Vanguard Personal Advisor Services: A Quick Review

It was only a matter of time before index fund giant Vanguard made its entrance into the fast-growing robo-advisor space. The highly anticipated release of its Vanguard Personal Advisor Services didn't disappoint investors, who have come to expect high-quality service at a low cost from Vanguard. Now you can have access to more than 100 Vanguard mutual funds and exchange-traded funds (ETFs) that are selected, allocated, deployed and managed through personalized investment management. Vanguard has differentiated itself from other robo-advisors by providing access to a live advisor who is available to review your portfolio and coach you through the rough times in the market.

Personal Advisor Services offers a complete array of investment management and advice tools to help you develop an asset allocation strategy to meet your specific investment objectives. An advisor is available to help you create a customized financial plan that focuses on your life goals with an analysis of your current investments and future income needs. After creating the plan, the advisor assists you in selecting an appropriate mix of investments based on an asset allocation strategy.

Although most of the number crunching and asset allocation is done with portfolio management software, a Vanguard advisor oversees your account by reviewing it on a regular basis to ensure it maintains the target allocation and is staying on course. You can access your accounts through a client portal on Vanguard’s website or by using a mobile app. You are kept informed of your progress through quarterly reports, and you can contact an advisor by phone or video conference between 8 a.m. and 8 p.m.

The minimum account size is $50,000, which is higher than other robo-advisors. However, Personal Advisor Services is available for most types of accounts, such as taxable brokerage accounts, traditional and Roth IRAs, SEP IRAs and trust accounts.

You are charged a flat annual management fee of 0.3% on all assets managed through Personal Advisor Services. There is no discount for larger accounts. In addition, the mutual funds and ETFs held in your portfolio carry their own expense ratios. Because the advisors select primarily from the Vanguard family of funds and ETFs, the expense ratios are generally very low. You also have access to Vanguard's Admiral class of funds, which have lower expense ratios than the Investor class funds; this can offset a portion of the 0.3% management fee. Vanguard waives the brokerage commissions usually charged for ETF purchases.

• Live financial advice: You may not feel like you need it, but you'll be glad you have it when the markets start to turn.

• Low fees: The management fee is slightly higher than other robo-advisors. However, when you factor in the low expense ratios of Vanguard funds and ETFs, the total fees would compare favorably.

• Account access: Your portfolio is always at your fingertips, either online or through a mobile app.

• Vanguard Funds and ETFs: If you were going to choose Vanguard anyway for its low fees and industry-leading track records, you have access to Admiral class mutual funds with even lower fees if you use Personal Advisor Services.

• High minimum investment: $50,000 is fairly steep compared with other robo-advisors.

• Management fees: Other robo-advisors, such as Wealthfront and Betterment, have lower fees and discounts for larger accounts.

To the extent that Vanguard emphasizes an advisory relationship, it's not a true robo-advisor. However, it does use technology to do most of the legwork in constructing and managing the portfolio. One of the big reasons behind the creation of the robo-advisor was so younger people, who may be less trusting of a real financial advisor, can have low-cost access to leading-edge portfolio management tools without having to speak with anyone.

Vanguard has always been at the forefront of do-it-yourself investing, which would lend itself well to the concept of a robo-advisor. Its largest customer base has been older investors; as they approach the reality of creating lifetime income, they could use more personalized advice and coaching. Vanguard's founder, John Bogle, believes that an investor’s worst enemy can be himself, which is why everyone should have an investment coach – this is exactly what you get with Vanguard Personal Advisor Services.