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Millennial Money Snapshot: Vanguard Personal Advisor Services pairs investors with a personal advisor who builds you a custom financial plan based on low-cost Vanguard index funds. Vanguard manages all aspects of the portfolio from investing deposits to re-balancing and there is a $50,000 minimum investment required to open an account. Investors with under $500,000 invested work with members of the Vanguard team, and with over $500,000 you can work with a dedicated advisor. The management fee is an on-going 0.30% of assets under management (which is 1/3 the cost of the average traditional advisor). Vanguard gives you a free financial plan (with no commitment) if you call them about the service and set up and appointment with a Vanguard Personal Advisor.
The Vanguard Reputation
Over the past year I have been evaluating different places to invest my money – including Betterment, Personal Capital, and now Vanguard. In order to test out the service before putting in more money I deposited $60,000 and I have also had a Vanguard Roth IRA account since 2010. I am a big fan of the Vanguard investing philosophy (which is built on investing in low cost index funds), as well as Vanguard funds in general. Because I have always had a great experience working with Vanguard I was excited to learn earlier this year that they were unrolling the new Vanguard Personal Advisor Services to the public after a two year beta period where they tested the service.
Founded in 1975 by Jack Bogle, The Vanguard Group developed the first index fund that mirrored the the S&P 500 which provides a broad level of exposure to the US stock market with a low expense ratio (meaning it is very cheap to have your money invested with Vanguard). The founder Jack Bogle is now so popular he has a massive following who call themselves the Bogleheads and maintain one of the best investing forums online.
Low cost index fund investing is widely believe to be one of the most effective investment strategies to create wealth and have have driven the growth of The Vanguard Group who now mange over $3 trillion dollars in assets (more money than the GDP of most countries) and the firm has a rock solid reputation. For Millennials low cost index fund investing is a great strategy when you have a long time horizon to build wealth. To learn more about low-cost index fund investing (and the “case” for investing in general) read The Coffeehouse Investor and The Bogleheads’ Guide to Investing. Both are awesome books that are on the Millennial Money must read list.
Overview of Vanguard Personal Advisor Services
The Vanguard Group have been offering personal advisor services in some form for many years – but they have previously only been offered to investors who have at least $500,000 in assets. To serve a broader base of customers and in response to the robo-advisors like Betterment (read my new review of Betterment) that have popped up over the past few years, Vanguard started piloting a new service in 2013 offering personal advisor driven investment services to investors with between $50,000 and $500,000. In May 2015 Vanguard opened the Vanguard Personal Advisor Services to any investor with at least $50,000 in assets to invest. Since launch the service is growing quickly and now oversees $2.5 billion in assets. The service is pretty simple:
Vanguard advisors develop a custom investment plan based on your life goals and a brief online assessment (there is no commitment required for this assessment)
If you decide to move forward then Vanguard manage your investments to align with your custom portfolio strategy which will be built on Vanguard’s low cost index funds. Note: Vanguard do not allow you to invest in any non-Vanguard investments
You have access to chat with a Vanguard personal advisor anytime you want and all deposits and withdrawals have to be made through your personal advisor (this minimizes the chances that you will pull out your money if you freak out when the stock market drops – one of the key advantages of this service is behavioral since it puts a real person between you and you money in order to keep you on track).
You get an annual report and Vanguard rebalances your portfolio if it drifts more than 5% in order to maintain your target asset and fund allocation
You pay 0.3% of assets under management (this equals about $150 for every $50,000 invested) and you can cancel anytime.
To learn more about the service check out this video from Vanguard.
Call with a Vanguard Personal Advisor
After calling Vanguard it took a full month to get me on the schedule of a personal advisor. A month is a long time to wait and by the time I finally saw the call on my schedule a lot had happened in a month – the Dow had dropped almost 2,000 points in the biggest decrease of the year and I had lost a lot of money across my other investing accounts. I have since been told that Vanguard can’t hire staff fast enough, but the wait time to get on a personal advisors schedule has decreased to 2 weeks. This is still a long time and one of my initial concerns about the service from this experience was how long would it take for me to get an advisor on the phone if I became a client.
After waiting a month I finally had the opportunity to chat with a Vanguard Personal Advisor named Monica Keyes – who has worked at Vanguard for the past 4 years and is currently in the process of becoming a CFP (certified financial planner). Despite not yet being a CFP Monica knew a ton about investing and gave me some really great advice. While we only had a 45 minute call scheduled, we ended up talking for almost an hour and a half about my life, my investing goals, and my attitudes on money. One of the things I liked best about her was that she didn’t just go through the motions – she was actually interested in learning about me and because she is also 30 she understood what it was like to be a Millennial trying to save, invest, and figure out how to retire early.
As an existing Vanguard customer I have always been impressed with the level of customer service I get when I call – but Monica truly went above and beyond. She literally discussed and answered questions about all of the investing topics I have recently been thinking about – including weighing the pros and cons of placing all of your bond investments into tax-deferred accounts, why Vanguard decided to recently increase their recommended stock allocation to include 40% international stocks, and how more investors using REITs (real estate investment trust funds) to balanced their portfolios and mitigate risk. One important thing to note is that Vanguard Personal Advisors are salaried employees – they aren’t paid a commissions on sales (like at many financial firms) so they are able to provide objective advice.
