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Vanguard's white-hot 'hybrid robo' just added $4 billion in three months -- a heat that may cast a chill on 'pure' robos

Now at $21 billion, Vanguard Personal Advisor Services is cannibalizing as a segmentation strategy and emphasizing new technology that edges it toward a more robo-centric, less call center-oriented model

Author Lisa Shidler July 16, 2015 at 5:02 PM
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Katie Henderson: We really do believe that the need for advice is growing. This is something retail clients have been asking for as they get close to the pre-retiree phase.

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Top Executive: Michael Kitces

Stephen Winks

Stephen Winks

July 16, 2015 — 7:46 PM

Vanguard Personal Advisor Services (VPAS) at 30 bps is a wakeup call for the brokerage industry as it transcends base point advisory services at a lower cost. This is the price Wall Street pays for not creating large scale institutionalized support for advisory services (expert authenticated advice in the best interest of the investing public or professional standing of its brokers entailing fiduciary duty). Vanguard is just a step away from supporting expert individualized advice which recognizes fiduciary duty. The difference between VPAS at 30 bps and retail brokers at 120 bps is now the revenues required to support large scale institutionalized support for fiduciary standing of brokers, if brokers are to actually act in the consumer’s best interest. Broker/dealers now face the very real characterization of being a high cost low value added alternative retail brokers. Given John Stumpt, CEO of Wells Fargo Bank (a Hathaway Berkshire Company), voiced his support of “robo technology” and the support of Jamie Dimon (CEO of JP Morgan Chase) and John Theil (President of Merrill Lynch) of fiduciary duty, it seems like the brokerage industry’s denial of the same consumer protections for “retail investors” accorded to all other investors is not sustainable. Prudent process, advanced technology and a far more modern approach to portfolio construction that give advisors control over their value proposition, cost structure, margins and professional standing is coming and it will not be from small undercapitalized novices in advisory services.

Large scale institutionalized support for fiduciary duty in the consumer’s best interest will prevail. It is a shame the brokerage industry is not the catalyst for innovation but in opposition finds itself vulnerable.

Consumers get it and advisors understand market share is at play.

Stephen Winks

Paladin Registry

Paladin Registry

July 24, 2015 — 3:52 PM

A major brand name helps. So does offering integrated planning and investment advisory services for 30 bps. And, don’t forget investors have easy online access to their data and a financial advisor of dubious quality. This is a formula for success that cannot be duplicated by many firms starting with an exceptional brand name and a second revenue stream when clients invest in Vanguard products. This should be an Internet marketing wake-up call for financial advisory firms. As more investors use the Internet to find advisors (Robo, Virtual, Traditional) they need to develop effective digital marketing strategies and productive of webs. They can learn a lot from the better Robos starting with Vanguard.

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