Vanguard Digital Advisor review 2023
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Vanguard Digital Advisor: Best for
- Newer investors
- Vanguard investors
- Investors focused on low costs
Vanguard takes its reputation for low-cost, investor-friendly services to the robo-advisor world with Vanguard Digital Advisor. This low-cost service builds a professional portfolio using well-established investing principles and then adds on plenty of investing tools and educational components in true investor-friendly fashion. While Vanguard scores well for low costs – its all-in fees may come to about half of what clients might pay elsewhere – it does lack some key premium features such as tax-loss harvesting that are commonly offered by the top robo-advisors. Don’t confuse Digital Advisor with Vanguard Personal Advisor, which offers access to human advisors, though in exchange clients are paying higher fees and must meet a higher account minimum.
If you’re looking for a robo-advisor with more features, then check out Betterment and Wealthfront, both perennially high scorers in Bankrate’s reviews. You’ll get premium features and similar investor-friendly services such as low-cost funds. Another popular pick is Schwab Intelligent Portfolios, not least because of that company’s investor-first street cred.
Vanguard Digital Advisor: In the details
Pros: Where Vanguard Digital Advisor stands out
You’ve come to expect low costs from Vanguard, and the company delivers on that promise with its robo-advisor, whether it’s the management fee or the costs of the ETFs it invests in.
Vanguard uses a bit of a different pricing structure from most robo-advisors, which add a management fee on top of the ETFs’ fees. In contrast, Vanguard targets an all-in fee of 0.20 percent, which includes the prices of the ETFs, which themselves already charge very low fees. That means all-in you’d pay a very competitive $20 each year for every $10,000 invested.
Naturally, Vanguard Digital Advisor uses its in-house ETFs. That’s not surprising since a huge portion of the robo-advisor industry turns to the company’s funds as primary ETFs for their services. In total, you’ll pay about 0.05 percent for your funds, about as low as it goes, with the expense ratio on the funds ranging from 0.03 percent to 0.08 percent. But unlike other robos that add the costs of ETFs to the management fee, all costs here are included in the all-in fee.
For example, robo-advisors such as Betterment and Wealthfront charge 0.25 percent as a management fee and then have another 0.08 to 0.10 percent in ETF fees (and potentially more, depending on exactly which funds and allocations you select). To be fair, those ETF fees don’t go to the robo-advisor but to the fund company itself (which often is actually Vanguard.)
That said, recommending its own funds is an inherent conflict of interest, though Vanguard’s consistently low expenses make this a less pressing concern than it could otherwise be.
If there’s a downside, it’s that Vanguard’s portfolio mix is surprisingly thin (more below).
Education and tools
Vanguard was built on the ethos of helping individual investors, and you see that across the site — from educational videos, articles and more — to help you make smart long-term decisions.
In practical terms, that means you’ll have access to all of Vanguard’s retirement-planning tools and calculators. You can import your accounts into your profile so that the robo-advisor can have a more comprehensive view of your finances. Then you can develop a more accurate plan, for example, through Vanguard’s debt-payoff tool, which helps you build a payoff plan for liabilities. You’ll also have access to fund screeners, allowing you to scour the fund universe for what you want, even if you can’t buy those funds in your Digital Advisor account.
Smooth sign-up process
Vanguard’s sign-up process feels among the most developed and sophisticated. The automated process is smooth and asks detailed financial questions such as your current spending, so you may want to come prepared with at least some of your info. This process may take longer than the sign-up at other robos, but it’s capturing important data to better shape your portfolio.
Vanguard’s sign-up also takes you through detailed financial scenarios where it assesses your risk tolerance. It asks questions such as “Would you risk $1 to make $4 in the next year?” Based on this analysis, it comes up with your risk tolerance and then builds a glide path for you, showing your allocation to stocks and bonds as you age.
The robo-advisor works from a Vanguard brokerage account, so you’ll need to have one to use Digital Advisor. When you’ve completed your assessment, you’re automatically taken to the brokerage to sign up for an account there, if you don’t already have one.
Cons: Where Vanguard Digital Advisor could improve
Limited portfolio mix
Unlike many robo-advisors, which may construct portfolios with ETFs representing more than 20 different asset classes, Vanguard constructs all its portfolios with just four ETFs:
- Vanguard Total Stock Market
- Vanguard Total International Stock
- Vanguard Total Bond Market
- Vanguard Total International Bond
Vanguard drastically simplifies the portfolio management process, which may not be the worst thing, given so much unnecessary complexity and deliberate misdirection in the financial world. But it’s hard not to think that the portfolio could be more diversified across asset classes such as real estate, commodities or others. That kind of balance could give a portfolio more resilience in tough times and even out a portfolio’s performance through the ups and downs of the market.
