Vanguard undercuts Digital only `advisory ` offerings

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019.

The Vanguard effect is well known in the ETF market and now it could extend into the digital advisory space. The Vanguard Digital Advisory service is pending SEC approval.

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Vanguard`s Personal Advisor services were launched in 2015 and as of June 30, 2019, $140billion are managed through this hybrid approach. This is more than four times higher than Schwab`s robo services.

This month, about 4yrs later, Vanguard is adding to their offering, the Vanguard Digital Advisory service. This is pure digital, no human advice, low minimum of $3,000. A simple allocation amongst four Vanguard ETFs, the usual simple questions to access risk and goals.

Vanguard`s Digital Advisory service uses

  • Vanguard Total Stock Market ETF
  • Vanguard Total International Stock Market ETF
  • Vanguard Total Bond Market Index ETF
  • Vanguard Total International Bond Index ETF

The cost is 15bps and if we include the ETF fees, it could go up to 20bps.

This is cheaper than the Vanguard hybrid offering which starts with a human advisor and a minimum of $50,000. The Personal Advisor Services are 30bps and up. So, the new Vanguard Digital Advisor could entice customers starting with less than $100k that don’t need a person to start investing.

The other attractive feature of the Digital Advisor is that it offers clients the capability to include other accounts, towards their goal setting. For example, a 401k account from an employee managed elsewhere, can be aggregated on the Digital Advisor dashboard and taken into account, in order to determine the optimal asset allocation. This feature is similar to what Personal Capital offers to its clients (Personal Capital offers a hybrid service).

Which brings to the harsh realization that no private bank in Switzerland offers this capability to its clients. Most HNWs hold portfolios in more than one bank and there is no one provider that offers this digital aggregation capability for online tracking and rebalancing.

Vanguard Digital Advisor is in invitation-only mode. It is for lower minimums; it is the lowest priced non-hybrid offering in the market and has chosen a very simple allocation with 4 only ETFs.

We can start checking on the Vanguard effect in 2020.

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Source of images

Related readings on Dailyfintech by Efi Pylarinou:

A mid-year look at Digital investing

Robo-advisors have not reduced the Cash Pile

High-quality Low-cost, Active Index investing

Robo-advisory: Women, Freemium, and Subscriptions Robo-advisory: Women, Freemium, and Subscriptions

Sources:

Robo-advisors With the Most Assets Under Management -2019

Vanguard to Offer a New Robo-Advisor with Vanguard Digital Advisory Service

Notable Replies

  1. The mantra of big companies facing disruption is “disrupt before you are disrupted”. This is very hard to do and is more often talked about than actioned. Vanguard seems to be an exception. If I competed with Vanguard I would be worried.

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