This review of Vanguard Personal Advisor services is based on my actual experiences. I migrated my spouse’s portfolio to Vanguard and considered using its advisor service to maintain that portfolio. The portfolio was held at a large, full service broker and was being charged an annual fee of 1.5% of assets under management. By comparison, Vanguard charges 0.3% for their service, but it’s a very different service.
What are Vanguard Personal Advisor Services?
For those subscribing to its optional Advisor service, Vanguard provides consistent investment advice per its philosophy of low cost index fund investing. For the accounts being managed, Vanguard will automatically reallocate investments when the allocation drifts more than 5% from desired goal percentages.
For customers with assets of $500,000 or more, a dedicated Vanguard account representative is assigned. For customers with $50,000 to $500,000, a team is assigned — so you might not get the same person each time you call in with a question. However, all Vanguard advisors are on the same page and dispense the same advice per the low cost index fund investing playbook. To participate with Vanguard Advisors, Vanguard must manage at least $50,000 of your assets.
Vanguard Advisors is a great option for someone who wants to pick up the phone and speak to an advisor about his/her portfolio. When I first engaged Vanguard, my expertise level with personal finance was limited. I knew that lower fees were better than higher fees, but I didn’t feel comfortable taking responsibility for my spouse’s retirement portfolio. I really liked the idea of being able to discuss investment selections with a professional.
What Vanguard Advisors is NOT
Vanguard’s advisor service is certainly different from a traditional big-broker advisor. Of course, those others commonly charge 1% or more for their market-beating expertise.
By contrast, Vanguard doesn’t claim to have unique predictive powers, able to outperform the market year in and year out. Instead, after a detailed intake process, Vanguard aims to propose an appropriate asset allocation and savings rate that has a high probability of attaining the objectives you have identified.
Unlike a “robo-advisor,” Vanguard features actual humans! In my experience, the people I dealt with were articulate and extremely helpful. The Vanguard employees don’t work on commission and I never felt they were pushing solutions for their benefit. I really sensed a sincere desire to find a solution that best met my needs.
According to Vanguard:
The Vanguard Intake Process and Questionnaire
My first step was calling 877-527-4942 (Monday to Friday
8 a.m. to 8 p.m., Eastern time). I wanted to confirm that the consult was really free and that I’d actually receive a detailed asset allocation plan, even if I didn’t sign-up.
My first phone call lasted almost an hour as I asked plenty of additional questions about the service. I shared my frustration by how much my spouse was spending each month at the full service broker. The Vanguard representative was extremely patient and didn’t try to rush me off the phone.
Once satisfied, I was directed to the Vanguard website to complete the intake questionnaire. If you are not already a Vanguard customer, you’ll have to create a free account first. Then, you can access the questionnaire.
Though the immediate task at hand was transferring my spouse’s portfolio, Vanguard needed detailed information about both of us to formulate a plan.
My spouse’s portfolio was all in retirement assets, but Vanguard wanted to know about my assets and joint household objectives as well. I provided:
- a detailed inventory of all assets (those at Vanguard, the other broker, my workplace 401k, etc.)
- Desired retirement ages for both of us
- Current income and savings rates
- Any non-retirement savings objectives
Then, an appointment was scheduled with a Vanguard Advisor for a telephone conference call. On that call, we planned to review the questionnaire and discuss our objectives.
That call also lasted 45 minutes, as I’m very chatty. Vanguard then needs a few weeks to develop the plan. We scheduled the next conference call for 3 weeks to review the proposed plan.
We Didn’t Want to Wait…
Once I showed my spouse the cost involved with the 1.5% advisory fee, he was likewise anxious to leave the old broker and move the portfolio to Vanguard. Since it was going to take 3 weeks for Vanguard to prepare its plan, we decided to work with the Vanguard Asset Transfer Team. That way, we could initiate the transfer immediately. His funds would then be at Vanguard and ready for investment, per the plan.
Asset Transfer Team
The asset transfer representative was equally articulate and helpful.
We basically had two choices:
- Sell the 81 investments that comprised the portfolio at the old broker and then transfer the cash to Vanguard. During the transfer period, we would be in cash for 5 to 7 business days. It would have taken longer if the ‘from’ broker didn’t accept electronic requests. Because the 1.5% fee at the old broker covered all transaction fees, there would be no cost to liquidate the portfolio there. If the market went up during that period, we would miss out on all the gains. Of course, if the market went down, being all in cash would protect us.
