strategy Group to apply statistical analysis of historical data, including interest rates and inflation, for global equities, commodities, and fixed income in order to produce expected long-term returns.

Clients can work with financial advisors to set retirement goals and work towards them in partnership with an advisor, so that portfolio investment selections are not simply left to the discretion of a technology-powered robot as is the case with some pure robo-advisory firms.

Vanguard Personal Advisor Services Pros and Cons

Vanguard Personal Advisor Services offers comprehensive, low-fee management of a broad range of accounts and include a personal touch not typically associated with robo-advisory firms. Drawbacks of Vanguard’s offering are primarily related to the high initial hurdle of $50,000 to get started.

Vanguard Personal Advisor Services Pros Vanguard Personal Advisor Services Cons
Low Management Fees: Vanguard management fees are highly competitive, especially when factoring in the access to live advisors. While the 0.30% management fee is higher than Betterment’s pure robo-advisory service, it is substantially lower than what Betterment and Personal Capital charge for premium services that combine their robo-advisory services with financial advisors. Transaction Costs and Investment Expenses Passed Onto Clients: Most robo-advisors pass on investment expenses to clients (Fidelity Go is a stand out exception) but most do not pass on transaction costs, which Vanguard does and, even though these can be small because ETFs and index funds are frequently used, it still counts against the service.
Live Advisors: Clients can access a team of live advisors once they have met the minimum account balance of $50,000.
For higher net worth investors who meet the $500,000 threshold, a dedicated advisor is assigned.
Limited Tax-Loss Harvesting: Many robo-advisors, such as Wealthfront, offer automated, daily tax-loss harvesting. Vanguard also offers tax-loss harvesting but it’s done on a client-by-client basis and typically spaced out quarterly.
Rebalancing: Portfolios are rebalanced quarterly in partnership with clients, as opposed to a pure robo-advisory service that automatically rebalances at more regular intervals frequently. High Account Minimum: By far the biggest blotch against Vanguard is its high account minimum of $50,000. Even Personal Capital’s $25,000 minimum doesn’t come close to Vanguard’s high hurdle. Personal Capital offers dedicated financial advisors to investors with $100,000 or more whereas Vanguard requires $500,000 before assigning to clients a dedicated financial advisor.
Low Expense Funds: Vanguard has a reputation as a low cost leader in mutual funds and it includes in client portfolios its own funds that have low expense ratios, typically between 0.05% and 0.19%.
Extensive Management: Vanguard caters to a broad range of account types, including non-retirement and IRA accounts as well as Trusts; Vanguard earns high marks is the extensive advisory services it provides on non-managed accounts, such as 401(k)s and 529 Plans.
Personal Touch: Vanguard offers a personal touch not necessarily associated with robo-advisors. By providing access to live advisors, clients can easily modify a tailored investment plan that needs to be adapted for life circumstances, such as the birth of a child, a marriage or other life events.

Vanguard Personal Advisor Services Fees & Minimums

Vanguard doesn’t offer much of a sliding scale in terms of lower fees as account balances increase; only above $5M does the first break in management fees come but the 0.30% basic rate is highly competitive when factoring in accessibility clients have to live advisors.

Category Fees
Account Management Fees 0.30% up to $5,000,000
0.20% above $5M up to $10M
0.10% above $10M up to $25M
Tax-loss Harvesting YES
(but not automatic; performed on a client-by-client basis)
Investment Expense Ratio 0.05% – 0.19%
Account Minimum $50,000
Automatic Rebalancing YES
(quarterly)
Annual, Transfer, Closing Fees Passed on to clients

Vanguard Personal Advisor Services Accounts

Vanguard Personal Advisor Services offers comprehensive management, including extensive advisory services on accounts that are not supported, such as 401(k)s and 529 Plans.

Type Capability
Individual Non-retirement YES
Joint Non-retirement YES
Roth IRA YES
Traditional IRA YES
SEP IRA YES
Rollover IRA YES
Trusts YES
401(k) NO
(will advise)
529 Plans NO
(will advise)

Vanguard Personal Advisor Services Tax Strategy

Automatic tax-loss harvesting is not a featured offered by Vanguard but rather it’s provided on a client-by-client basis.

Type Capability
Tax Loss Harvesting YES
(but not automated)
Free Account Rebalancing YES
(quarterly or as agreed with client)

Vanguard Personal Advisor Services Summary

For investors who can overcome Vanguard’s $50,000 account minimum, low fees, comprehensive management, accessibility to live advisors, tailored portfolio solutions and low investment expenses await them. Compared to other robo-advisors, Vanguard Personal Advisor Services offers one of the most competitive fee schedules, particularly when factoring in accessibility clients have to a team of financial advisors.

And for even higher net worth clients willing to pony up an investment amount of $500,000, Vanguard offers an even more personalized experience with a dedicated financial advisor.

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  • Jay L

    Thanks for the review. I wouldnt call them a “robo” advisor though really. They are real humans investing in index funds primarily , and its not left up to the computer as far as I know. Vanguard is a company built around the investors best interest too.

    • George Windsor

      Thanks for the feedback Jay!