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Vanguard Digital Advisor review 2022

Bankrate senior reporter James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more.

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Vanguard Digital Advisor Logo

Best For

  • Newer investors
  • Vanguard investors
  • Investors focused on low costs

Vanguard Digital Advisor brings a low-cost option for investors who are looking for a no-frills approach to professional management from the company that pioneered fund investing. The service offers all the fundamentals, including portfolio management, rebalancing, some tools and plenty of education, a Vanguard specialty. Predictably, a Vanguard robo-advisor scores well for low costs, but doesn’t offer some of the other features, such as tax-loss harvesting, that have become standard for premium services. Finally, don’t confuse Digital Advisor with Vanguard’s similarly named Personal Advisor, with its higher fees, more perks and a steeper minimum. 

If you’re looking for a more full-featured robo-advisor, you could consider Betterment, the top performer in Bankrate’s 2022 reviews, as well as Wealthfront, another top scorer. Both offer premium features at only a slightly higher price point and investing tools and education, too. 

Vanguard Digital Advisor at a glance

Star Rating

3.5
  • Cost: 5 of 5
  • Investments and Portfolios: 3 of 5
  • Account Types: 3 of 5
  • Features and Tools: 3.5 of 5
  • Customer Experience: 4.5 of 5
  • Account Minimum:
    $3,000
  • Management Fee:
    About 0.15 percent of assets annually
  • Portfolio Mix:
    Built with four Vanguard ETFs: two stock funds and two bond funds
  • Fund Expense Ratio:
    About 0.05 percent
  • Account Types:
    Individual taxable, Roth IRA, traditional IRA, rollover IRAs and eligible 401K plans
  • Cash Management Account:
    No
  • Customer service:
    Phone Monday to Friday 8 a.m. - 8 p.m. ET; email support
  • Tax Strategy:
    Optimizing asset location, minimizing taxes on sale
  • Rebalancing:
    Yes, if drifting more than 5 percent
  • Tools:
    Vanguard calculators, videos and articles, debt payoff tool, screeners
  • Promotion:
    None

 

Pros: Where Vanguard Digital Advisor stands out

Low costs

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 many 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). 

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.

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 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. 

Quick comparison of Robo-Advisor options:
Robo-Advisor Overall Rating Cost Rating Investments and Portfolios
Vanguard Digital Advisor logo
5 3 of 5
Wealthfront review 2022 logo Read Our Review
5 4 of 5
Betterment review 2022 logo Read Our Review
5 5 of 5
Schwab Intelligent Portfolios review 2022 logo Read Our Review
5 3.5 of 5

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. 

Account minimum

Digital Advisor definitely requires a higher upfront commitment than most rivals (Schwab Intelligent Portfolios being 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 you hold it 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.

Bottom line

For now, Vanguard Digital Advisor is still something of a work in progress, having launched in the middle of 2020. Still, it can offer a lot for investors: 

  • Digital Advisor makes a better pick for newer investors and those who have a Vanguard account already and simply want Vanguard’s robo-advisor to run the show at a modest cost.
  • The low all-in cost is one of the best reasons to consider this robo-advisor, with your cost capped at $20 annually for every $10,000 invested. And you’ll also get Vanguard’s educational offering and its tools, which can help you manage your financial decisions. 
  • However, the lack of more standard features such as a cash management account or higher-end features such as tax-loss harvesting mean the account may be less attractive for more sophisticated investors. 

Those looking for another low-cost option with strong street cred might turn to Schwab Intelligent Portfolios, which doesn’t charge a management fee and uses Vanguard funds, too. Other feature-rich picks include Betterment and Wealthfront, both independent robo-advisors.  If cost is your only consideration, SoFi Automated Investing or M1 Finance could be good options. 

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