Vanguard Personal Advisor Services – Review

Vanguard Personal Advisor Services is mutual fund giant Vanguard’s personal wealth management division. Its advisors provide financial planning and asset management for U.S.-based individuals and families. As salaried, noncommissioned fiduciaries, they’re sworn to act in their clients’ best interests and have no financial incentives to recommend specific investment products.

Like other financial planning and wealth management providers, Vanguard Personal Advisor Services is an alternative to self-directed investing and asset management. It’s ideal for investors without the time, expertise, or desire to create and execute their own financial plans or manage their own liquid assets. Anyone with $50,000 or more in investable assets can create an account and use Vanguard Personal Advisor Services. But getting a single dedicated advisor requires $500,000 or more in investable assets.

Because Vanguard Personal Advisor Services is backed by a major financial institution with many financial advisors on staff, it enjoys economies of scale that independent planners and advisors can’t match. With a maximum advisor fee of 0.30% of assets under management and a passive investing approach that keeps expense ratios and fund management fees very low, Vanguard charges much less than the average U.S. financial advisor, whose advisor fees exceed 1%, according to Vanguard.

Perhaps more important, Vanguard advisors are fiduciaries — a type of financial advisor sworn to act in clients’ best financial interests rather than giving the advice that can earn them as advisor the highest commissions. In fact, Vanguard advisors are salaried. They don’t earn commissions at all.

With investment options limited to Vanguard funds and exchange-traded funds (ETFs) and a $500,000 minimum asset load required to get a dedicated advisor, Vanguard isn’t ideal for adventurous or low-asset investors. But if you’re in the process of choosing a financial advisor and can meet its $50,000 minimum investable assets threshold to create an account, it definitely deserves a closer look.

Pricing

Vanguard Personal Advisor clients pay for financial planning and investment management services with an annualized percentage of their total assets under management (AUM) with Vanguard.

Up to $5 Million: 0.30%
$5 Million to $10 Million: 0.20%
$10 Million to $25 Million: 0.10%
Above $25 Million: 0.05%

As an example, a Vanguard Personal Advisor client with $12.5 million in assets under management would pay 0.30% AUM fees on their first $5 million under management, 0.20% on the next $5 million, and 0.10% on the final $2.5 million.

How It Works

There are six steps to enrolling in Vanguard Personal Advisor. Whether you have a dedicated advisor or are relying on the advisory team, the process is similar.

1. Completing Your Investor Profile (Onboarding)

Creating an investor profile is the first step in your relationship with Vanguard Personal Advisor Services. You have two options to complete it: a phone call with a Vanguard representative or a step-by-step online process. The latter is better if you’re not confident you can find 15 to 30 minutes of uninterrupted time during the workday or early evening.

Regardless of which option you choose, you need an online account to complete it. You must then complete four steps necessary to produce a comprehensive customized financial plan and asset allocation:

Detailing goals and objectives, such as saving for retirement and covering your kids’ higher education costs
Outlining your investing strategy, including your general risk tolerance and preferred securities classes
Detailing your income and tax status, including all sources of income, your tax filing status, and other details that could affect your position
Revealing assets you’d like to include in your financial plan or transfer to Vanguard’s management

You need at least $50,000 in investable assets to enroll in Vanguard Personal Advisor Services. This total excludes certain types of accounts, including college savings accounts, some employer plans, irrevocable trusts, and annuities.

2. Initial Consultation

Your next step is a virtual meeting with a Vanguard advisor. Vanguard offers phone calls or video conferences during extended weekday business hours.

While every new client gets to speak one-on-one with a Vanguard advisor, Vanguard doesn’t provide dedicated advisors to clients with less than $500,000 in assets under management. In other words, if you can’t bring $500,000 to your Vanguard investment account, you aren’t guaranteed to speak with the same advisor each time you need to discuss or revise your financial plan or investment strategy.

Together with your investor profile, your initial consultation forms the basis of your financial plan. Your advisor guides the conversation, covering major life goals, learning about your dependents, and testing your tolerance for market risk.

3. Creating a Financial Plan

Next, your advisor — or members of Vanguard’s advisor staff if you’re bringing less than $500,000 to the table — creates your financial plan that covers the rest of your expected lifespan. Your plan sets targets for each goal, including:

The date you’re aiming to reach the goal (for instance, retiring by 2050)
The dollar value you must have to achieve the goal (for instance, $4 million in retirement savings by 2050)
Annual savings target to stay on track for the goal (for instance, save $45,000 per year until 2050)
Likelihood of achieving the goal if you stick to the savings target
Current and recommended asset mixes, the latter based on your risk tolerance and growth needed to reach your goal

Each goal’s probability of success comes with detailed “what-if” scenarios that probe how the strategy fares in different scenarios — some optimistic, some dire. Vanguard’s software runs many thousands of simulations to assess how the relative likelihood of success or failure evolves as inputs change.

You’re under no obligation to move forward with Vanguard Personal Advisor Services once they create your plan. If you choose to work with Vanguard, your plan remains visible from your Vanguard Personal Advisor dashboard.

4. Allocating Assets

Your advisor or advisor team uses your plan as an outline to create a diversified portfolio tailored to your risk tolerance and goals, with a mix of stocks and fixed-income securities. Portfolios created to achieve more aggressive goals with higher risk tolerance are heavier on stocks, while portfolios built to preserve capital or achieve modest growth at lower risk tolerance are heavier on fixed-income securities, such as bonds.

