Vanguard Personal Advisor Services (PAS) Review

Vanguard Personal Advisor Services is Vanguard’s version of a robo-advisor. There are dozens of robo-advisors, including those offered by most every investment brokerage firm. What makes Vanguard Personal Advisor Services stand out from the pack? Let’s start with this: Vanguard Personal Advisor Services is the largest robo-advisor in the industry, with more than $115 billion in assets under management. And it’s not just the largest, the largest by a wide margin. For example, Charles Schwab Intelligent Portfolios is the second-largest robo-advisor with just $37 billion in assets under management. And the ever-popular Betterment, the largest independently owned robo-advisor, has only $16 billion. Why is Vanguard Personal Advisor Services far and away from the largest robo-advisor? It almost certainly has something to do with the fact that Vanguard funds can be found in the portfolios of just about every robo-advisor in the industry. If you’re going to invest through a robo-advisor, why not go directly to the source? But there are other reasons why Vanguard Personal Advisor Services (PAS) is the largest robo-advisor.

About Vanguard

Vanguard is one of the largest investment firms in the world, with more than $5.3 trillion in assets under management. It ranks among the world’s largest provider of mutual funds and exchange-traded funds (ETFs). And much like a mutual insurance company, Vanguard is actually owned by its investors, not stockholders. This means Vanguard’s primary responsibility is to its investors. The company is based in Malvern, Pennsylvania, and was founded by legendary investment advisor and pioneer John Bogle. It’s hardly surprising that Vanguard is one of the leading providers of index-based ETFs, given that Bogle created the concept of the retail index fund when the company was founded in 1975.

How Vanguard Personal Advisor Services Work

Unlike most robo-advisors, where you complete a brief online questionnaire that will determine your risk tolerance, investment goals, and time horizon to create your portfolio, with Vanguard Personal Advisor Services those will be determined by discussions with a live financial advisor. Access to your personal advisor will be done by phone, email, or video chat sessions, rather than face-to-face. (More on the personal advisor in the next section.) Much like other robo-advisors, your portfolio will be constructed of funds, rather than individual securities. Your portfolio will be periodically rebalanced, to keep it on track with your investment goals. As you might expect, your portfolio will be comprised entirely of ETFs and mutual funds from the Vanguard family. One of the major advantages of using Vanguard funds is that you will have access to Admiral class mutual funds without the usual $3,000 minimum investment requirement per fund. Vanguard’s Admiral class mutual funds have some of the lowest expense ratios of any funds in the industry. And as any investment professional knows, the lower your expense ratios are, the more you get to keep from how your investments perform. Your portfolio will be invested in a mix of funds that invest in both international and domestic stocks and bonds.

Vanguard Personal Advisor Services’ Investing Strategy

Much like other robo-advisors, Vanguard Personal Advisor Services creates a portfolio for you, then handles all aspects of managing it. That includes portfolio rebalancing and reinvesting of dividends. Once you open an account, your only responsibility is to fund it and keep your advisor informed of any changes in your financial situation. But there are two factors that make Vanguard Personal Advisor Services different from the vast majority of its robo-advisor competitors:

Access to a Personal Advisor

In the interest of keeping fees to an absolute minimum, most robo-advisors limit investor access to human advisors – if they even have them. Vanguard Personal Advisor Services does the exact opposite. When you sign up with Vanguard PAS, you’ll have access to a live financial advisor. This will give you the benefit of both automated investment management, as well as live professional input. The combination is much more comparable to traditional human investment advisories than it is to typical robo-advisors. Services provided by a personal advisor include work with portfolio allocations, personal advice during times of market turbulence, and tax-efficient investing. Your personal advisor will work with you to develop a financial plan based on your current investments, your investment goals, and your future income needs. The plan will be customized to your individual investor profile. The advisor will also review your portfolio, and send out quarterly progress reports. With an investment portfolio of at least $500,000, you’ll get the benefit of a dedicated personal advisor. However, if your balance is lower, you’ll work with a pool of advisors.

