Vanguard Personal Advisor Services Review 2017

Advisors, Investing

Vanguard

Vanguard has maintained its standing as the leading broker-launched online advisory offering, even as other online brokers have thrown their hats into the ring. Vanguard Personal Advisor Services manages an impressive $47 billion in assets, combining human financial advisors with robo-advisor technology to charge 0.3% for account management.

Vanguard Personal Advisor Services uses primarily Vanguard funds and requires an account minimum of $50,000, the highest of any of the online advisors we’ve reviewed. All clients get access to Vanguard’s financial advisors, but those with balances of $500,000 or more get their own dedicated advisor.



Vanguard Personal Advisor Services

Arielle O’Shea
Jan. 1, 2017
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Quick facts

  • Management fee: 0.3%
  • Account minimum: $50,000
Get started on Vanguard's secure site
Get started on Vanguard's secure site

Vanguard Personal Advisor Services is best for:

  • Large account balances.
  • Low-cost access to financial advisors.
  • Comprehensive financial planning.

Vanguard Personal Advisor Services at a glance

Overall

Account management fee0.3%. Discounts available on account balances above $5 million.
Investment expense ratios0.05% to 0.19%
PortfolioPortfolios are created by advisors on an individual basis. Core holdings are Admiral Shares of Vanguard index funds. ETFs and active funds are incorporated if needed.
Account minimum$50,000
Account fees (annual, transfer, closing)Clients may incur transaction fees.
Accounts supported
  • Non-retirement accounts.
  • Roth, traditional, rollover and SEP IRAs.
  • Trusts.
Vanguard will also consider 401(k)s, 529 plans and other outside assets when creating a client’s financial plan but doesn't directly manage those assets.
Tax strategyAssets are allocated strategically among taxable and tax-advantaged accounts to optimize for taxes. Tax-loss harvesting is done on client-by-client basis.
Automatic rebalancingPortfolios are rebalanced once per quarter or as agreed upon in financial plan.
Customer supportClients with account balances under $500,000 have access to a team of Vanguard financial advisors. Clients with assets of $500,000 or more get their own dedicated advisor.

Where Vanguard Personal Advisor Services shines

Low management fee: Is a 0.3% management fee low in the grand scheme of robo-advisors? Not really. Wealthfront charges a flat 0.25% on balances over $10,000 and manages the portion under $10,000 free. Other services, like Schwab Intelligent Portfolios and WiseBanyan, are free of management costs altogether — though as with all robo-advisors, the investments carry expense ratios paid by the investor.

But it may be more reasonable to compare Vanguard’s fees with similar hybrid services like Betterment and Personal Capital. Vanguard comes in lower there: Betterment charges 0.40% for its service that is most similar to Vanguard, offering unlimited access to a team of financial advisors. Personal Capital charges 0.89% for accounts up to $1 million. Compared with that — and the 1% or greater fee typically charged by a financial advisor — Vanguard’s management fee is reasonable.

However, Personal Capital clients get access to one or two dedicated financial advisors, depending on their account balance. Vanguard provides a dedicated advisor only to clients with $500,000 or more. Under that amount, clients have access to a team of over 100 advisors but won’t work with the same one regularly.

Investments: Vanguard Personal Advisor Services builds portfolios on a client-by-client basis, using primarily Vanguard funds. In many ways, that benefits investors. Vanguard funds carry some of the lowest expense ratios available, and many competitor robo-advisors also use them as the base of their portfolios. However, it allows Vanguard to line its pockets twice; once with the management fee and again with fund expense ratios, which range from 0.05% to 0.19%.

Unlike other robo-advisors, Vanguard’s service doesn’t exclusively use exchange traded funds. Portfolios are primarily constructed of index funds and, in some cases, actively managed funds. Vanguard says its advisors will incorporate ETFs if the client wants to use them, and clients also can include a money market fund for access to liquidity. Core portfolio holdings include Admiral Shares of Vanguard’s total stock market index fund, total bond market index fund, international stock market index fund, international bond market index fund, and limited-, intermediate- and long-term tax-exempt funds, which invest in municipal bonds.

Comprehensive management: Vanguard Personal Advisor Services directly manages brokerage and individual retirement accounts, as well as trusts. But the advisors will also take into account other aspects of a client’s portfolio, like a 401(k), college savings plans or even accounts held at another firm, when developing a financial plan. It’s up to you to tell your advisor about those assets, and they won’t be managed directly by Vanguard advisors. But the advice you get will be comprehensive and fitting of your full financial picture.

Financial advisors: Part of the value in hiring a financial advisor is that you have someone to turn to when life gets stormy, whether that means the markets have taken a dive or you’re experiencing personal turbulence. An advisor will help you adjust your plan, if needed, or remind you that your plan is sound and you just need to ride out the waves. Likewise, an advisor can help you plan for and adjust to major milestones, like a marriage or the birth of a child.

Vanguard Personal Advisor Services does that, too, though it does it best for clients with $500,000 or more. Only at that asset level do you get a dedicated advisor, something we found the company’s website fails to make clear.

At lower account balances, you’ll work with Vanguard’s band of advisors rather than one person assigned to your account. The advisors will help you adjust your investments as needed and send you quarterly progress reports. You can schedule time to speak to an advisor via phone or video conferencing, and advisors are also available for quick questions via email.

Where Vanguard Personal Advisor Services falls short

Account minimum: There’s no way around this: $50,000 is a high account minimum. It’s clear Vanguard is limiting its service to balances that, given the low management fee, will make a significant impact on its bottom line. The minimum puts the service out of reach for many new investors, though that minimum can be spread among multiple accounts. The company adds another layer with the $500,000 minimum to access a dedicated financial advisor.

Possible transaction fees: Many robo-advisors swallow the cost of any transaction fees incurred in client accounts, such as trade commissions and mutual fund load or sales charges. (Expense ratios typically are passed on to the investor.) These fees are generally minimal in robo-advisor accounts, which primarily use ETFs and index funds. But Vanguard’s service does use other investments in some cases, and the advisor’s service brochure notes that the client is subject to any transaction fees, brokerage charges, sales charges, commissions or other fees and expenses that stem from the purchase of non-Vanguard investments. The company notes that it typically recommends no-load mutual funds and Vanguard funds.

Tax-loss harvesting: The service is available here, but it isn’t automatic. Rather, tax-loss harvest opportunities are approached on a client-by-client basis, which the company says is by design. Vanguard’s investment research shows that while tax-loss harvesting can be beneficial, it also carries risk. Clients who want daily monitoring for tax-loss harvesting opportunities may not be happy with this approach.

Vanguard does allocate assets across account types, optimizing for taxes. For example, tax-efficient investments will be placed in taxable accounts, and those that generate a tax burden will go into tax-sheltered retirement accounts, when the client has both types of account. This is similar to Betterment’s Tax-Coordinated Portfolio.

Is Vanguard Personal Advisor Services right for you?

Compared with robo-advisors, Vanguard Personal Advisor Services is on the pricey side, with a high account minimum. But this service is more than a robo-advisor, offering personalized financial planning and financial advisors to clients.

It’s an excellent choice for investors who can meet the account minimum and want to use the computer algorithms of a robo-advisor while maintaining access to a human touch. If you have the $500,000 balance required to get your own dedicated financial advisor, you’ll be able to extract even more value from the 0.3% management fee.

Open a Vanguard Personal Advisor Services account

Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. Email: aoshea@nerdwallet.com.Twitter: @arioshea.

Updated Feb. 1, 2017.