Industry trends spark a new age for advice

October 21, 2021

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As one of the nation's largest recordkeepers, we continuously monitor retirement industry trends, and one in particular keeps popping up: the growing demand among participants for advice.

Whether they're navigating a life-changing event like retirement or simply seeking peace of mind that they're still on the right path, participants of all ages are valuing the financial and emotional benefits that advice provides.

The value of advice

Demand for in-plan advisor services has been steadily growing for many years—and for good reason. Research shows that participants who use an advisor are more likely to achieve their financial goals, and our own data supports this.

But there's more to advice than just financial upside. Investors who work with an advisor can benefit emotionally through improved confidence and feelings of trust, especially during periods of market volatility.

In fact, with more workers managing their own retirement funds, the emotional value of working with an advisor is on the rise—accounting for 45% of perceived value among participants.

"As technology advances, advice services are becoming more comprehensive and solving for a greater range of needs. Advisors can help investors prioritize goals like paying down debt or building an emergency fund so they feel more in control of the future," says Colton Fisher, senior manager, advice and wellness solutions.

By leveraging innovative technologies such as artificial intelligence, we're able to create more personalized relationships with participants based on their individual needs and eliminate confusion on how, where, and when they can access advice. You can read more about our hyper-relevant approach in this article.

For more seasoned investors, working with an advisor is still a good idea. A recent Vanguard study found that two-thirds of self-directed investors who met with a personal advisor wound up making meaningful changes that improved their portfolio diversification, such as reallocating cash reserves and reducing or eliminating single-stock investment risk.

"Many participants tend to hold cash reserves in lieu of longer-duration assets that can deliver better returns without adding undue risk. A personal advisor can suggest small improvements in diversification that can make a real difference over the long run, while also providing peace of mind—and that helps investors make positive changes," says Colton.

Advice for all

At Vanguard, we believe advice should be accessible to everyone—not just those nearing or in retirement.

"The reality is that participants of all ages want more support in their investing decisions, and we're responding to that need with digital and advisor-led options that are fully integrated into the participant experience," says Colton.

Industry-disrupting pricing

"The most common concerns we hear from participants are that advice is too expensive and that it only benefits wealthier investors with substantial assets under management—Vanguard wants to change that," says Colton.

While some financial providers rely on complex pricing to rope in investors, Vanguard offers transparent, consistent pricing to everyone. Our personal advisor service, for example, costs just 0.30%—one of the lowest in the industry.

What's more, retiring participants who roll over to a Vanguard IRA® continue to pay the same low advice fees as they did in their employer-sponsored plan.5

Colton adds, "As the pioneer of low-cost investing, we're taking the same equitable approach that helped us revolutionize fund fees and applying it to financial advice so that all investors can access the support they need when they need it."

1 2020 Retirement Confidence Survey Summary Report EBRI, April 2020.
2 The study sample consisted of more than 44,000 Vanguard self-directed investors who began working with PAS from 2014 through 2018. They had a median age of 64, a median Vanguard tenure of 15 years, and median wealth of just under $400,000 invested in the service. Source: Assessing the Value of Advice, Vanguard, September 2019. Find more details about the study here. Assessing the Value of Advice, Vanguard, September 2019.
3 The Value of Advice: Assessing the Role of Emotions. Vanguard, March 2020.
4 Cogent DC Participant Planscape Study, June 2020.
5 Vanguard Personal Advisor Services charges fees based on a tiered fee schedule calculated as an average net advisory fee on all assets managed by Vanguard Advisers, Inc. or by Vanguard National Trust Company. For portfolios less than $5 million in assets, the fee is 0.30%; for portfolios from $5 million and below $10 million in assets, the fee is 0.20%; for portfolios between $10 million and $25 million in assets, the fee is 0.10%; and for portfolios above $25 million in assets the fee is 0.05%. Retail asset and institutional asset fees will be assessed separately.

Notes:

  • All investing is subject to risk, including the possible loss of the money you invest.
  • Diversification does not ensure a profit or protect against a loss.
  • Vanguard Personal Advisor Services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company. The services provided to clients who elect to receive ongoing advice will vary based upon the amount of assets in a portfolio.
  • Please review the Vanguard Personal Advisor Services Brochure for an overview of the service.
  • Neither VAI nor its affiliates guarantee profits or protection from losses.