Ready to really take on Schwab and Merrill Lynch, Vanguard quantifies 'meaningful' value that financial advisors deliver 'beyond portfolio performance' in code shift

Vanguard Group is offering hard proof that wealth management yields “meaningful” soft value shortly after Joanna Rotenberg came aboard to make the company an advisory force against Morgan Stanley, Fidelity and Schwab.

The Malvern, Pa, asset manager announced the results of a survey that underscored that financial advisors unlock “hidden value” that can't be measured in alpha, beta or basis points.

The finding coincides with its January launch of a separate wealth unit headed by Rotenberg, though the firm has fielded a large, successful RIA, Vanguard Personal Advisor Services (VPAS) a decade ago. It's grown to more than $300 billion of assets under management. See: How exactly Vanguard Group -- with a dash of robo and lots of mojo -- went from a virtual unknown in wealth management to posing a threat to Merrill Lynch

It also follows a 2022 Vanguard study that showed the non-hidden i.e. investment management value, of financial advice.

The former head of retail at Fidelity Investments will serve as managing director of Vanguard Advice & Wealth Management. See: Vanguard completes shakeup with outsiders Salim Ramji, Joanna Rotenberg supplanting firm lifers Tim Buckley, Karin Risi as RIA takes center stage

“Our findings demonstrate that financial advice offers significant value beyond traditional portfolio construction and financial planning interventions,” the report states.

“The peace of mind and time savings that clients experience should be integral measures when assessing the value of financial advice, because they can enhance clients’ quality of life," the report concludes.

The most tangible result was that investors believe they save about two hours a week or 100 hours annually by having a financial advisor they trust.

Bogle's belief

Vanguard’s new Emotional & Time Value of Advice survey sampled 12,443 Vanguard investors in July a year ago. It included 7,746 advised clients—both working and retired. 

The online survey measured the emotional and time-related value of financial advice, with questions about financial stress, time spent managing finances, and perceptions of financial advice and well-being.

Vanguard did the survey because certain financial planning aspects can get “overlooked,” says Vanguard spokeswoman, Constance Brown-Gainor, via email.

“We conducted the study because our research suggests the industry may be overlooking the full spectrum of benefits that advice provides—not just portfolio management and financial planning, but also emotional support and time savings.

“We felt it was important to quantify these often-overlooked benefits," she adds.

Quantification aside, the findings are not groundbreaking, says William Trout, director, securities & investments at Datos Insights, a wealth management consulting company.

“The measure of success long ago moved past portfolio management to broader financial advice, and Vanguard is racing to keep up with the times,” he says.

Vanguard's reticence about wealth management can be traced back, for the most part, to its founder, Jack Bogle.

Bogle believed that advisors often did more harm than good, especially with investment returns, because of high fees, commissions and perverse incentives. 

As a result, Vanguard became famous for minimizing such drags on performance, mostly in how it built ETFs and mutual funds.

Peace of mind

Trout says that Bogle is not top of mind at Vanguard, these days.

“I'm not sure Bogle is being debunked so much as Vanguard is doubling down on an area where the firm believes it can make money, that is, digitally supported, remote advice.”

Indeed, Rotenberg couches the study's importance as reinforcing existing beliefs rather than charting a new direction.

“This research reinforces what we’ve long believed: the value of advice is multidimensional, even extending beyond portfolio construction and financial planning interventions,” she said in a release. 

“In a world where finances are inherently complex, schedules are demanding, and information overload is causing burnout, peace of mind—knowing you’ve made a sound financial decision that keeps your goals on track—and saving time while doing so are truly invaluable. 

"That’s why Vanguard remains committed to delivering lasting value through a range of human and digital advice solutions designed to meet the needs of clients at every stage of their financial journey.”

Exclamation point

The study's commission in July 2024 coincided with Salim Ramji's appointment as CEO. It's taken nearly a year for the public to hear the results – perhaps because Vanguard could've lived without the study, says Trout.

“Was an investor survey needed to justify this shift?” he asks.

"Perhaps not, but Vanguard is determined to position itself as the friend and ally of the average investor, even as it pivots away from its roots in passive investing and toward advice-based planning. 

“Surveys like this are an exclamation point at the end of the sentence.” 

Whether Rotenberg and Vanguard can successfully deliver wealth management across the wide spectrum of wealth is another matter, Trout says.

“The bigger question to me is whether Vanguard has the technology tools to capture, interpret and act upon the client, reference and other data implicit in a multidimensional approach to client needs. 

"Clearly, Joanna R. is saying that the firm has what it needs to provide the insights and guidance that these clients expect, i.e., this is not your grandfather's Vanguard.”

Instilling confidence

It's a technology challenge Rotenberg took on at Fidelity after being lured from Canada in 2021. See: Abby Johnson hires Canadian whiz and possible successor to head up, monetize and automate Fidelity retail to close early digital deficits with Schwab, Robinhood and Vanguard-- and maybe win institutionally embedded 401(k) millionaires

She ended up leaving in 2023 and remains based in Toronto. See: Joanna Rotenberg is departing Fidelity Investments after only two years, writing that she traveled 20,000 miles and successfully split her retail division into wealth and brokerage units

Time is money, says Paulo Costa, a Ph.D. senior behavioral economist at Vanguard. 

“When we overlook the emotional and time value of advice, we risk undervaluing its true impact. It’s not just about dollars and cents; it’s about confidence, clarity, and life well-being.”