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Vanguard Expands Digital Advisor Pilot Program

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The Vanguard Digital Advisor is now moving beyond its original pilot to an expanded one, allowing current Vanguard brokerage clients as well as anyone who signs up for a Vanguard brokerage account to access the service. A $3,000 asset minimum is required.

The expanded pilot is “part of the test and learning development process” for the robo-advisor. according to a spokesman.  

“We will seek feedback from clients as we expand and enhance the service’s functionality and capability in advance of making it available to all investors later this year,” he said. On its website, Vanguard Digital Advisor identifies three forthcoming features: helping clients prepare for emergencies, manage debt, and manage extra cash — invest or pay down debt.

As described in its original brochure, the Vanguard Digital Advisor will have discretion to invest client assets in four core building block ETFs for an all-in expected fee of 20 basis points. That’s cheaper than most all-digital advisory services, and its $3,000 minimum is smaller than that of most robo-advisors, though not all. 

Digital Advisor will recommend varying combinations of the four Vanguard ETFs — the Total Stock Market, Total International Stock Market, Total Bond Market Index and Vanguard Total International Bond Index ETFs (collectively referred to as the “Four Totals”) — based on an investor’s financial profile, investment preferences and time horizon, risk tolerance, goals and current asset mix. 

The Digital Advisor will also consider outside accounts of a client for purposes of goals forecasting but not investment recommendations, and it will eventually be available to 401(k) participants if their plan fiduciary approves the service.

Whether investors will be interested in the offering now, during an extremely volatile bearish stock market, is unclear. This is a time “when a little human hand-holding and advice is needed more than ever,” says Dan Wiener, editor of The Independent Adviser for Vanguard Investors, who encountered technical difficulties when he tried out the Vanguard Digital Advisor recently. 

Still, Wiener said, the computer “dashboard” appeal of a $3,000 minimum and all-in fee of 0.20% will attract “young, inexperienced and low-minimum investors” in the coming months, though he’s not sure it should. “Do you really need to pay Vanguard a fee to build a four-fund portfolio that in many ways mimics one of their long-dated Target Retirement funds like Target Retirement 2065 (VLXVX)?”

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