Inside Vanguard’s Latest Push Into Financial Advice

Vanguard has revolutionized retail investing over the past 50 years — now, it’s got its eye on financial advice. 

The Malvern, Penn.-based firm announced a restructuring of its wealth management division this week, effectively carving out the $900 billion business into a separate unit, in a move designed to speed up investments and meet increasing demand for advice. It’s the $10 trillion asset manager’s largest restructuring in more than a decade. It’s also one of the first major moves by new CEO Salim Ramji, who was poached from BlackRock in July, and could spell new, and extremely low-cost, competition for prospective wealth management clients. 

“Vanguard is recognizing that customers who need advice have different needs and investing behaviors than self-directed investors,” said Vijay Raghavan, a senior analyst at Forrester. 

Load Up the Van

Vanguard is known for cheap investing products and it’s no different in its wealth business. The company’s Personal Advisor Services digital platform was originally launched in 2015 with a $50,000 minimum, but a second, all-digital robo-advisor got tacked on in 2020. Vanguard now charges just 15 basis points on the latter option, called Digital Advisor, and slashed investment minimums from $3,000 to just $100 in September. 

To lead the revamped business unit, the company tapped Joanna Rotenberg, former head of personal investing at Fidelity (which coincidentally also restructured its wealth unit in August), according to a release. She’s not alone. The firm also brought on a handful of top industry executives, including:

• Matt Benchener, who will become head of Vanguard’s Personal Investor business, which currently includes the firm’s wealth management products.
• John James, who was promoted to head of the company’s workplace and advisor solutions business.
• Jon Couture, who joined the company as a managing director, previously heading HR at the Principal Financial Group.

“Creating separate units allows them to truly differentiate the two offerings,” Raghavan told The Daily Upside. “These structural changes reflect a broader movement towards attracting the next generation of investors.” 

Where’s My Money? Vanguard will have its work cut out for it. According to research firm Forrester, client satisfaction at the company ticked lower year over year, and it was one of only a handful of brokerages to see declining scores. For all its low-cost options, Vanguard has been plagued by technology issues and glitches that even saw customers get locked out of accounts for days on multiple occasions. 

“For this strategy to be successful in the long run, Vanguard will also need focused improvements in their digital experience, and customer service, to effectively serve both,” Raghavan said. That’s especially true for new advised clients that are paying Vanguard for the privilege.