Vanguard Introduces Personal Advisor Services, Lowers Minimum to Investors With $50,000

VALLEY FORGE, PA (May 5, 2015)—Vanguard today announced that Vanguard Personal Advisor Services®, a new advice service that combines an ongoing relationship with an advisor, a user-friendly online experience, and sophisticated investment modeling technology, is now broadly available to individual investors with $50,000 or more available for a managed portfolio. Personal Advisor, which has been in pilot for the past two years for investors with $100,000 or more, is an evolution of Vanguard’s advice offerings that have been available to individual investors since 1996.

“Vanguard Personal Advisor Services represents our continued effort to lower the cost and complexity of investing by giving investors access to affordable, high-value financial advice,” said Vanguard CEO Bill McNabb. “Demographic and behavioral trends point to an increased demand for advice, and we believe this new service can help more of our clients reach their financial goals.”

A hybrid advice offering

Personal Advisor is distinguished in the advice marketplace as a hybrid model, marrying the sophistication of digital advice providers with the personal relationship and judgment of a human advisor. More specifically, the service features:

Low costs. Personal Advisor is available at an annual advisory cost of 0.30% of a client’s managed assets, or $150 on a $50,000 portfolio annually. The advisory fee plus low-cost Vanguard funds provide a compelling “all in” cost proposition.

Consultation with and ongoing support of a financial advisor. During the onboarding process, the client and an advisor work together to create a financial plan based on the individual client’s financial goals, time horizon, and risk tolerance. Thereafter, advisors monitor a client’s investment portfolio, rebalance as necessary, and recommend adjustments on a periodic basis. Advisors are also available on an ongoing basis via phone or videoconferencing to help clients navigate life changes and key decisions, such as when to retire. See accompanying fact sheet.

Portfolio construction based on Vanguard’s time-tested philosophy. Vanguard’s philosophy of broad diversification, low cost, and tax efficiency with a long-term focus is applied to every Personal Advisor portfolio. The portfolio construction process starts with strategic asset allocation and focuses on decisions that have the greatest influence on the risk/return characteristics of the portfolio. This also includes fund selection and asset location to optimally position the types of investments across each investor’s various accounts to minimize taxes.

An all-Vanguard investment portfolio. Based on a client’s individual needs and preferences, Personal Advisor recommends ultra-low-cost Admiral Shares of Vanguard index and active mutual funds (with expense ratios ranging from approximately 0.05% to 0.19%) that will serve as the core holdings of most portfolios.[1] The service provides investors with the flexibility to include existing non-Vanguard holdings.

In addition to low expense ratios, Vanguard funds have delivered strong returns relative to their peer-group averages on a one year (85%), three year (84%), five year (84%), and 10 year (93%) basis.[2]

Sophisticated modeling technology. Personal Advisor's advanced investment modeling technology is powered by Vanguard Capital Markets Model®, Vanguard’s proprietary financial simulation tool.[3] A number of factors, including market conditions and risk-return assumptions based on the client’s individual needs, feed into 10,000 simulated outcomes for an up-to-date assessment of how each client is tracking towards his or her goals.

A robust web experience. Clients can log onto their personalized profile on vanguard.com at any time to check their balances, view their progress relative to their goals, and see advisor recommendations designed to help increase the likelihood of reaching their goals. See accompanying client experience presentation.  

“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 fact, Vanguard’s Advisor’s Alpha research demonstrates the key role an advisor plays in constructing a portfolio and serving as a behavior coach. 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.”

A focus on retirement-minded investors

Vanguard believes that Baby Boomers who are near or in retirement are particularly well-suited for the service. This generation (born between 1946 and 1964) represents nearly 25% of the U.S. population or about 77 million individuals, the first of who turned 65 in 2011.[4]  According to analysis by the Pew Research Center, roughly 10,000 Americans will turn 65 every day for the next 15 years.[5] 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. Pew also reports that in excess of 60% of Baby Boomers use an advisor to inform their investment decisions.[6]

Personal Advisor offers a comprehensive approach to retirement planning whereby each client in or nearing retirement receive a customized tax-sensitive, total-return drawdown strategy that aligns with their unique financial goals. For example, an advisor and client discuss how to maintain a desired lifestyle throughout retirement, prepare for unknown future expenses like medical costs, incorporate Social Security benefits, and plan for future outlays such as a family member’s college tuition or a bequest.

Simplifying Vanguard’s advice offerings

Vanguard is rolling out Personal Advisor more broadly following the conclusion of a successful pilot phase, during which the service attracted more than $7 billion in new assets through March 31, 2015. To simplify its multiple advice services, Vanguard is in the process of transitioning clients of Vanguard Asset Management Services (AMS) – an existing wealth management, trust, and estate planning services – to the new Personal Advisor platform. Through the end of March, nearly $10 billion has been transitioned, giving Personal Advisor more than $17 billion under management in aggregate.

