Vanguard virtual RIA's growth rate plummets from 50% to 32% with a staggering consolation -- another $10 billion in AUM since January
Now at $41 billion, up from $31 billion six months before, Vanguard gorged on easy cannibalization but classic RIAs are also losing assets to the Malvern growth engine
Robert J. Martorana, CFA
Brooks and Michael:
Kudos to Vanguard on their success with a hybrid robo, but this is hardly the dealthknell of independent RIAs.
The value proposition offered by Vanguard is excellent, but RIAs can compete on product, service, and price.
1) Product: Marc Gerstein of Forbes has pointed out many of the flaws in Vanguard’s robo advice: http://www.forbes.com/sites/marcgerstein/2016/07/18/vanguard-robos-diversification-and-kurt-vonneguts-monkey-house/ The advice is only as good as the advisor, and the menu is limited to a few Vanguard funds. This eliminates laddered bonds, for example, executed via ETFs or individual securities. Then there is the issue of portfolio customization, which simply isn’t practical on VPAS from a cost perspective or from a compliance perspective.
2) Service: If an RIA meets with clients via Skype and communicates via blogs and email, the RIA will have an efficient practice. But the RIA may be sacrificing depth in the client relationship. I meet with clients in person at least once a year, and I speak with them frequently.
3) Price: Vanguard offers a great service for 30 basis points, and this may force RIAs to migrate from 1% towards 50bps to 60bps. But the technology for RIAs is getting better every day, eliminated much of the tedious paperwork and streamlining the process for portfolio construction and rebalancing.
I remain optimistic for independent, fee-based RIAs. Bob Veres is right: The industry will adapt and flourish.
Robert J. Martorana, CFA
Right Blend Investing, LLC
Alan Moore is the No. 2 busiest man in the RIA business and he just convinced the No. 1 busiest man to budget $200,000 to hire a 'rockstar' to replace him
Alan Moore is CEO of both XY Planning Network and AdvicePay -- and he has three young kids; Michael Kitces agreed to let him hire a full-time replacement CEO for AdvicePay -- with some giant reqirements for the new exec.
February 14, 2023 at 3:15 AM
RIA Quick Takes: Orion deepens DFA embrace by using it as portfolio manager-inside-ETF ~ Hardship withdrawals surge at Vanguard and Fidelity ~ Schwab hires 400 ~ Fidelity flips six funds into ETFs ~ Kitces makes list before Christmas ~ Amit Dogra has $1 billion of good news from his new Portland gig
Americans are struggling, though jobs are plentiful; Larry Fink's ESG zeal costs BlackRock another client, just as the Vatican issues ESG guidance; UBS says we didn't like you anyway to mass affluent and Michael Kitces and Craig Iskowitz join forces.
December 3, 2022 at 3:16 AM
Five RIA Doubletakes: An RIA-only law firm breaks away • Kitces launches picker of 'best of breed' RIA software bundles • Vanguard targets 2070 just as media targets TDFs • SEC fishing for RegBI Scofflaws, including RIAs • CFP appoints first African-American chair
RIA Lawyers will reject RIA custodians• Kitces Nascar montage is now interactive and helpful • Vanguard's super long TDF draws critics• SEC supply lines are stretched with new battle front • Kamila Elliot is ex-DFA, diverse and calling CFP shots
January 12, 2022 at 3:13 AM
Michael Kitces and Adam Birenbaum are now on the same $50-billion Buckingham team after the blogger called the young CEO with a multi-pronged proposal
Kitces is leaving Pinnacle - after 17 years - for fewer conflicts and more opportunity
March 12, 2020 at 1:45 PM
Top Executive: Michael Kitces