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Vanguard's planned robo poised to shake up automated investing

In a move sure to disrupt the automated advice market, mutual fund giant Vanguard is planning to launch its own purely digital robo advisor.

According to an initial filing with the SEC, the company is piloting a service called Vanguard Digital Advisor, which will offer $3,000 account minimums and fees of 15 basis points.

That is even less than the entry level and cost for its hybrid digital advice service Personal Advisor services, which still stands as the only digital provider with over $100 billion in assets under management.

Vanguard is cutting commissions for 15 mutual fund shares.

“This product will undercut the cost of most of the other digital advice products available today with a cost, including the expenses of the underlying ETFs, of just 0.20%,” said David Goldstone, head of research at Backend Benchmarking. “This product will increase an already highly competitive market for digital-only advice products and amp up pricing pressure in an industry that already operates on thin margins.”

When contacted for comment, the mutual fund giant declined to elaborate on its plans. “Vanguard is in the early stages of a pilot for a new advice service,” said Vanguard spokesman Charles Kurtz.

The direct-to-consumer robo launch would come after a number of robo independents abandoned the digital-only model to add human advisors to their services.

"In terms of the digital advice business, it’s clear that the commoditization of the robo business is being slowly replicated in the planning space," says Will Trout, senior analysts at Celent. "Meaning more pressure on financial planning vendors and the banks and wealth managers using their platforms."

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