Vanguard announced Tuesday that it cut the minimum account requirement in half for its digital-human hybrid service, Personal Advisor Services. Individual investors with at least $50,000 of available assets can now open an account that combines the online, automated technology benefits of so-called “robo advisors” with the personal relationship and judgment of human advisors.
Personal Advisor uses proprietary "financial simulation" technology to create investment models and assess how clients are tracking towards their goals, as well as how market conditions are impacting their investments. Clients can view their progress and check their balance through an online profile on Vanguard’s website.
Like other online investment services, Vanguard uses algorithms, automation and its famously low-cost mutual funds to cut advisory fees, but also includes access to a human advisor. Investors pay an annual fee of 30 basis points ($150 a year on $50,000), which is lower than many competing services from the likes of Schwab, Betterment and Wealthfront.
Vanguard is stressing that it human advisors are available to help clients open accounts, create a plan and with portfolio management. Instead of an online questionnaire, Vanguard advisors work with clients to determine financial goals. The advisor remains in charge of monitoring the portfolio, rebalancing and recommending adjustments, and are available via phone or videoconferencing to help clients with life changes or big financial decisions.
“We value the role that an advisor plays in helping our clients achieve better results,” said Karin Risi, head of Vanguard Personal Advisor Services. “In particular, an advisor can act as an emotional circuit breaker during periods of market volatility, make adjustments to a financial plan when a client’s financial situation changes, and counsel clients on other financial issues.”
Though Vanguard is making the service available to more investors, it isn’t as focused on reaching younger, emerging affluent investors. Vanguard said Personal Advisor Services is best suited for Baby Boomers who are near or in retirement that need a tax-sensitive, total-return drawdown strategy and an advisor to help deal with unforeseen medical expenses, Social Security benefits or future bequests to family members.
The service has been available to investors with $100,000 for two years. Vanguard said the service attracted $7 billion in new assets during the pilot phase. Vanguard has also transitioned clients from its existing wealth management, trust and estate planning services, Asset Management Services, over to Personal Advisor, giving the digital program a total of $17 billion under management.