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You have some money sitting around and want to invest it in the stock market so it can grow.
But you’re not sure where to put the money or what to do with it on a daily basis. And you don’t want to hire a full-time portfolio manager, which can be very expensive.
This is where it could possibly benefit to use a robo advisor, which is an investment strategy that more and more people are taking seriously.
Simply put, a robo advisor is a low-cost financial tool that automates asset allocation and rebalances your portfolio for you with the goal of driving investment growth.
This post explores two low fee robo advisor services from Vanguard, which is one of the most popular brokerage account, mutual fund, and investment management providers on the market.
Vanguard Robo Advisor Services Review
Vanguard’s two robo advisors — Personal Advisor and Digital Advisor — both essentially provide the same service for customers. At the end of the day, they create well-balanced portfolios that align with specific needs and risk tolerance.
The main difference between the two services is the level of features and support they offer.
Personal Advisor is a high-end robo advisor offering advanced features and investment advice from humans, while Digital Advisor is a low-cost, yet highly effective option for managing a portfolio of individual stocks, exchange-traded funds (ETFs), index funds, bonds, mutual funds.
The option that you pick largely depends on your budget and the amount of hand-holding that you want.
Here’s some financial advice: Just because you can afford the high-end Personal Advisor service doesn’t necessarily mean that it’s the best option for you at this time.
Vanguard Robo Advisor Features
Personal Advisor is a hybrid robo advisory service that grants investors access to both a human financial planner and a digital investment manager.
Here’s how it works: A computer algorithm analyzes your financial situation and creates a portfolio around your specific investment needs. But unlike most other robo advisors, the program then defers management to a human advisor to oversee your account and make decisions on your behalf.
With a personal advisor, investors also gain access to portfolio rebalancing, 401(k) support, and basic customer support from Monday through Friday. And if you have at least $500,000 in your accounts, you can receive a dedicated advisor from Vanguard to provide ongoing support and guidance for your investment portfolio.
Personal Advisor also comes with a helpful video chat feature for remote face-to-face meetings with your advisor. So, if you prefer to put a face to your investment advisor, this feature provides that option.
Another feature that Vanguard offers is tax-loss harvesting, which is provided on an as-needed basis.
One thing to keep in mind is that Personal Advisor is a socially responsible service, meaning your portfolio will not be exposed to companies that have a negative social impact. This is important to note before getting started because it may impact your overall portfolio performance.
Digital Advisor is Vanguard’s lower-tier robo advisory service, offering pure computerized investment support without human support.
This service is ideal for people who are seeking automated support for their brokerage and retirement accounts. The service builds a core portfolio of investments around ETFs, offering low-costs and reduced account minimums.
Investors who use this service receive access to Vanguard Total Stock Market ETF, Vanguard Total International Stock ETF, Vanguard Total Bond Market ETF, and Vanguard Total International Bond ETF, among other products.
Investors benefit from low management fees and broad exposure to a variety of funds. In addition, it eliminates humans from the decision-making process for a more streamlined and automated approach.
Digital Advisor does not offer socially responsible investing as Personal Advisor does. So, if socially responsible investing is less of a priority to you, this may be the better option.
Vanguard Robo Advisor Pricing
One of the biggest differences between Vanguard Personal Advisor and Digital Advisor is the minimum investment required to open an account.
Personal Advisor carries a minimum investment of $50,000, putting it out of reach for most people who are just entering into the market or are investing on a budget. However, if you’ve been investing for years and you have a decent sum of money that you are looking to grow and manage, this could be a good fit.
Digital Advisor comes with a much more attractive minimum investment of just $3,000, making it better suited for the average investor.
As an added bonus, Personal Advisor and Digital Advisor both come with free access to Vanguard’s free educational resources.
As for the fee structure, both advisory services include assets under management (AUM) fees. At the time of writing, Personal Advisor offers 0.30% on assets up to $5 million, 0.20% for assets of $5 million to $10 million, 0.10% on assets between $10 million and $25 million, and 0.05% on assets over $25 million.
