Vanguard Preps to Bulk Up Wealth Management

Should financial advisors be concerned about the ramped up efforts by the Vanguard Group to offer financial advice?

Just like the Malvern, Pa.-based financial services conglomerate forced the larger asset management industry into a race to the bottom when it come to fees, Vanguard is reinforcing its wealth management business that currently charges less than a third of what most advisors do.

Wealth management is not new to Vanguard, nor is the awkward conflict of providing advisors with the low-cost products they desire while also competing with advisors, but the news this week of a new wealth management head to oversee a bulked-up division looks like increasing advisor competition.

Vanguard, which has $8.7 trillion under management, including $2.6 trillion in ETF assets, also has about $300 billion worth of investor assets under the advisor business it launched in 2015.

You can bet that wealth management operation is only going to grow under the leadership of Joanna Rotenberg, the former executive from Fidelity Investments who will join Vanguard in January.

Vanguard Expands its Advice Business

Rotenberg will lead Vanguard’s new Advice & Wealth Management division that is “focused on enhancing a range of capabilities to improve outcomes for its clients,” according to the Vanguard announcement.

The addition of Rotenberg follows the hiring earlier this year of BlackRock veteran Salim Ramji as the new CEO.

Jeff DeMaso, editor of the Independent Vanguard Adviser newsletter, said Vanguard has “hinted toward enhanced and expanded offerings” in the wealth management division.

Vanguard’s advice business currently ranges from the bare bones digital advice starting at 5 basis points all the way up to personalized wealth management for accounts with at least $5 million.

The highest end of Vanguard’s wealth management services starts at 30 basis points and drops down to 5 basis points depending on account sizes.

That’s peanuts compared to the 1% of assets most financial advisors charge their clients.

Depending on how Vanguard develops and markets its wealth management business, DeMaso said Vanguard might become a much bigger competitor to the financial advisors buying their ETFs.

“That’s the tightrope Vanguard has been walking since 2015,” he said. “So far, it hasn’t slowed them down much.”