This guest post is authored by Harry Sit , who posts on the bogleheads® forum as tfb and blogs at The Finance Buff.
If you need help in coming up with an investment plan, Vanguard offers an affordable financial plan. The financial plan is just recommendations. You still have to implement the plan yourself.
If you want your accounts managed consistently by Vanguard, you had the option of Vanguard Asset Management Services but only if you have at least $500,000, and fee is 0.7% for the first $1 million.
Many investors find both the asset minimum and the fee for Vanguard Asset Management Services out of reach. Good news, Vanguard now offers a new service with a lower minimum and a lower fee. It’s called Vanguard Personal Advisor Services (VPAS).
Launched in the first quarter of 2013, it’s still not yet publicly advertised. Bogleheads® Forum member mec123 first mentioned it in a post in April 2013. Forum member statman mentioned it again in another post in December 2013 after Vanguard sent out a letter to select customers.
I called Vanguard recently to find out more about this new service. This blog post is based on my notes from the conversation and my subsequent research. Opinions and any inaccuracies are strictly my own.
Lower Minimum and Lower Fees
The minimum for accounts managed under the Vanguard Personal Advisor Services is $100,000. That’s for all accounts combined, not per account. The fee is a flat 0.3% per year.
There is no minimum time commitment. You can terminate the service whenever you want.
What You Get
You get a designated financial advisor with CFP credential. The advisor will work with you on a plan. After you sign off on the plan, the advisor will take care of implementing it. They will check the accounts quarterly to keep them on track but only rebalance if the asset allocation is off by 5% or more.
The plan can be updated whenever you have substantial changes in your financial life. You also get an annual review. During the course of the year you can email your designated financial advisor at any time with questions or request a scheduled callback or web video conference.
If you have money in employer sponsored plans, such as a 401k not managed by Vanguard, the advisor will also tell you how to invest your 401k money. If you have other financial questions such as when to claim Social Security or how much to save for college, your financial advisor can help with those too. All these are free, included as part of the service.
The default investment strategy is all indexing through Vanguard funds and/or ETFs. The advisor can offer part indexing part active management only upon request but never all active management. You can state your preferences within a band, such as more small caps or less international. All plans are internally reviewed to ensure quality and adherence to Vanguard guidelines.
The investment plan will be managed for tax efficiency. Rebalancing will be done first in tax advantaged accounts and with natural cash flows when possible.
Your Hands Off The Wheel
Once you have your accounts managed, you are relieved from messing with them. Your cash flow needs will be arranged with automatic deposits to your bank account. If you have a sudden need for more cash or if you come up with extra cash to invest, you go through your advisor.
Investors want and need help, but help hasn’t been reachable and affordable until now. Vanguard revolutionized the investment business years ago with low-cost index funds. Now it’s doing it again in advisory service by leveraging its brand and scale. 1% is no longer the going rate for personalized investment management. You don’t need half a million dollars to have a personal advisor either.
At the low end of $100,000 in assets, the fee for VPAS is only $300 per year. That’s $25 per month, lower than most people’s cell phone bills.
The 0.3% fee isn’t much higher than some of the new software-based services such as Wealthfront or Betterment. You get a human advisor and the service covers more than just investing the pot of money.
At assets above $1 million, the 0.3% cost is competitive with other low-cost investment management firms, and lower than most advisors using a passive strategy with DFA funds.
Another advantage of VPAS is that your assets stay at Vanguard. It’s perfect for learning the ropes. If after a year or two you are comfortable with managing on your own, you still have your accounts and your funds. You don’t end up with a bunch of ETFs that you don’t know what to do with or DFA funds you can’t add to.
Vanguard has three hidden landing pages on its website (not linked from the home page, not in search results).
It also filed a 28-page brochure with the SEC. Although it’s not publicly advertised yet, it is available for signup now. I’m guessing Vanguard just doesn’t want to be overwhelmed with a surge of demand just yet.
The toll free number listed on the hidden web page is 866-734-4531. If you have others questions not covered by the web page or the brochure, call and ask, then share the answers in the Bogleheads® Forum with other members.