- AUTOMATED INVESTING
- BEST ROBO-ADVISOR COMPANIES
Comprehensive goal-planning tools for those with at least $3,000 to invest
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- Account Minimum: $3,000 ($5 for eligible defined contribution plan participants)
- Fees: 0.15%-0.20%
Our Take
Since Digital Advisor's launch in 2019, the team at Vanguard has continuously evolved the offering to better provide personalized, convenient advice. From its creation, the core strength of Vanguard’s offering has been passive management of your assets using some of the best low-cost index funds in the industry.
Over the past year, however, Vanguard’s digital investment management platform has seen major upgrades. This includes the addition of tax-loss harvesting, an ESG portfolio, active funds, select municipal bonds, custom goal planning and optimization, a spousal experience, and Medicare match. While Vanguard Digital Advisor still steers far clear of cryptocurrency, it has started allowing non-Vanguard securities into portfolios when it is in clients' best interest. We’ll look at the enhancements and the other features of Vanguard Digital Advisor to help you decide whether it is the right fit for your portfolio needs.
Pros and Cons
- Account setup is fast and easy
Account setup is fast and easy
- Can see custom portfolios before you invest
Can see custom portfolios before you invest
- Relatively low cost versus other offerings
Relatively low cost versus other offerings
- Upgraded goal planning
Upgraded goal planning
- ESG and tax-loss harvesting options
ESG and tax-loss harvesting options
- $3,000 minimum investment
$3,000 minimum investment
- No individual stocks
No individual stocks
- Banking services not available
Banking services not available
Account Overview
Account Setup
Investors who’d like to set up a Vanguard Digital Advisor account can do so completely online. There’s a $3,000 minimum in order to open an account, which is one of the highest of all the robo-investing platforms we reviewed.
As part of your onboarding to Digital Advisor, you will go through a risk assessment to determine your tolerance and timeline. You are able to see your recommended portfolio prior to funding your account, and your responses to the risk assessment will inform what customizations are presented to you. Portfolio options include all-index, active, ESG options, and municipal bonds. Portfolios are also customizable and can be adjusted based on a specific goal or target date.
If you are transferring in an existing portfolio from another brokerage, Digital Advisor will give you the option to retain eligible investments and swap them out over time for more tax-efficient transfers.
Source: Vanguard
Goal Planning
Vanguard’s Digital Advisor solution offers an improved suite of retirement planning tools as well as planning tools for large purchases (such as a home, vehicle, or college expenses). In addition to retirement planning and custom goal-setting, Digital Advisor also offers other specific planning tools to help investors reach their goals. These include:
- Next Steps: Helps guide investors through a digital experience to ensure they’re taking the necessary steps to meet their goals
- Rainy Day Tool: Provides guidance on how to set up emergency savings goals
- Debt Calculator: Helps investors learn how to pay off debt as efficiently as possible
- Medicare Match: Uses investor preferences for certain insurance features and health status to help them choose which Medicare plans align with their needs
- Health Care Cost Estimator: Maps out healthcare expenses by estimating healthcare costs and long-term care expenses based on user inputs
- Social Security Optimizer: Provides guidance for claiming Social Security and shares options for mortality-weighted lifetime benefits and early and late claiming ages
- Goal Optimization: Gives recommendations to improve the likelihood of investors achieving their financial goals
Vanguard Digital Advisor’s approach to goal-setting is unique in that all the funds you deposit into the platform are invested in a single portfolio, with the multiple goals and timelines informing the strategy for the whole rather than splitting it into separate goal buckets. Vanguard believes this approach is better positioned to help you achieve your long-term goal of retirement while accounting for other large financial goals that come up along the way. As part of the goal-setting process, you will see projections and risk glide paths to understand how they will change based on additional goals.
In 2024, Vanguard has expanded its goal-planning capabilities and introduced a multi-goal strategy where a single goal can be given multiple target dates. This capability is specifically meant to support the education savings goal where you will need the money over a period of years rather than all at once.
INVESTOPEDIA ROBO-ADVISOR SURVEY
According to Googlawi's 2023 Robo-Advisor Consumer Survey, when asked to choose from a list of up to three top investment goals that they are most likely to use their robo-advisor to plan for, the majority of respondents said they use these digital wealth management platforms to invest for large purchases like houses, vehicles, and travel.
Account Services
When you set up a Digital Advisor account at Vanguard, you can combine self-directed trading and robo-advising—in the sense that both are available through Vanguard. The balance of your self-directed account will be considered when the platform does projections, but holdings there will not impact how your Digital Advisor manages the automated portfolio. You can also integrate your Digital Advisor account with other banking or brokerage accounts for easy account transfers and include these accounts as considerations in your goal planning.