If you’re looking for a wide selection of investments, then be sure to look at Wealthfront as well as M1 Finance, where you can buy pre-made funds or virtually construct your own funds. Interactive Advisors also offers an above-average selection of investments.
Digital Advisor requires a higher upfront commitment than most rivals (Schwab Intelligent Portfolios is an exception). In contrast, you’ll need at least $3,000 in the Vanguard account to use Digital Advisor. That’s not a lot in the big picture, but much more than the zero that many robo-advisors allow you to start off with.
No tax-loss harvesting feature
Vanguard doesn’t offer automatic tax-loss harvesting services for its account, when it’s something of a standard in the industry. That’s not to say Vanguard does nothing to minimize taxes. In fact, it optimizes your taxes and considers the tax impact of all portfolio decisions.
Vanguard factors your cost basis in any decisions to sell or rebalance your portfolio and sells off pieces that create the least negative impact on your taxes – similar to what Ellevest offers.
And if you have both taxable and tax-advantaged accounts with Vanguard, the robo-advisor will try to optimize the placement of assets within those portfolios to minimize taxes. For example, more highly taxable assets could go into tax-advantaged accounts such as an IRA, while those with a lower potential tax impact would go into a taxable account.
No cash management account
A cash management account is a standard feature on a robo-advisor account these days, and the best of them – those by Betterment and Wealthfront – offer all the convenience of a checking and savings account and other added features, too. Unfortunately, Vanguard’s robo offering doesn’t provide a cash management account, though idle cash is swept into an interest-bearing fund containing U.S. government bonds. So your cash will be safe but will likely earn very little while it waits for investment.
You can’t purchase fractional shares
Vanguard doesn’t purchase shares in its funds in fractions, so you’ll end up with only whole shares in your account. That won’t mean much as your account really grows, but as you get started, it could mean that your portfolio is not as diversified as your target allocation says it should be. In addition, it means less of your money is being put to work where it should be.
Limited account types
For now, Vanguard has a limited selection of account types that are available on its Digital Advisor account: individual and joint taxable accounts, as well as IRAs (Roth, traditional and rollover). That’s less than typical robo-advisors offer, though Vanguard may expand this selection.
However, Vanguard offers something that other robo-advisors really don’t touch: You may be able to have your employer-sponsored 401(k) managed if it’s held at Vanguard. Not all 401(k) accounts will be eligible, and your company must have authorized the program. A 401(k) account may also be invested in a wider variety of ETFs not offered in the standard account.
Betterment5.0 Bankrate Score
Betterment offers a high level of service and features across every aspect of its robo-advisor, from its core investment management to low-cost funds to premium features such as tax-loss harvesting. You can also upgrade your service if you need unlimited access to human advisors, and get access to a feature-rich cash management account, too.
Axos Invest3.0 Bankrate Score
Axos Managed Portfolios offers a strong robo-advisor service with some premium features, all at a reasonable price. Clients also receive a wide choice of funds, including socially responsible funds, though the associated cash management account forces clients to jump through some hoops to receive what is only a mediocre interest rate.
Interactive Advisors4.5 Bankrate Score
Interactive Advisors has upped its game this year, with new features such as tax-loss harvesting that put it among the top robo-advisors. That’s on top of one of the widest range of investing choices, low-cost funds and low overall fees. As strong as all these features are, though, the robo-advisor doesn’t offer access to human advisors, not unusual among robo-advisors.
SigFig3.0 Bankrate Score
SigFig keeps costs low whether it’s account fees, fund fees or the annual management fee. You’ll also get access to human advisors and benefit from automatic rebalancing and tax-loss harvesting. But the lack of a cash management account and relatively high account minimums may cause some investors to look elsewhere.
E-Trade Core Portfolios3.5 Bankrate Score
E-Trade Core Portfolios offers a capable robo-advisor, one that may work best for customers looking to keep their accounts with the broker while having someone do the investing for them. Clients will get low-cost funds as well as less-common choices such as socially responsible funds, though the service doesn’t offer tax-loss harvesting or many tools.
Titan Invest3.0 Bankrate Score
Titan offers something unusual in the robo-advisor space: Titan combines its own actively managed investments with passively managed ETFs, something no other major robo-advisor does. It also hedges those portfolios, does not charge a management fee for the passive funds – a rarity among rivals – and has a low minimum, making it easy to get started.
