Despite the shock to passive investment strategies caused by market volatility, Vanguard is moving forward with its new low-cost, purely digital automated investing service.
A website for the product, Digital Advisor, went live recently, offering retail consumers more information about the product, an early look at the user interface and a chance to enroll.
A Vanguard spokesperson said Digital Advisor is still in the test and development process. With the website, Vanguard is broadening access to the pilot program to collect more user feedback and improve functionality before a full public launch later this year.
As previously reported by InvestmentNews, Digital Advisor will require a $3,000 minimum investment and charge a 0.15% management fee, making it more affordable than the company's existing digital service, Vanguard Personal Advisor Services, which charges 30 basis points, has a $50,000 minimum and provides access to a human financial adviser.
“Vanguard is now moving downstream by launching a product for clients that have even lower asset levels or are comfortable with a digital-only product,” said David Goldstone, head of research at Backend Benchmarking. “This rapid expansion of services into the lower wealth tiers of the market means that companies will be trying to attract clients at much earlier stages of the clients’ life cycles.”
The expense ratio of the Vanguard products used in the portfolio bring the overall cost up to 20 basis points, but the price still undercuts the other major digital-only robo-advisers on the market.
According to a video on the product website, Vanguard will allow users to input retirement goals and receive an investment recommendation before investing.
The focus seems to be on individual retirement accounts – both traditional and Roth IRAs – at launch. The website doesn’t include information about opening a traditional brokerage account.
However, Vanguard does plan to add features advising investors on saving for emergencies, managing debt and optimizing extra or idle cash.
While the markets haven’t been kind to the passive strategies employed by robo-advisers, Goldstone said volatility can create new opportunities for firms as investors rethink their current accounts and providers. Vanguard could use this time to attract clients to its new platform.
“Many clients are taking a look at their investments and providers, and there will be opportunities with those clients that are not satisfied with their current services,” he said.
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