If you agree to ongoing advisory services, your advisor or advisor team begins transferring assets to your new Vanguard account and purchasing securities to build out your portfolio within five business days.

Vanguard advisors work on salary. They don’t earn commissions on sales of any financial product and have no direct financial incentives to recommend specific mutual funds or ETFs. However, the service only gives you access to Vanguard funds and ETFs, so they’ll only recommend those products over competitor products with better historical performance or third-party ratings.

5. Ongoing Asset Management

As a Vanguard Personal Advisor Services client, you grant Vanguard permission to purchase and sell securities on your behalf. Your advisor or advisor team needs this permission to periodically rebalance your portfolio — an essential part of the asset management process — without getting your approval for each transaction.

6. Periodic Consultations and Plan Modifications

Moving forward, you can consult with your Vanguard advisor or advisor team during a regularly scheduled annual check-in. If your financial situation, goals, or risk tolerance changes between these consultations, you can always contact your advisor or team to discuss modifications to your plan.

You can contact Vanguard advisors and support staff weekdays from 8am to 8pm Eastern. If you have over $500,000 in assets under management with Vanguard, you can contact your dedicated advisor at will and they’ll get back to you if they’re in the office (or at their earliest convenience if not). If you’re under the $500,000 threshold, you’ll reach whoever is available on your advisor team.

Advantages

Vanguard Personal Advisor Services’ top advantages include low asset management fees, low investing fees and expenses, fiduciary obligation to clients, salaried advisors, and 12-hour availability on weekdays.

Low Asset Management Fees. Vanguard’s asset management fees are very low by industry standards. Clients pay just 0.30% per year on the first $5 million under management — a fraction of the industry-average management fee of about 1%. It’s not uncommon for clients to pay management fees of 1.5% or more on assets under $1 million.
Low Investing Fees and Expenses. Beyond its management fees, Vanguard is renowned for low investing fees and expenses. That’s a function of its dominant index investing approach. Since they track the performance of specific asset classes or market indices, its passively managed funds require much less work to maintain than customized or actively managed mutual funds.
Operates as a Fiduciary. Vanguard’s personal advisors are sworn fiduciaries, which means they’re ethically bound to act in their clients’ best financial interests. While fiduciaries aren’t immune from poor judgment, the designation certainly increases clients’ confidence that their advisors are making what they believe are the best decisions.
Advisors Don’t Earn Commissions. Vanguard advisors are salaried, not commissioned, which means they have no direct financial incentive to sell or recommend any particular financial product. In other words, you can trust them to give you honest advice.
12-Hour Availability on Weekdays. Vanguard’s advisor team and support staff are available by phone and email from 8am to 8pm Eastern on weekdays. That’s three hours longer than the typical independent financial advisor.
Backed by a Trusted Brand. Vanguard Personal Advisor Services has a rock-solid foundation. Since its inception in the mid-1970s, Vanguard has been a low-cost investing pioneer, and the first index mutual fund was its first among many innovations. Public trust in the company is evident in its financial success: Assets under management at Vanguard grew from less than $1 trillion to about $5.6 trillion in the 10 years ending in August 2019, according to a company history.

Disadvantages

Vanguard Personal Advisor Services’ most significant disadvantages include high asset requirements to get a dedicated personal advisor, an open-ended onboarding process that could confuse novices, and asset management options limited to Vanguard products.

High Asset Requirement to Get a Dedicated Personal Advisor. Vanguard Personal Advisor Services clients need at least $500,000 under management with Vanguard to qualify for a dedicated personal advisor. Those with less than $500,000 under management aren’t guaranteed a single point of contact at Vanguard and can’t count on speaking with the same advisor when they call or email with questions or concerns. Independent financial advisors typically offer dedicated service to lower-asset clients.
Open-Ended Online Onboarding Process Could Confuse Novices. Vanguard Personal Advisor Services’ online onboarding process is open-ended and potentially confusing for novice investors. In particular, it asks new clients to create and detail life goals other than retirement, assuming a basic fluency with financial planning that not everyone possesses. While the subsequent initial consultation should illuminate the process for most clients, the digital onboarding might put them off so much they never bother to reach that point.
Asset Management Options Limited to Vanguard Products. Vanguard has a vast array of investment products, but it’s not a complete catalog of every equity instrument in existence. In particular, its focus on index funds is a weak spot for investors who prefer active management.

Final Word

Vanguard Personal Advisor Services is an excellent fit for investors seeking fiduciary financial planning and wealth management services in a low-cost package. Vanguard’s legendary reputation and low fees and expenses generate a powerful tailwind behind its advisor staff, who never earn commissions on the products they recommend — providing the sort of peace of mind that comes only with truly unbiased advice.

Vanguard Personal Advisor Services isn’t for all investors, not the least those with few assets to invest. But it’s an excellent alternative to an independent financial advisor, one that — unlike dime-a-dozen robo-advisors — doesn’t ask clients to sacrifice human interaction.

Does Vanguard Personal Advisor Services sound like a good fit for your financial planning and asset management needs?

Published at Wed, 16 Dec 2020 23:44:23 +0000