About Vanguard

Vanguard, headquartered in Valley Forge, Pennsylvania, is one of the world’s largest investment management companies. Vanguard manages nearly $3.1 trillion in U.S. mutual fund assets, including more than $458 billion in ETF assets. The firm offers more than 160 funds to U.S. investors and more than 120 additional funds in non-U.S. markets. For more information, visit vanguard.com.  

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All asset figures are as of March 31, 2015, unless otherwise noted.

For more information about Vanguard funds, visit vanguard.com or call 800-662-7447 to obtain a prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

Advice services are provided by Vanguard Advisers, Inc., a registered investment adviser.

Vanguard Marketing Corporation, Distributor.

All investing is subject to risk, including possible loss of principal.

Past performance is no guarantee of future returns.

© 2015 The Vanguard Group, Inc. All rights reserved.


[1] Based on the top funds held in a Personal Advisor managed portfolio

Most Recommended Funds

Expense Ratio*

Vanguard Total Stock Market Index Fund Admiral Shares

0.05%

Vanguard Total Bond Market Index Fund Admiral Shares

0.08%

Vanguard Total International Stock Index Fund Admiral Shares

0.14%

Vanguard Total International Bond Index Fund Admiral Shares

0.19%

Vanguard Limited-Term Tax Exempt Fund Admiral Shares**

0.12%

Vanguard Intermediate-Term Tax Exempt Fund Admiral Shares**

0.12%

Vanguard Long-Term Tax Exempt Fund Admiral Shares**

0.12%

*Expense ratios are as of the latest fund prospectuses

 

**Recommended in taxable accounts only

 

[2] Periods ending December 31, 2014.

For the one-year period, 6 of 10 Vanguard money market funds, 79 of 98 bond funds, 26 of 26 balanced funds, and 175 of 204 stock funds, or 286 of 338 Vanguard funds outperformed their peer group averages. For the three-year period, 10 of 10 Vanguard money market funds, 63 of 85 bond funds, 22 of 25 balanced funds, and 174 of 199 stock funds, or 269 of 319 Vanguard funds outperformed their peer group averages. For the five-year period, 10 of 10 Vanguard money market funds, 50 of 72 bond funds, 21 of 24 balanced funds, and 136 of 153 stock funds, or 217 of 259 Vanguard funds outperformed their peer group averages. For the ten-year period, 10 of 10 Vanguard money market funds, 46 of 51 bond funds, 18 of 18 balanced funds, and 107 of 115 stock funds, or 181 of 194 Vanguard funds outperformed their peer group averages. Only funds with a minimum one-, three-, five-, or ten-year history, respectively, were included in the comparison. (Source: Lipper, a Thomson Reuters Company.) Note that the competitive performance data shown represent past performance, which is not a guarantee of future results, results will vary for different time periods, and that all investments are subject to risks. For the most recent performance, visit our website at www.vanguard.com/performance.

[3] IMPORTANT: The projections and other information generated by the VCMM regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Distribution of return outcomes from VCMM, derived from 10,000 simulations for U.S. equity returns and fixed income returns. Results from the model may vary with each use and over time.

The VCMM projections are based on a statistical analysis of historical data. Future returns may behave differently from the historical patterns captured in the VCMM. More important, the VCMM may be underestimating extreme negative scenarios unobserved in the historical period on which the model estimation is based. 

The Vanguard Capital Markets Model® is a proprietary financial simulation tool developed and maintained by Vanguard’s primary investment research and advice teams. The model forecasts distributions of future returns for a wide array of broad asset classes. Those asset classes include U.S. and international equity markets, several maturities of the U.S. Treasury and corporate fixed income markets, international fixed income markets, U.S. money markets, commodities, and certain alternative investment strategies. The theoretical and empirical foundation for the Vanguard Capital Markets Model is that the returns of various asset classes reflect the compensation investors require for bearing different types of systematic risk (beta). At the core of the model are estimates of the dynamic statistical relationship between risk factors and asset returns, obtained from statistical analysis based on available monthly financial and economic data from as early as 1960. Using a system of estimated equations, the model then applies a Monte Carlo simulation method to project the estimated interrelationships among risk factors and asset classes as well as uncertainty and randomness over time. The model generates a large set of simulated outcomes for each asset class over several time horizons. Forecasts are obtained by computing measures of central tendency in these simulations. Results produced by the tool will vary with each use and over time.

[4] Cohn, D’Vera and Paul Taylor. “Baby Boomers Approach 65—Glumly.” PewResearch Center: Social & Demographic Trends, December 20, 2010. http://www.pewsocialtrends.org/2010/12/20/baby-boomers-approach-65-glumly/ 

[5] Cohn and Taylor, “Baby Boomers Approach 60—Glumly.”

[6] Market Strategies International: Cogent™ Wealth Reports, Investor Brandscape, 2013