Market Overview

There's A New Robo-Advisor In Town

There's A New Robo-Advisor In Town

Recently, there has been a shift within the personal financial world nudging investors away from traditional advisors to digitalized guides. Robo-advisors, these new financial management services, minimize or entirely eliminate the human financial advisor aspect of asset managing.

While robo-advisors cannot compete on all fronts with the unique personalization offered through traditional face-to-face interactions with traditional advisors, the speed, flexibility and cost of robo-advisors has quite the appeal.

Related Link: A Closer Look: Robo-Advisors Vs. Traditional Financial Advisors

Vanguard Joins The Ranks

Last Tuesday, the Vanguard Group announced that it is now offering a unique service that bridges the gap between digitalized portfolio managers and human personal advisors. Their Personal Advisor Service is touted as a hybrid, combining "computerized asset allocation and rebalancing with access to human advisors over the phone and via videoconferencing."

The hybrid service emerged from research that illustrated the key differences between top-notch advisors and run-of-the-mill, average managers. Karin Risi, Head of Personal Advisor Services for Vanguard explained one crucial aspect that brings advising from mediocre to magnificent is the human element, providing a sounding board to "act as an emotional circuit breaker during periods of market volatility, make adjustments to a financial plan when a client's financial situation changes, and counsel clients on other financial issues."

Related Link: Getting To Know Charles Schwab's New Robo-Pal

Breakdown Of Vanguard's Hybrid Service

  • Charge: 0.30 percent, plus expense ratio where applicable (i.e., ETFs and mutual funds)
  • Target Audience: Baby boomers. Unlike full robo-advisors that are geared toward the tech savvy, tech reliant Millennial investors, Vanguard is taking the approach that through a hybrid, more investors from all walks of life and ages can benefit from their service.
  • The Human Element: The financial planners involved in Vanguard's hybrid services attempt to provide advice regarding retirement, withdrawals and Social Security. Forrester Research's VP and Principal Analyst Bill Doyle stated, "They [Vanguard] are bringing human advice to the mass affluent market, those with less than $1 million in investible assets. These people can't get attention from human advisors and this will fill an unmet need."
  • Depending on the portfolio size, the service will provide a personal human advisor (for those holding $500,000+), or be provided with access to a team of advisors ready and available through an 800 number (for those with less than $500,000).
  • The Robo Element: Personal profile held on where, Vanguard boasts, "a robust web experience" is available at the click of a button. In regards to modeling portfolios, the automated element of the advisor service considers a plethora of factors "including market conditions and risk-return assumptions based on the client's individual needs," Vanguard said. These factors are then fed into "10,000 simulated outcomes for an up-to-date assessment."
  • Portfolio Construction: Based on low cost, tax efficiency and broad diversification, with an emphasis on longevity.

The Bottom Line

Regardless of what flavor of personal advisor fits your fancy, the offerings available for average investors continue to expand based on innovations and the unique needs of today's money-conscious individuals.

From a traditional hands-on approach offered by human-only management to robo-advisors and now to a hybrid of the two spectrum ends, investing does not need to be any more stressful than it has to be. As with all things financial, the more you know, the more control you have over your own financial health, well-being and future.

Image Credit: Public Domain


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Posted-In: Bill Doyle Charles Schwab Forrester Research Karin Risi Personal Advisor SErviceEntrepreneurship Tech Personal Finance Best of Benzinga