2023 Robo-Advisor Landscape | 22 July 2023 | See Important Disclosures at the end of this report.
lower-net-worth clients. Despite well-publicized turmoil in regional banks earlier this year, U.S.
Bancorp's stable market position as the fifth-largest U.S. bank has shielded it from severe stress thus far.
Vanguard Digital Advisor/Vanguard Personal Advisor Services | High
Vanguard Digital Advisor, or VDA, and its hybrid sibling Vanguard Personal Advisor Services, or PAS,
which combines automation with human expertise, once again earn the top spot among robo-advisors
we surveyed. In fact, Vanguard has extended its lead through multiple enhancements, with only an
uncharacteristic pricing misstep keeping it from a perfect score.
Vanguard has been in the advice business since 1996, but it did not move into discretionary asset
management until the respective May 2015 and May 2020 launches of PAS and VDA. Aiming to
transform advice in the same way its retail indexing business revolutionized investment management,
Vanguard has spent heavily on both services through hiring personnel, increasing choice among
investment strategies, and adding capabilities. In recent years, Vanguard has introduced ESG options,
active equity and fixed-income funds, and a municipal-bond strategy. Tax-loss harvesting is now
available to all advice clients, who also benefit from tax-efficient implementation, including a completion
methodology that tailors exposures around 90 existing Vanguard strategies so investors transitioning to
VDA can avoid realizing capital gains on existing holdings.
The core of VDA, however, remains its four broadly diversified passive ETFs focusing on U.S. and non-
U.S. stocks and U.S. and non-U.S. bonds along with a portfolio construction approach that combines
relative simplicity with customization. Using those ETFs, or similar exposures crafted from Vanguard’s
advice-eligible investment options, VDA draws on the Vanguard Life-Cycle Investing Model to create
more than 300 glide paths based on an investor's age, goals, and risk tolerance. The risk-tolerance
assessment uses third-party Capital Preferences' well-researched scenarios. VDA then evaluates
portfolios daily and rebalances when any asset class is off target by more than 5 percentage points. The
glide paths are updated annually as model inputs change.
VDA and PAS have evolved into an ecosystem of advice, united by a common investment philosophy,
similar if not identical investment strategy building blocks, and low costs. Where they differ is in the
degree of customization and suite of services available. Clients with at least $3,000 can enter the digital-
only version of that ecosystem, VDA, for as little as 0.20% per year (including underlying fund fees) and
utilize an impressive array of planning tools, including outside account aggregation, custom goal
planning, debt planning, a rainy day tool, healthcare estimator, and Medicare match. Clients with at
least $50,000 can opt for the hybrid PAS service for a 0.30% annual advisory fee (not including
underlying fund fees) and have unlimited access to a pool of CFPs, who can further customize their
portfolios around non-Vanguard fund holdings and individual stock ownership. At $500,000, clients
receive a dedicated CFP who touches base at least twice a year. Clients with more than $5 million have
access to a private equity option and estate planning and trust services, all for declining fees that drop
to 0.20% for assets exceeding $5 million to $10 million, 0.10% for the next $15 million, and 0.05% for
assets above $25 million.
Reprinted by permission of Morningstar, August 2023