Senior Advice Strategist, Institutional Investor Group
Mr. Wolf is a senior advice strategist in Vanguard Participant Advice & Wellness. His focus is consulting with plan sponsors and consultants on Vanguard's advice and guidance offers for retirement plans. Most recently, Mr. Wolf served as head of Investment Services in Vanguard Financial Advisor Services™, leading Vanguard Advisor Portfolio Analytics and Consulting, Vanguard ETF® strategic model portfolios, and a team of national speakers responsible for sharing Vanguard thought leadership. Previously, Mr. Wolf led a team of senior financial advisors providing discretionary advice to Vanguard's highest-net-worth individual investors and their families. Earlier in his career, he was an investment analyst in Vanguard Portfolio Review Department, a relationship manager to nonprofit clients in Vanguard Institutional Asset Management, and a retirement education specialist in Vanguard Participant Education. Evan earned a B.A. from the University of Virginia and an M.B.A. from the Wharton School of the University of Pennsylvania. He is a CFP® professional.
My 8-year-old son recently went through an intense Pokémon phase. When he pursues a new interest, that means everyone in the family is along for the ride, developing a certain level of expertise by proxy. At this point, if you show me two Pokémon cards, I’ll gladly explain the differences between them—by type, evolution, and hit points.
Wine is another story. I’ve been to my share of vineyards, swirling and sniffing with the best of them. But I haven’t invested the time or effort, nor do I have the interest, required to advance from enjoying the occasional glass to confidently differentiating between a fruit-forward Shiraz and a savory Bordeaux.
Finally, there are managed accounts. I spend nearly all my working time thinking, writing, and talking about them. This may not make me the most popular guy at parties, but it does mean that I can pretty quickly and easily distinguish one from another.
One of the ways I’ve honed this ability is by engaging often with some of the most sophisticated, well-resourced consultants and plan sponsors in the retirement industry. While it’s been interesting to observe that there’s no standard framework for how these due-diligence professionals assess advice programs2 (perhaps because deep advice oversight is a somewhat newer trend), I have noticed three factors that consistently appear:
- Investment methodology—considers how participants’ risk tolerance is assessed, how glide paths and portfolios are constructed, what asset classes are used, and how funds and managers are selected.
- Participant experience—often includes participant personalization and flexibility, the digital experience, communications, the depth and breadth of the services, and support during decumulation.
- Fees—includes both the objective fees for the services, potential conflicts of interest, and an assessment of the reasonableness of the fees relative to the value delivered.
A few other assessment factors that aren’t used quite as frequently, but are still common, include:
- Quality, stability, and experience of the firm as an advice provider.
- Risk management, technology, and cybersecurity.
- Recordkeeping considerations, including how well the advice program integrates with the recordkeeper and whether it’s portable across recordkeepers.
- Plan sponsor considerations, such as fiduciary status and available reporting.
If you’re a plan sponsor and currently offer an advice program to your participants (or are thinking about adding one), this list may seem daunting. If it doesn’t, hopefully that means you already have a consistent, transparent, documented process for evaluating your managed account provider, likely in partnership with a trusted consultant. If you are feeling somewhat (or a lot) daunted, please know that help is available. Here are a few Advice Guy-approved tips:
1. Check in with your consultant. Managed account selection and oversight may not be in the current scope of your consultant relationship(s), but it’s at least worth a discussion. They may be willing to share some general guidance, or you may consider broadening the scope of your engagement.
2. Talk to your recordkeeper. Recordkeepers hove a vested interest in your advice decisions, but trustworthy ones con be reliable partners in helping you match the needs of your participants with the best available services. Recordkeepers will also likely be the best source for the nitty-gritty details about each advice program.
Let’s end where we began, with this question: Aren’t all managed account providers the same? Even if you already knew before reading this blog that the answer is a clear and hearty no, I hope that the list of key factors used by leading players in the industry to differentiate providers is helpful.
Your Vanguard representative will be happy to share more, and they may even bring me or a member of my team into the discussion (given how much I love talking about defined contribution advice programs). You may have also learned that if you’re looking for a deep wine conversation, I’m not your guy. And if it’s Pokémon expertise you seek, I’d be glad to put you in touch with my son.
Do you have questions, comments, or ideas on what I should cover? Send an email to: TheAdviceGuy@Vanguard.com.
Comments?
Ideas for future blog posts?
Sources:
1 I use “advice” and “managed accounts” interchangeably, but I recognize they can have different connotations. Advice is sometimes used to describe onetime, nondiscretionary support, while managed accounts often refer to ongoing, discretionary management. Vanguard uses advice to describe the full range of services.
2This observation is in contrast to a relatively more consistent approach to fund evaluation, which usually includes some or all of the following factors: firm, people, process, philosophy, portfolio, and performance.
3Vanguard received the first overall ranking in Morningstar’s 2023 Robo-Advisor Landscape report among 17 other robo-advisors selected by Morningstar. Morningstar evaluated each provider across the following weighted criteria as of December 2022, to determine their rankings: total price (30%); the process used to select investments, construct portfolios, and match portfolios with investors (30%); the parent organization behind the digital platform (20%); and breadth of services (20%). Morningstar also selected Vanguard Digital Advisor® for the 2022 award based on December 2021 data. For more on Morningstar’s methodology, go to The Best Robo-Advisors of 2023. Current fees may vary for Digital Advisor and the other robo-advisors considered. Although Vanguard compensates Morningstar for marketing services, Morningstar’s opinions and evaluations are independent and unrelated to the selection of Vanguard for this ranking. Following the independent announcement of this ranking, Vanguard purchased a license from Morningstar for the right to include this rating in Vanguard marketing. Source: “2023 Robo-Advisor Landscape” by Amy C. Arnott, et al. © 2023 Morningstar, Inc. All rights reserved.
Advice is provided by Vanguard Advisers, Inc. (VAI), a federally registered investment advisor. Eligibility restrictions may apply. VAI cannot guarantee a profit or prevent a loss.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, in the U.S., which it awards to individuals who successfully complete the CFP Board's initial and ongoing certification requirements.
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