Vanguard Grabs The Lead
The dominant player in the hybrid cyborg category is mutual fund colossus Vanguard, which launched its Personal Advisor Services (PAS) two years ago this week; at the end of the first quarter this year, PAS had attracted $65 billion in assets. Research firm Cerulli Associates reports that 2016 year-end assets under management at PAS were roughly four times larger than its nearest competitor, Schwab Intelligent Portfolios ($13 billion) and far ahead of Betterment ($6.1 billion), Wealthfront ($4.7 billion) and Personal Capital ($4.3 billion).
PAS benefits from Vanguard’s massive scale - at its launch, $15 billion was transferred from a legacy advisory service for high net-worth clients, and 85 percent of clients already were Vanguard customers before adding PAS. Most are closing in on retirement age, said Frank Kolimago, who heads the service.
“Many of them were comfortable self-directing their investments while they were accumulating assets, but concluded that with the complexities of retirement it’s time to get some professional help,” he said.
PAS advises retirees on tax-efficient drawdown and decumulation strategies. Advisers also help with Social Security optimization, estate planning and nonretirement goals such as college saving, or perhaps saving for a vacation home.
One of the most profound changes, Kolimago said, is the shift away from the old brokerage orientation of beating the market investing to meeting objectives. “We frame the conversation that way - how well are you doing related to your own unique objectives?”
He adds that the human dimension plays an important role in volatile markets. "We can serve as an emotional circuit-breaker, and help people from making short-term decisions that can hurt them in the long run."
Opponents of the fiduciary standard keep looking for ways to bring it down - an effort that is likely to fail. Meanwhile, the cyborgs (and robos) already are far down the track toward a fiduciary reality. PAS is a registered investment advisory firm that already complies with the conflict-free standard. “It’s straightforward for us," said Kolimago. "Many things that the rule requires are already built into what we have designed.”
This column was provided by Reuters.