Vanguard is preparing to enter the digital-only advisor space for retail investors with an offering that will charge far less than its Personal Advisor Services, which combines digital advice with a human financial advisor.
According to an initial disclosure brochure filed with the Securities and Exchange Commission, the service, called Digital Advisor, will charge 15 basis points, require a minimum $3,000 (PAS charges 30 basis points and requires a $50,000 minimum) and invest in a select number of Vanguard ETFs. Including the ETF costs, Vanguard expects total costs will be 20 basis points.
Digital Advisor is a discretionary service that has the authority to trade on behalf of clients and maintain a mix of recommended investments based on what clients have communicated about their investment goals, risk tolerance, time horizon, tax status etc. Investors must set at least one financial goal in order to enroll. The service will be based on a “personalized, goal-based financial plan.”
“Once you’ve agreed to ongoing management of your Portfolio, we will provide discretionary management based on the financial goal you set in the DA Website and Interface,” according to Vanguard’s SEC brochure.
The service will also be available to 401(k) account participants if their plan sponsor has approved the offering.
“Vanguard Digital Advisor appears to be more of a classic robo-advice product where clients mostly interact with digital tools, set their own risk tolerance and are able to invest at a low minimum balance,” Says David Goldstone, head of research at BackendBenchmarking, which publishes The Robo Report.
“In typical Vanguard fashion, this product will undercut the cost of most of the other digital advice products available today with a cost, including the expenses of the underlying ETFs, of just 0.20%.“
Goldstone expects the Digital Advisor will increase price pressures in the already competitive robo-advisor market.
The Vanguard filing with the SEC is preliminary and no date has been set for its official opening, but it is currently available to a limited number of prospective users by invitation only, according to a Vanguard filing with the SEC.
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