Vanguard to Lower Asset Minimum for Digital Adviser Access
The minimum holding to receive financial advice from "robo-advisory" services will drop to $100 from $3,000.
Vanguard announced Wednesday it will lower the asset minimum for its automatic advisory services to expand access to a broader swath of clients.
The asset management giant has lowered the minimum asset requirement to $100 from $3,000 to use Digital Advisor, its automated advisory offering, which provides a broader range of investing glide paths than its target-date funds, along with advice and planning tools.
The digital service, launched in 2020, is designed for clients to “identify their retirement and non-retirement goals, and [it] then crafts and manages customized, diversified and tax-efficient investment portfolios to achieve them,” according to Vanguard, which had more than $19 billion in assets under management, as of June 30.
Vanguard framed the move as broadening access to low-cost advice when personalization has become an industry buzzword for retirement saving and planning. It also comes a few months after Vanguard tapped Salim Ramji, formerly of BlackRock Inc., as its first external CEO hire. Ramji led BlackRock’s exchange-traded-fund investment offering, iShares.
“Lowering the investment minimum for Vanguard Digital Advisor is an important step in our endeavor to broaden investors’ access to advice, and to empower them earlier in their financial journey,” Brian Concannon, head of Vanguard Digital Advisor and mass affluent advice, said in a statement. “We believe that advice strengthens investors’ ability to navigate their personal finance and investment needs, and can drive better investment outcomes.”
David Goldstone, manager of investment research at Condor Capital Wealth Management, noted that the move comes after Vanguard added fractional share trading capabilities to Digital Advisor. That, he says, helps allow Vanguard to offer “much lower minimums.”
“If investors can buy partial shares of ETFs, they can invest in a diversified portfolio of funds with just a few dollars,” he says. “Another benefit of fractional share investing is it can help improve the efficiency of tax loss harvesting. When cash comes into an account either through dividends or deposits, that cash can be immediately invested into fractional shares even if the dollar amount is low. This means that more tax lots are created and thus increases the opportunity to sell lots at a loss.”
Goldstone, who leads Condor Capital’s “Robo Report” analysis and ranking of advisers, says Vanguard is joining competitors who have had fractional share capabilities and are offering lower minimum investments; overall, it will help make them more competitive in the marketplace, he says.
Vanguard ranked fourth in the most recent robo ranking score from Condor Capital Wealth Management, considering areas such as access to advisers, costs and performance. The top performers were Fidelity Investments, Bank of America’s Merrill and Sofi.
“One of the biggest impacts Robo Advisors have had on the investing landscape is increasing accessibility to professionally managed accounts,” Goldstone says. “Low Minimums like this one have opened the doors to new investors and democratized professional money management.”
Other areas of Digital Advisor that Vangaurd has been investing in, according to the firm, include:
- Personalized coaching for users;
- More portfolio investment options, including adding actively managed funds to Vanguard’s more well-known passive index funds; and
- Tax-efficiency services that include an automated tax-loss harvesting service, including asset location, tax-efficient rebalancing and tax-efficient fund selection (e.g., municipal bond funds).