The CEO of the Vanguard Group, the low-cost mutual fund giant, said today that his company will soon be offering personalized investment advice and management for small investors—for less than a third of the typical cost.
F. William McNabb III, Vanguard's Chairman, President and CEO, told a crowd at Consumer Reports' headquarters today that the company is planning a new program, Personal Advisor Services, that would provide ongoing, one-on-one advice and portfolio management to its retail customers for 0.3 percent annually, or $3 for every $1,000 invested. Customers with as little as $100,000 in investments would be eligible. The company expects to roll out the service within 12 to 18 months.
"You should be willing to pay for advice, but not too much," McNabb said, adding that investors should not pay total fund and advisory fees of more than 1 or 1.25 percent. "We'll give the advice for 30 basis points, and we'll make it personalized."
An investor with under $250,000 in assets typically pays portfolio management fees of at least 100 basis points, or 1 percent, according to a 2013 survey of registered investment advisers by WealthManagement.com. Half of the surveyed advisers reported charging 1.1 percent and upward to those investors. Investment fees of all kinds are often cited as the principal culprit in reducing investors' returns.
The Vanguard program would include "comprehensive financial planning, ongoing portfolio management, access to financial advisors, and a highly personalized web experience," a Vanguard spokesperson told Consumer Reports. "Advisors will help clients identify their goals, develop a plan, and stay on track to achieve their financial goals." The service will be conducted via web, e-mail, phone, and videoconferencing. Vanguard is currently piloting the program with a pool of retail clients close to retirement age.