On the flipside, Digital Advisor charges a fee of 0.15% for all balances.
Getting Started with Vanguard Robo Advisor
To enroll for Vanguard Digital Advisor, you need to have $3,000 in each Vanguard account that you want to be managed. What’s more, the money must be invested only in Vanguard Federal Money Market Fund.
Investors must also confirm they are U.S. citizens and are not retired or within one year of retirement. You must also have no affiliation as a company insider or control person, and you can’t be enrolled in Vanguard Personal Advisor services either.
The Vanguard Personal Advisor service takes a bit more time to get up and running. Vanguard recommends customers come to the table ready to explain their investment objectives, along with estimated income and spending needs and information on any non-Vanguard assets or income.
After providing this preliminary data, investors can schedule a time to meet with an advisor to discuss any next steps.
As of right now, Vanguard is not offering any promotions that are specific to their robo advisory services.
That said, Vanguard offers tiered benefits for all investors, depending on the amount they invest with the company. For example, benefits tend to vary depending on whether you invest up to $50,000, between $50,000 and $500,000, and between $500,000 and $1 million.
Vanguard Robo Advisor Security
Vanguard remains one of the most trusted and stable providers in the financial industry. Over the years, the company has demonstrated a proven ability to protect consumer financial data from cybercrime.
In addition to providing basic amenities like full encryption, password protection, and Secure Socket Layer (SSL) validation for consumer accounts, Vanguard offers multifactor authentication via SMS-based security codes, as well as voice biometric verification.
In addition, the company provides account activity alerts for customers when suspicious transactions are detected.
Another great feature that Vanguard provides is security keys. Customers have the option to purchase a small device that plugs into the computer’s USB drive for enhanced protection when logging into their website.
What’s more, customers can also choose to set up a trusted contact, i.e., a person who Vanguard can reach out to out of concern for potential financial exploitation or diminished mental capacity. This is a great feature for people who are approaching retirement age and those at risk of suffering from diseases like dementia, which can lead to questionable financial decisions.
You’ve worked your whole life to secure a strong financial future for yourself and your family. The last thing you want is to make a suboptimal decision and throw it all away.
Customer Service and Support
In addition to their digital and hybrid robo advisory services, Vanguard also offers full customer support, with hours extending Monday to Friday from 8 a.m. to 8 p.m. ET.
In addition to providing live phone service, Vanguard also offers a comprehensive support center for customers filled with a wealth of pointers on investing, collecting tax forms, moving money, technical support, and a variety of other topics.
Vanguard generally provides helpful and comprehensive customer support, in large part because the company was designed to be friendly to investors. When working with Vanguard, you should expect to receive timely financial guidance and customer support as needed.
Pros and Cons of Vanguard Robo Advisors
- Hands-off investing across asset classes
- Automatic rebalancing
- Affordable advisory services
- Human assistance if desired through Personal Advisor
- Broad market exposure via ETFs
- High minimum investment requirements of $50,000 (Personal Advisor) and $3,000 (Digital Advisor)
- No tax-loss harvesting for Digital Advisor
- No access to a human advisor through Digital Advisor
Alternatives to Vanguard Robo Advisor
Vanguard is far from the only financial advisor offering robo advisory services. These digital advisors have exploded in popularity over the last few years, offering affordable and convenient guidance for investors of all stripes.
With that in mind, here are some top competing services to check out.
Schwab Intelligent Portfolios
Schwab offers Intelligent Portfolios, which — at the time of writing — has a $5,000 minimum investment and provides support for IRAs, trusts, and UGMA/UTMA accounts.
Robinhood is a robo investor platform, offering commission-free trading for customers on taxable accounts. The company is known for its free stock promotion at sign up and is very popular among beginner investors for its educational tools. However, the company has also been mired in scandal and is generally not for advanced investors.
