Vanguard has signaled a bigger push into advisory services with today’s announcement it has cut in half the investment minimum for its Personal Advisor Services program that combines interaction with a human financial advisor and online features.
The Valley Forge, Pa.-based fund giant slashed the minimum to $50,000 from $100,000 that had been in place during the program's two-year pilot run. Before that, the company for a number of years had provided advice to retail clients with a $500,000 minimum.
Investors who use the program partner with a Vanguard financial advisor to discuss their financial goals, time horizon, and risk tolerance. Then the advisor creates a custom-tailored financial plan consisting of a portfolio of Vanguard mutual funds and exchange-traded funds.
According to Vanguard, the portfolios reflect its investment mantra of broad diversification, low cost and tax efficiency with a long-term focus. Vanguard’s low-cost Admiral Shares funds will be the core holdings of most portfolios, according to the company.
Vanguard’s program charges an annual advisory fee of 0.30 percent of a client’s managed assets, plus additional fees for funds contained in a portfolio. Given that low-cost Admiral Shares funds used in customer portfolios have expense ratios ranging from 0.05 percent to 0.19 percent, the company’s goal is to limit the all-in cost to roughly 0.45 percent.
Clients can keep tabs of their portfolios online from any device. A Vanguard advisor reviews and rebalances a client’s portfolio on an as-needed basis, and provides quarterly reports. Investors communicate with an advisor via phone or videoconferencing.
Unlike other investment platforms with low minimums that are geared toward millennials or other newer investors, Vanguard’s advisor service seems to be reaching out to baby boomers––a demographic that has been the bedrock for many established RIA firms.
“While Personal Advisor could be valuable for investors at any stage, Vanguard’s experiences with clients has shown that as individuals near retirement and prepare to shift into the drawdown phase, the complexity of their financial situations increase significantly,” the company said in a press release.
Vanguard said it’s launching Personal Advisor to a wider audience after what it describes as a successful pilot phase where the service garnered more than $7 billion in new assets through the end of March.
Vanguard said it has transitioned almost $10 billion of client assets in its Vanguard Asset Management Services––an existing wealth management, trust, and estate planning platform––to the Personal Advisor platform as of the end of March, which gave the latter roughly $17 billion in total AUM.