- The other choice was to transfer these 81 items as-is to Vanguard. Under this option, we wouldn’t be out of the market at all, but if Vanguard wanted us to sell everything, we’d pay Vanguard per-item to sell. Depending on how much money you have at Vanguard, trades could be free or $7, and some ETF’s could be $35 per stock trade. You can determine the trade cost in advance with the ticker symbol on Vanguard’s website.
Nearly every item in the existing portfolio had a very high expense ratio and was incompatible with the Vanguard low cost philosophy. Therefore, Vanguard ultimately proposed that we sell everything and invest in the low cost allocation of index funds. In retrospect, I wish we sold everything at the old broker and ported over the cash. We ended up paying about $550 in fees to liquidate the portfolio, once we transferred to Vanguard.
Being Online Helps
The conference with the Vanguard Advisor can be done by telephone or by video conference. I recommend the video conference because the vanguard advisor can display helpful slides to illustrate various points. My favorite slide — which convinced my spouse to sell his beloved (and expensive) water sector fund — depicted the top 10 performing sectors over time.
During the asset transfer, you will be directed to the Vanguard website to complete various tasks. This is where you will be opening accounts, agreeing to terms, etc.
Wow! What a Nice Investment Plan!
Our customized Vanguard Investment Plan was 33 pages and contained an amazing level of detail:
- Detailed summary of our current asset allocation across all accounts (both our Vanguard accounts and my workplace 401k)
- Proposed asset allocation (e.g. 80% stock, 20% bonds)
- Specific buy/sell recommendations
- Retirement goal summary (goal retirement dollars and date for each of us)
- Proposed savings strategy (required savings rate/month)
- Planning horizon (ours: ‘til age 100)
- Filing status (married filing jointly)
- Marginal tax rate
- Priority of goals
- Income (employment income until age ~67)
- Social security and pension (starting at age ~67)
An Actionable Plan
The list of buy/sell recommendation was basically a roadmap of how to transform the existing chaos into a coherent portfolio with an appropriate asset allocation:
Probability of Attaining Retirement Objective and Asset Mix
Based on the proposed savings rate and allocation, the estimated portfolio balance at retirement was expressed as a series of probabilities (much life snowfall total predictions on the weather channel).
The report had a significant educational component. It included a spectrum of rates of returns based on asset allocations:
Re-Allocation Over Time
Though Vanguard Advisors intends to speak with its clients every year, to review progress and adjust for any life changes, the plan depicts changing allocation percentages over time. These include reducing stock exposure over time as you approach the retirement years.
So, Why Didn’t I Sign Up?
During the period that I was interacting with Vanguard Advisors, I did a deep dive into the world of personal finance. I binge-listened to 200+ episodes of the Dough Roller podcast and read “The Bogleheads’ Guide to Investing”. After doing that, I felt completely comfortable with Vanguard philosophy, the concepts of asset allocation, and rebalancing our portfolios. I didn’t think I needed to pay Vanguard to rebalance my accounts on an ongoing basis.
I briefly considered perhaps letting Vanguard Advisors manage $50,000 so I’d be able to pick up the phone and ask them questions. That seemed like a bargain: $50,000 * 0.3% = $150 / year. However, during this same period, I became active in the Bogleheads Forum (https://www.bogleheads.org/forum/index.php). I was amazed by the quantity and quality of the answers to the questions I posted there, all from like-minded buy & hold index fund investors.
Because I was so grateful to the advisor assigned to our case, I really wanted him to get credit for the “sign-up”. However, once I built an Excel model for both our portfolios, trying to carve out $50,000 to be separately managed seemed like a messy complication. Instead, I wrote a really nice thank you note and made him promise he’d show it to his boss.
I remain eternally grateful to the Dough Roller podcast, especially this episode which convinced me to contact Vanguard Advisors: http://www.doughroller.net/investing/vanguard-investment-advisory-services/ .
Though I ended up nerding out on personal finance and acquiring the skills necessary to rebalance our accounts, I remain fully impressed and confident that Vanguard would have done a great job. I did tell my spouse that if I get hit by a truck, he should have Vanguard Advisors manage both portfolios.