Use of ETFs and Mutual Funds

This is another unique investment strategy that sets Vanguard apart from other automated investment strategies. Most robo-advisors create fully passive portfolios, made up of index-based ETFs only. Vanguard Personal Advisor Services instead offers the ability to invest your portfolio in a mix of both ETFs and mutual funds. The significance of the mix is that while ETFs are generally passive investment funds, some mutual funds can offer actively managed investments. That means your portfolio may contain a blend of passive and actively managed funds. The inclusion of actively managed mutual funds holds the possibility that your portfolio may outperform the market, rather than just track it.

Key Features of Vanguard’s Personal Advisor Services

• Minimum initial investment: $50,000.
• Available accounts: Individual and joint taxable accounts; Traditional IRA, Roth IRA, rollover, SEP IRA and SIMPLE IRAs; trusts.
• Fees: 0.30% of the account balance for most investors. However, there is a sliding scale for larger portfolios (see next section).
• Mobile app: There is no specific app for the Vanguard PAS. However, Vanguard offers a mobile app for self-managed Vanguard brokerage accounts, which is available on the App Store for iOS devices, and on Google Play for Android devices.
• Customer service: Available by phone and live chat, Monday through Friday, 8:00 am to 8:00 pm, Eastern Time. However, contact by email is available on a 24/7 basis.

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How Much Does Vanguard Personal Advisor Services Cost?

Vanguard Personal Advisor Services uses a tiered pricing system, in which the fee falls as your account balance gets larger. The annual fee schedule is as follows: The low fee structure on very large accounts may help to explain why Vanguard Personal Advisor Services is the largest robo-advisor in the industry. Compared to the typical live investment advisor fees of between 1% and 2%, Vanguard Personal Advisor Services is a serious bargain. The robo-advisor likely attracts larger portfolios than its competitors.

Who is Vanguard Personal Advisor Services For?

Investors who want automated investment management, with access to human financial advisors. Vanguard Personal Advisor Services gives you the best of both. It operates as a fully automated investment platform but gives you regular access to a financial advisor who will work with you to determine the best path to meet your investment goals. Large investors. The sliding scale of the Vanguard Personal Advisor Services management fee structure definitely favors larger portfolios, starting with those of $5 million or more. A portfolio of many millions of dollars can be managed for just a few thousand dollars. That’s well below the fees charged by traditional human investment advisors. Investors who want low-cost investment management, that also includes actively managed investments. If you’re not content to merely track the financial markets with your portfolio, and prefer an opportunity to outperform it, Vanguard Personal Advisor Services inclusion of actively managed mutual funds holds that possibility. Investors who want to participate in self-directed investing in Vanguard funds and other investments, while having at least part of their portfolios professionally managed. If you like the idea of having some or most of your portfolio professionally managed at low-cost, but also want to do some self-directed investing in mutual funds, ETFs, and even stocks, options, and bonds, you can do it with Vanguard. The company even offers thousands of funds commission-free.

How Does Vanguard PAS Compare to other Robo Advisors?

If you don’t fit neatly into any of the investor profiles above, other robo-advisors may be a better fit for you. For example, if you don’t meet the $50,000 minimum balance requirement, Betterment has no minimum requirement. They also charge a fee of 0.25% on most account balances, though you’ll pay 0.40% for accounts with access to personal advisors. If fees are an issue, Charles Schwab Intelligent Portfolios will be worth considering. They charge no annual management fee and have a minimum initial investment requirement of just $5,000. However, Intelligent Portfolios doesn’t offer live personal advisory services. Fortunately, with the growth in the number of robo-advisors available, there’s one for every investor profile. Like all the others, Vanguard Personal Advisor Services will be the best choice for some investors, but not for others. But if it looks like it will work for you, check out the Vanguard Personal Advisor Services website.

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