Vanguard’s Personal Advisor Services — anything but personal

By RICK FERRI

Vanguard investors have been inundated with offers to manage their money through the Personal Advisor Services program (PAS). Every time I log onto my account, a banner ad pops up telling me I need to “Partner with a Vanguard personal adviser”. I get other ads for Personal Advisor Services by email. Enough already! I don’t want to partner with a Vanguard personal adviser! Please, Vanguard, if you’re listening, take me off your list.

Don’t get me wrong, PAS is a good mass customisation service. For 0.30 percent of assets per year, you have access to a financial adviser who helps you set investment policy, then invests your money in the same four Vanguard mutual funds recommended to every other PAS investor; Vanguard Total Stock Market Index Fund, Vanguard Total International Stock Index Fund, Vanguard Total Bond Market Index, and Vanguard Total International Bond Index Fund. The portfolio will be rebalanced occasionally to keep in line with the investment policy. You’ll also get an occasional communication from Vanguard telling you to stay the course, and if you have questions, call your Vanguard financial adviser.

The price is right also. You’d pay much more outside Vanguard for something similar. Many brokerage firms and independent advisers charge one percent or more to invest your money in a dozen or more mutual funds and ETFs they claim may deliver higher returns. I’m not convinced a complex portfolio does lead to higher returns, especially after paying higher fees. You pay an independent adviser more because you think you might get more, but only the first part of the proposition is guaranteed.

Vanguard is now working on a new program that cuts the cost further by taking out the Vanguard personal adviser, according to Ryan Neal of InvestmentNews. Vanguard hasn’t disclosed how the new all-digital financial planning and automated investing product will work, but I’m speculating it’s Vanguard’s answer to robo-adviser services like Betterment, Wealthfront, and a host of other digital investment products. The minimum investment will be considerably lower than the $50,000 PAS program because there is no human interaction.

True to form, Vanguard would undercut Betterment and Wealthfront’s 0.25 percent annual fee by charging only 0.15 percent. Ironically, Betterment was charging 0.15 percent until 2017 and then raised their fee. Smack!

I’ve got a name and acronym for this new Vanguard service; the Impersonal Advisor Service (IAS). It’s the same investment strategy and back-office automation as PAS, but you’re not allowed to talk with anyone at Vanguard about your account strategy. That makes IAS impersonal.

The market for IAS would be new investors who would otherwise be drawn to a robo-adviser service like Betterment. You’d answer a series of questions online, an algorithm decides what your overall stock and bond allocation should be, you’re provided with a generic investment policy statement, then you hit a button and invest your money in the same four mutual funds as PAS. You’ll get special IAS emails from Vanguard and see occasional portfolio rebalancing. There may even be a tax-management element to it for taxable accounts.