Vanguard Enhances Retirement Readiness Tool and Other Offerings

Vanguard has enhanced certain service offerings for 401(k) and non-qualified plan sponsors and participants.

It has decided to partner with TD Ameritrade to offer a self-directed brokerage account. Martha King, Vanguard managing director and head of the Vanguard Institutional Investor Group, tells PLANADVISER that Vanguard has been offering brokerage windows in 401(k) plans for years. “The majority of plans don’t offer them, but even if they do only a small group of participants use them. Still, we don’t want to ignore their needs,” she says.

King notes that an important differentiator of the TD platform from Vanguard’s platform is that advisers will have access to participant accounts. “It is not uncommon for participants to have relationships with advisers,” she says.

This new service will give registered investment advisers access to the TD Ameritrade institutional account management and trading platform for RIAs—called Veo. Using this service, advisers who work with Vanguard 401(k) plan participants can view and manage client accounts individually or collectively. Participants will still need to verify their financial advisers’ access as part of the enrollment process.

The difference is that when using Vanguard Brokerage Services, participants could grant account access and management to their personal advisers; however, advisers are limited in that they have to manage each client account individually and cannot download/transfer information to their own proprietary software. Vanguard Brokerage Services was tailored to its primary user—the do-it-yourself retail investor.

New retirement readiness tool

As part of its participant website enhancements, Vanguard is offering the Retirement Readiness Tool to provide actionable advice about retirement savings. It can aggregate participants’ 401(k), pension, individual retirement account (IRA) and projected Social Security benefits to offer a full retirement savings picture. Participants may need to input information about outside assets.

In addition, the tool uses assumptions, such as future contributions and forecasts from the Vanguard Capital Markets Model, to project how savings will grow over time. Applying a customizable 4% withdrawal rule, the tool is then able to produce an estimate of future monthly retirement income. The information can also help plan sponsors calculate the projected income replacement ratios for their participants through Vanguard’s new Retirement Readiness Plan Assessment.

According to King, knowledge gleaned from the retirement readiness tool helps with Vanguard’s new Personalized Participant Journeys offering. “Plan sponsors can use the knowledge they’ve gained from analytical capabilities to utilize personalized messages/nudges so they can get participants engaged [in retirement planning],” she says.

More about this offering can be found here.

Non-qualified plan administration

Vanguard has also decided to partner with Newport Group, a provider of non-qualified (NQ) plan administration, which specializes in the complexities of NQ plans. King explains that Newport’s recordkeeping system will be used by Vanguard, but Vanguard will continue to be in front of relationships—participants will speak to Vanguard and so will plan sponsors. “We are leveraging significant investment in the technology Newport offers,” she says.

“In any of our businesses, we can never just stand still. We consistently evaluate offerings, systems and what we’re providing clients,” King says. “In the course of our review, we saw opportunities for better service experiences for clients. We can build some capabilities ourselves, and we can partner with others to bring things to market more quickly.”

More information about all of the changes can be viewed here.