During our discussion Monica asked me a number of questions (in addition to the questionnaire that assess your risk profile that Vanguard emails you before your call with a Vanguard Personal Advisor) not just about my finances and tolerance for risk, but about my life – what did I love to do, how often did I travel, what kind of lifestyle do I want to live in 5 and 10 years, and then finally the most important question – when would you like to retire?
This was an easy one for me – 5 years I told her. She didn’t seemed phased and after looking over and discussing my finances she told me it was possible – as long as the market isn’t in the toilet in 4 or 5 years. She also started making recommendations based on my answers – which included her belief that I was too heavily invested in bonds (at only 15%) and that I should all of my stock investments into equities. This may sounds incredibly risky given my 5 year time horizon to retire at the age of 35 then you would be right – but she recommended that I diversify my equity exposure to include more international stocks (which I am doing more research on) and pull back on my bonds.
I think this is solid advice, but over the next 5 years one of my personal goals is to further diversify my own portfolio into other types of investments – like expand my real estate portfolio (I currently own a downtown condo in a historic part of town). Smart diversification is not only an important element to generate wealth, it’s also the essential ingredient for wealth preservation. An hour and a half it was over and Monica scheduled a follow-up conversation with me for two weeks later. Like the other people I spoke with at Vanguard Monica also assured me that Vanguard were in the process of hiring more team members for the personal advisor service.
While individual experiences certainly will vary I was blown away by my first call a Vanguard Personal Advisor – it was one of the best conversations, maybe the best conversation I have ever had about investing with a professional advisor.
My Custom Vanguard Investing Plan
Two weeks later I received a custom investment plan that is really simple and built on Vanguard’s philosophy of investing in low-cost index funds. Knowing Vanguard I had expected it to be pretty simple, but I was surprised they recommended I only place my money into two Vanguard stock market index funds – the Vanguard Total Stock Market Index Fund (which tracks the US equities market) and the Vanguard Total International Stock Index Fund (which tracks the international equities market).
That was it. They also recommend that I pull the money in my Roth IRA out of the Vanguard Target Retirement 2045 Fund and move it all into the international stock index fund. This recommendation surprised me, but based on my risk tolerance Vanguard recommended I be 100% invested in equities at my current age and put more money into international stocks. One of the things I liked about the personal report shared by Vanguard is that even if I decide not to move forward with their personal advisor service I am still able to take their recommendations and implement on my own across my portfolio.
In my discussion with Monica I had a hard time estimating what I would likely be able to put into my Vanguard account each year into a taxable investment accounts (remember this is outside of my 401k and in addition to other investments). I told her I thought I could pretty conservatively put at least $40,000 a year into a Vanguard taxable account so that she should use that number to run future return projections. Using a Vanguard algorithm that projects future portfolio performance based on 10,000 different potential market scenarios there is an 81% chance that my initial $60,000 portfolio with additional $40,000/year deposits would turn into at least $3,370,000 over the next 29 years as show below.
For me it was helpful to see this graph and since I am using this $60,000 as a test for this service I have also asked Vanguard to now run a simulation on the expected return of a larger part of my own portfolio with a focus on trying to retire in the next 5 years. This will be valuable to see and another useful tool in deciding whether or not I should use Vanguard’s Personal Advisor Service to manage a larger part of my portfolio.
In addition to providing custom investing advice, my Vanguard plan also included a number of additional supporting pages on Vanguard’s investing philosophy and what they call the essential elements of investing. Here is one example on the importance of maintaining a balanced asset mix from the custom Vanguard plan.
I was super impressed with Vanguard’s new service and I have scheduled a follow up call with Monica the Vanguard Personal Advisor to continue the conversation. Will I sign up and use Vanguard Personal Advisor? Not yet – simply because I currently enjoy managing my own money and I am getting better at not freaking out when the stock market drops. I am however going to take Vanguard’s advice and continue to invest more money with Vanguard over the next year while I continue to evaluate Vanguard’s Personal Advisor service for my own use.
But just because I am not using Vanguard’s service myself doesn’t mean that you shouldn’t. In fact for most Millennial investors there are few better choices than investing directly with Vanguard, whether you are working with Vanguard’s Personal Advisor service or plan to buy Vanguard funds on your own. They are clearly one of the most reputable investing firms in the firm and based on my experience they offer both exceptional advice and customer service. If you are looking for a low-cost way to invest in high quality funds and the ability to call up a personal advisor whenever you have questions then I would definitely recommend Vanguard’s Personal Advisor service. Then just set it up, continue to put as much money as you can into your account, check in once a year with your advisor, and you will likely get better investment returns and build more wealth than 90+% of other investors. It’s a pretty simple plan based on solid investing fundamentals.
If you want an easy to use platform, low fees, and automated re-balancing- Vanguard offers all of those and the added element of solid personal investing advice to help you accomplish your financial goals. If you are thinking about using Vanguard’s Personal Advisor service then I recommend you at least take advantage of their free assessment (with no sign- up commitment required). Just call them up at 877-527-4942 and schedule a phone call to learn more. I am almost certain you will find them helpful and get some great advice.
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