Wealthfront offers arguably the most robust robo investor service on the market. This service is known for being user-friendly, affordable, and informative.
When you sign up for Wealthfront, you also gain access to Path — a free financial planning tool that merges your account data and uses third-party data to help plan your finances.
Betterment is a leading online financial advisor offering a robo advisor for portfolio management. One of the best parts about Betterment is that it comes with no minimum investment. However, it does have a standard 0.25% annual fee — the same as Wealthfront.
Betterment also offers automatic tax-loss harvesting like Wealthfront, as well as a unique “design your own portfolio” feature. If that sounds interesting to you, it’s worth checking out.
Vanguard Robo Advisor Frequently Asked Questions
Is Vanguard’s robo advisor good?
Vanguard offers competitive robo advisors that can provide hands-free investing. So, if you’re looking for a robo advisor service, you can’t go wrong with Vanguard.
That said, Wealthfront offers a more robust platform that you can use with a broader range of investments. Explore the various options so that you can make sure you pick a robo service that aligns with your goals and expectations.
Is Vanguard a robo advisor?
In other words, Vanguard is more well known for its affordable rates than for offering cutting-edge digital services. If you’re looking for a more comprehensive mobile experience, consider using a service like Wealthfront.
What is Vanguard known for?
Vanguard was the brainchild of founder John. C. Bogle, a famous investor who launched the company with the groundbreaking idea that an investment firm should not have external owners.
Vanguard’s framework puts clients first by offering low costs and delivering strong performance gains over many years.
Should you trust a robo advisor?
Many investors are spooked about the idea of a robo advisor managing their personal finances, and rightfully so. It’s always good to be skeptical about using new or emerging technology — especially a tool that thinks for you and manages large amounts of your precious capital.
That said, robo advisors are generally safe to use. They give you full visibility over your accounts, and you can also override them if you need to.
Also, since they’re still considered an emerging technology, these services are also fully monitored and scrutinized by regulators. If trust is an issue, at least you know someone has your back.
One thing to keep in mind is that some robo advisors do not provide quite as much diversification as recommended. As a result, they can be riskier than managing accounts on your own. There’s definitely a chance you could lose money due to the natural volatility of the market.
Who uses robo advisors?
Back when robo advisors first hit the market, they were generally seen as the go-to investment option for young, digitally savvy investors.
But as time has gone on, word has spread about the benefits of using robo advisors. Now, they are widely used by investors of all ages.
Is a robo advisor right for me?
Everyone’s financial circumstances are different. As such, only you can determine whether a robo advisor is right for you.
Some people like being in full control over their investments, and don’t want anyone else — bot or human — calling the shots. Yet others understand that they generally don’t know what they’re doing in the market and are willing to take a gamble on a robo advisor.
Spend some time researching how robo advisors work and determine the level of support and guidance that you need. If you have the capital, Vanguard’s Personal Advisor service offers the best of both worlds — an automated strategy, backed by live human support.
The Bottom Line
The world of investing can be confusing. Most people — including experienced investors — often find themselves making educated guesses.
Even with all the data in the world, without a sound financial plan, it’s easy to lose money in the stock market.
Using a robo advisor is like investing with guardrails because it can help you form a strategy that guides your overall investment situation — whether that’s short or medium-term investing or long-term retirement planning. From there, the service can keep you on track by serving as a completely unbiased, and low-cost investment advisor.
Vanguard offers powerful robo advisory services for Vanguard funds in combination with industry-leading financial products that deliver minimal expense ratios and strong performance.
That said, it’s still not a bad idea to explore the other top robo advisors before you pick one.
As a final takeaway, remember that if you decide to rely on a robo advisor, you still need to remain in control of your money. Pay attention to every decision that the tool makes, and do your best to learn what’s going on behind the scenes in your account.
To get ahead in finance, you need to be aware of every small change that affects your portfolio. You never know when one of these moves can lead to tremendous results down the line.