Vanguard steps up efforts in financial advisory
Vanguard is betting demand for financial advice will explode over the next decade, as the world’s second-largest asset manager steps up its push into the fragmented market.
The Pennsylvania-based group will open an office in Dallas next year, which is seen as having an attractive pool of potential clients to tap into as well as investment advisers to hire.
Since taking office in 2018, chief executive Tim Buckley has made financial advice, including how to build retirement savings and when to tap them, a goal for Vanguard.
The group has significantly reduced mutual fund fees over the past decades, a strategy it intends to replicate with financial advice. Vanguard also expects technological advancements, such as automated digital services, to lower the cost of advice and increase the size of the market.
Investment advisers registered with the Securities and Exchange Commission oversaw $ 97.2 billion on behalf of 42 million clients at the end of 2020.
“Growth is accelerating and this year is almost double what we saw at this time last year,” Jon Cleborne, head of Vanguard Personal Advisor Services, told the Financial Times. “Counseling is still in its infancy, the need will continue to grow as baby boomers retire and millennials face new challenges in their goal of saving for the long term. “
Launched in 2015, VPAS, offers a combination of digital tools and human advice for clients who have at least $ 50,000 to invest. According to Vanguard, an annual fee of 0.3 percent is lower than the industry average of 1.01 percent. Last year, the group launched a cheaper, digital-only advisory service for younger clients with a minimum investment of $ 3,000 required.
Cleborne said the technology investment in the consulting business represented “a very large capital allocation within the company,” reaching “hundreds of millions of dollars” per year.
Vanguard has come under pressure to improve the customer experience after complaints about online outages and delays in discussions with advisers during volatile markets.
“If you’re managing money now, you want to be an advisor and there is room to bring low-cost advice to the market,” said Greggory Warren, financial services industry strategist at Morningstar. “Vanguard believes in some ways that there is enough fruit on hand among investors with less than $ 500,000 in assets.”
Of the clients who seek consulting services, 80 percent already have a pre-existing relationship with Vanguard. “We still have a long way to go with our existing customers. The advisory pie is going to get bigger, ”Cleborne said.
Opening an office in Dallas will expand the 900 advisers Vanguard already has. “There is a great concentration of certified financial planners in Dallas,” Cleborne said. “We train advisors and target recent college graduates, but we also believe Vanguard is an attractive brand for existing advisors. ”
Buckley’s ambitions for the financial advisory industry extend beyond the United States.
In April, Vanguard launched a new low-cost retirement advisory service for UK investors. Those with a minimum of £ 50,000 will be able to get retirement savings advice from Vanguard for an annual cost of 0.79%, which includes fund fees, transaction and platform fees.
According to the Financial Conduct Authority, less than 10 percent of adults have taken financial advice. Vanguard has registered more than 280,000 customers since arriving in the UK in 2009, adding 100,000 new customers this year.
The group plans to eventually launch a similar retirement advisory service in Germany and other European markets.