Morgan Stanley Access Investing3.5 Bankrate Score
For younger investors looking to invest based on their values or certain themes, Morgan Stanley’s Access Investing provides a suitable option among robo-advisors. Investors can choose between impact portfolios that focus on environmental, social and corporate governance (ESG) issues, market-tracking portfolios that minimize fees and performance-based portfolios that attempt to outperform through active management.
J.P. Morgan Automated Investing3.0 Bankrate Score
J.P. Morgan Automated Investing provides portfolio management services with automatic rebalancing and may be a good fit for existing J.P. Morgan customers. But you’ll also pay above-average management fees and have limited account types to choose from. There’s also no tax strategy included in the offering.
Fidelity Go4.5 Bankrate Score
Fidelity Go offers a solid robo-advisor offering that beginning and cost-conscious investors will especially appreciate. However, investors looking for features such as tax-loss harvesting or comprehensive goal planning may be disappointed.
Personal Capital4.0 Bankrate Score
Personal Capital customers will get an experience that more closely resembles that of a traditional financial advisor than a robo-advisor, but you’ll need at least $100,000 to get started. You’ll also get a comprehensive tax strategy to help minimize what you owe to Uncle Sam. But this higher level of service does come at an above average cost compared to the rest of the robo-advisor industry.
Stash3.5 Bankrate Score
Stash’s managed portfolios might appeal to small investors who are looking to save as they spend, but the monthly fees can be high for investors who don’t have a large balance built up and there are only a few types of accounts available.
M1 Finance4.5 Bankrate Score
M1 Finance takes some of the best of what brokers and robo-advisors do and mixes it into a new service that provides automated investing in a fully customizable portfolio – all for no cost. If you want to take it up a notch, you can pay an additional fee and receive a host of upgraded features, including one of the best cash management accounts out there.
Wealthfront5.0 Bankrate Score
Wealthfront offers a strong lineup of features – sophisticated portfolio management using low-cost funds – that showcase why it’s one of the leading independent robo-advisors. It provides a strong cash management account, a robust planning tool and premium features such as tax-loss harvesting that may more than pay back your annual fee.
Ellevest3.5 Bankrate Score
Ellevest brings a competent and well-considered robo-advisor, pitching itself to women, whose financial needs are traditionally underserved. But don’t think it won’t work for anyone who needs nuanced investment management, since it offers low-cost funds, socially responsible funds and – unlike most rivals – a flat monthly fee, making it advantageous for those with more to invest.
Schwab Intelligent Portfolios5.0 Bankrate Score
Schwab Intelligent Portfolios provides a top robo-advisor experience that should be a good fit for many investors. The basic plan comes with no management fee and a low-cost portfolio, plus you’ll get Schwab’s top-notch customer support and easy-to-use platform. The premium plan comes with unlimited access to human financial advisors, but both plans come with above-average account minimums and tax-loss harvesting isn’t an option until you reach at least $50,000 in assets.
Acorns3.5 Bankrate Score
Acorns is a good choice for new investors who are starting with small sums of money, allowing customers to build a diversified portfolio with just a few dollars. However, the fees are above average for small account values, though they’ll decline as your portfolio grows, and you won’t find any tax strategy as part of the robo-advisor offering.
Wells Fargo Intuitive Investor4.0 Bankrate Score
Wells Fargo Intuitive Investor is a solid robo offering that gives customers easy access to human financial advisors at no additional cost along with tax-loss harvesting that can help you save on taxes. However, the management fee is above average unless you’re an existing Wells Fargo banking customer.
Ally Invest Managed Portfolios4.0 Bankrate Score
Ally Invest Robo Portfolios are a good option for new investors who pay particular attention to costs. Existing Ally clients may also appreciate having all their finances in one place. Unfortunately, Ally doesn’t offer tax-loss harvesting or provide human advisors to help with those especially difficult questions.
Merrill Guided Investing3.5 Bankrate Score
Merrill Guided Investing offers a credible investing service for Bank of America customers, but its high management fee makes it less attractive among a competitive field of robo-advisors. Merrill offers several positives, including access to human advisors and low-cost investment funds, but premium features such as tax-loss harvesting are missing.
SoFi Automated Investing4.5 Bankrate Score
SoFi Automated Investing gives cost-conscious investors a solid robo-advisor offering that comes with access to human financial advisors at no additional cost. But the lack of tax-loss harvesting and no socially responsible investing options may cause more sophisticated investors to look elsewhere.
Marcus Invest4.0 Bankrate Score
Marcus Invest offers the core feature of a robo-advisor – portfolio management – and then adds some twists, such as several portfolio types, all for a cost-competitive fee. It’s a great add-on for current Marcus customers, though some features of higher-end robo-advisors such as tax-loss harvesting and an expansive toolset are missing.