Over the past few years, robo-advisors have emerged as viable alternatives to human financial advisors. However, instead of seeing this dynamic as a threat, some companies wasted no time incorporating robo-advisors into their suite of services. Vanguard is a perfect example of this evolution. The company famous for its exchange-traded funds (ETFs) now offers clients the option between its Digital Advisor (robo-advisor) services and Personal Advisor Services (a blend of human and robo-advisor investing).
If you’re more interested in a little of that human touch when it comes to financial advice, consider working with a financial advisor.
Overview of Vanguard Digital Advisor vs. Personal Advisor
Vanguard Digital Advisor is the company’s robo-advisor. Unlike traditional financial advising services, a robo-advisor receives your financial information and uses an algorithm to invest your money. Vanguard Digital Advisor uses a range of its renowned exchange-traded funds (ETFs) to accomplish customers’ investing goals.
As a robo-advisor, Vanguard Digital Advisor is an example of putting your investments under passive management. This style reduces costs but limits flexibility. Typically, Vanguard Digital Advisor clients set up retirement funds under this service. However, brokerage accounts and IRAs are available with this service.
Vanguard Personal Advisor Services blends human financial advisors with digital advisors. With this service, you’ll meet with a human advisor and form an investment strategy tailored to your needs. Then, your advisor will oversee your account and use his or her expertise and Vanguard’s digital tools to drive your investments forward.
Vanguard Digital Advisor vs. Personal Advisor: Fees
Vanguard appeals to customers through minimal fees. However, its two advisor services have varying fees and requirements.
Vanguard Digital Advisor Fees
Vanguard Digital Advisor charges a management fee of 0.20% of the total assets managed. The financial firm derives this figure from two associated costs: a net advisory fee of 0.15% and investment expense ratios of 0.05%. Upon paying those fees, the rest of the money your account earns is yours. Plus, Vanguard is currently running a promotion that waives advisory fees for the first 90 days.
You’ll need at least $3,000 to deposit to open a Vanguard Digital Advisor account. However, holders of eligible 401(k) accounts only need $5 to get started.
While you don’t have access to a human financial advisor with this account, you can contact customer support for free. In addition, Vanguard Digital Advisor doesn’t make use of tax-loss harvesting. That said, Vanguard designs its ETFs to incur minimal tax expenses.
Vanguard Personal Advisor Fees
Vanguard Personal Advisor Services has more fees due to its human component. Since it provides in-depth, hands-on services to account holders, its service fee is 0.30% of assets managed. However, larger balances incrementally reduce fees in the following way:
- Balances of $5 million to $10 million incur fees of 0.20% of assets managed.
- Balances of $10 million to $25 million incur fees of 0.10% of assets managed.
- Accounts over $25 million incur fees of 0.05% of assets managed.
In addition, this service has an average investment expense ratio of 0.06%. As a result, an account holder with $500,000 in assets would have $1,500 in management fees plus $300 for investment expense ratios for a total of $1,800 in fees.
Vanguard Personal Advisor has a more restrictive account minimum requirement of $50,000. This account type uses tax-loss harvesting to reduce tax expenses. Plus, its funds are generally tax efficient. Lastly, contacting a financial advisor or customer support agent is free.
Vanguard Digital Advisor vs. Personal Advisor: Services and Features
Vanguard specializes in passively managed funds with minimal fees. As a result, its Digital Advisor and Personal Advisor Services accounts sport low fees and access to its signature ETFs. Plus, customers can access a plethora of financial education resources. Additionally, customer service is available at no charge from 8 a.m. to 8 p.m. ET.
Each account type offers specific benefits as well. For example, Vanguard Digital Advisor customers can use financial planning, debt payoff and portfolio creation tools. Also, you can connect your non-Vanguard financial accounts to view all your finances in one place. This feature can help you better assess your financial wellness.
Vanguard checks Digital Advisor accounts daily to see if they’re on track and makes adjustments as needed. Digital Advisor can also manage multiple goals simultaneously in taxable and retirement accounts. It does so by moving money between funds and automatically adjusting allocations based on your time horizon.
Clients can hold brokerage accounts, IRAs (Roth, traditional and rollover) and 401(k)s with Digital Advisor. Unfortunately, Digital Advisor funds don’t provide an option to invest in socially responsible portfolios.
Although it takes far more money to open a Vanguard Personal Advisor account, you’ll receive a more robust array of services, including the following:
- An assigned human financial advisor you can communicate with at any time
- A customized financial plan
- Investment and portfolio guidance
- Real-time updates on progress toward financial goals
- Actively managed funds
- Tax-loss harvesting
- Factoring in retirement dynamics, like Social Security income and healthcare expenses
- Access to socially responsible investments
- Brokerage accounts, IRAs of all types and trusts
Customers with higher balances access additional benefits, such as trust services and a group of advisors to manage their funds.
Vanguard Digital Advisor vs. Personal Advisor: Online and Mobile Experience
Customers with all account types use Vanguard’s mobile app. It earns 4.7 stars on the Apple store and 2 stars on Google Play. Apple users laud the app’s clean, intuitive interface, but Android customers experience challenges with their version’s awkward, incomplete functionality.
Who Should Use Which?
Vanguard Digital Advisor serves clients who prefer passive investing. Rather than frantically opening your portfolio throughout the day and trying to make profitable trades, you generally set your investment goal and trust the process. Of course, you can check in at any time, change goals or introduce new ones and learn more about investing through Vanguard’s educational resources.
Generally, Digital Advisor is for investors looking for inexpensive robo-advisor services that will automatically adjust your investments amongst select time-tested funds. The drawback is the $3,000 it takes to get started, as other robo-advisors don’t have such a high requirement.
Vanguard Personal Advisor Services has a far more stringent minimum ($50,000), but customers get access to a human financial advisor and a host of other services. Investors who want to match a detailed financial plan with an involved, complex investment strategy will likely prefer Personal Advisor Services. It can meet the needs of many kinds of investors through a holistic suite of services, including tax-loss harvesting and options for ESG-rated funds.
Investment brokerages have made enormous efforts to meet customers’ various needs, and Vanguard is no exception. Clients who prefer minimal costs and automated investment services will feel comfortable with Vanguard Digital Advisor. On the other hand, investors with at least $50,000 and a preference for hands-on service will probably gravitate toward Vanguard Personal Advisor Services. Its combination of customizable investments, financial planning and low costs can help investors of all stripes receive healthy returns.
- If trying to navigate the world of robo-advisors, human investors and portfolios makes your head spin, you’re not alone. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Investing for retirement is essential, but it helps to have a plan first. So before you make a financial commitment with an investment firm, you may want to consider the retirement you want. Use this guide for retirement strategies for savers and spenders.
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