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Vanguard to roll out robo technology to advisors

Following the initial success of Vanguard’s direct-to-consumer robo advisor, financial planners can expect access to the technology in the future, according to Tom Rampulla, head of Vanguard’s Financial Advisor Services division.

“We’re getting a lot of requests from [advisors] to perhaps use that technology with them, so we’re in the process of working on that,” Rampulla tells Financial Planning. “We’ll be rolling that out at some point to give [advisors] the ability to use technology that has been proven to help with their business — different types of software to do their business and make them scalable.”

A Vanguard spokesman confirmed the company is “in the beginning stages of building out those capabilities.” He said it was too early to provide further details on the offering or a timeframe of availability.

Vanguard plans to expand its application of blockchain in early 2018.

The firm’s four-year old robo offering, dubbed Personal Advisor Services, has $130 billion in AUM, according to Vanguard. It is one of several hybrid robo advisor offerings for retail clients. Personal Advisor Services charges 30 basis points, compared to Betterment’s 40 basis points for its hybrid offering and Schwab’s $30 a month with a $300 initial fee. Betterment and Schwab also offer the technology behind their robo to advisors.

Vanguard’s move would expand its existing business with financial advisors. While Vanguard may be better known for its retail offerings, advisors manage about 35% of the $5.6 trillion in AUM at Vanguard, according to Rampulla. Launched in 2002, the firm’s financial advisor services unit caters to 60,000 advisors from firms such as Merrill Lynch and Creative Financial Planning.

“It’s grown like crazy,” Rampulla says.

The firm offers advisors education and consulting, such as coaching on portfolio gaps or on articulating their business model. The company also gives advisors tools, including one that runs an advisor’s portfolio and provides risk metrics and analysis as well as a web portal with access to marketing materials.

“Different advisors are offered different things depending on how large they are and how deep the relationship is,” Rampulla says.

Rampulla’s team has had conversations with advisors who were initially skeptical with Vanguard’s hybrid robo.

“We have no intentions of going out in the marketplace and having Vanguard advisors all over the country face-to-face. We’re built for scale, not that customization,” Rampulla says. “Over 90% of our clients are existing Vanguard clients, and have been asking us for something like this for quite some time,” he says.

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