Vanguard Personal Advisor Services (PAS), which melds robo-advisory features with human advice, is stoking fear among advisors, who liken the impact the fund manager has on a market to Amazon.com, Inc. (AMZN), the nation's largest e-commerce player. According to a report in The Philadelphia Inquirer, Vanguard is doing brisk business with Personal Advisor Services, which ended the first quarter with $106 billion in assets under management. Last year, the fund company hit the $100 billion mark for PAS, which came online in 2015.
But because Vanguard charges only 0.3% per year for the robo-advisory portfolio and human hand-holding, it is worrying advisors about the impact it will have on the industry. After all, price wars are common, and Vanguard has built its business on low-cost investing. For those who invest more than $25 million, the fee declines to 0.05% annually, noted the report. While Vanguard spokeswoman Emily Farrell told the paper that the fund company has no plans to lower the fees any time soon, it is not stopping advisors and competitors from worrying.
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"Investors are so sensitive to fees that we see Vanguard's influence all over the place," said Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, in the report. "That's why Vanguard's PAS is the scariest three letters to financial advisers. It's the Amazon of finance – if Amazon goes into a business, everyone shudders, and it's the same with Vanguard."
Heading into 2018, Vanguard Chief Executive Mortimer J. "Tim" Buckley said that the company is focusing on its Personal Advisor Services in the near term to grow customer assets, which currently stand at more than $5 trillion. In an interview with The Wall Street Journal in January, Buckley said that Vanguard will invest more into that service, pointing out that one of the biggest expenses in that business is getting clients signed up and understanding what their investment needs are. Both of these obstacles can be eased with the use of technology, the chief executive said. "Once that's done, you can scale the business very well," Buckley told The Wall Street Journal at the time. The service is geared toward clients with $50,000 or more in investable assets.