However, the Vanguard Digital Advisor platform does not offer direct access to banking services, margin, or charitable giving options.
Vanguard Digital Advisor supports five different types of accounts:
- Individual taxable
- Joint taxable
- Traditional individual retirement account (IRA)
- Roth IRA
- The 401(k) in select Vanguard record-kept plans
Cash Management
While Vanguard does not offer banking services, it does offer automatic sweeps for excess cash balances. This excess cash is invested in the Vanguard Cash Reserves Federal Money Market Fund or the Vanguard Federal Money Market Fund, both of which pay interest rates that are some of the most competitive in the industry. These funds have an expense ratio of 0.10% and 0.11% respectively and both have a seven-day yield over 5.28% as of February 2024.
If you need to withdraw money from your account, there’s a seamless online process that lets you choose which account to draw from, how much to withdraw, and where to send it. Vanguard has also opened up the Cash Plus account for Digital Advisor clients to move funds into, but this operates outside of the money market sweep. Vanguard Cash Plus gives you a bank-insured account to move cash into with a higher-than-average interest rate (currently 4.7%) and the ability to pay bills.
Portfolio Construction
Digital Advisor leads with low-cost, highly diversified Vanguard mutual funds and ETFs. This is a hallmark of its services and is designed to meet a multitude of investor needs and preferences. Portfolios are comprised of index funds, actively managed funds (including funds that are exclusively available to Vanguard’s advised clients), and municipal bonds. Vanguard doesn’t offer fractional shares, but cash balances are invested as soon as possible and swept into a money market fund when idle. Digital Advisor can include non-Vanguard securities now when it works for the portfolio needs.
Vanguard doesn't reach into the realm of alternative assets like cryptocurrency and likely never will. The firm has built an entire brand around passive investing for the long term, and crypto doesn't exactly fit in that outlook.
Available Assets
Portfolio Customization
Digital Advisor clients can’t place trades for individual stocks, specific mutual funds, fixed income (besides muni bonds), REITs, or any other asset classes, like crypto or forex. International stocks and bonds are also not available to trade. Vanguard’s passive investing approach leans heavily on time and diversification, so hedging strategies are also absent. Vanguard does offer socially responsible or ESG investments to Digital Advisor clients who want them, in addition to the aforementioned active funds seeking to outperform indexes.
Much of the portfolio customization is done by the system based on your responses and your external holdings. Vanguard Digital Advisor considers your overall diversification and creates a complimentary portfolio that will meet your needs. The portfolio that Vanguard Digital Advisor puts together is customized exactly to you, but it is not customized by you.
Portfolio Management
Digital Advisor evaluates investor portfolios daily and rebalances when needed to keep them in alignment with target allocations. Portfolio allocations are also adjusted based on their glide path toward retirement or other financial goals. Real-time reporting on progress toward goals is available, and Digital Advisor considers synced external accounts for goal planning and management. Investors who want to harvest tax losses in taxable accounts can also do so through Digital Advisor. The portfolios are built to be tax-efficient by default for non-IRA accounts, and then tax-loss harvesting algorithms monitor daily for opportunities to reduce the overall tax burden on the portfolio.
User Experience
Desktop
Vanguard offerings are designed to make low-cost investing widely accessible. The company serves investors of all experience levels, as well as financial advisors and institutions. With so much information available, there can be a lot to sift through. But navigating Vanguard’s account services is relatively simple and straightforward.
Vanguard’s desktop web experience is relatively clean. In addition to Digital Advisor, information is also available on Vanguard’s managed investments as well as other accounts and services. Vanguard’s main website is also where you’ll find free educational resources and tools. The one big thing missing from Vanguard is other financial services like banking.
Mobile
In addition to its website, Vanguard also offers an iOS app and an Android app that investors can use to manage their accounts. Vanguard’s Digital Advisor accounts are accessible through the app, as are self-directed brokerage accounts. You can do all of the same functions on the app—deposit, withdraw, view holdings—as you can on the desktop interface.
Customer Service
- Phone support on weekdays from 8 a.m. to 8 p.m. ET
- FAQs specific to Vanguard Digital Advisor
Vanguard doesn’t offer online chat for prospective or existing customers. If you become a client, there are no licensed advisors to help you. However, customer service is available to help with account-related issues from Monday to Friday between 8 a.m. and 8 p.m. ET.
Security
Vanguard’s website is encrypted and two-factor authentication is available. Vanguard accounts are also covered by Securities Investor Protection Corporation (SIPC) insurance. Vanguard has an additional commitment to reimburse any funds that leave your account due to fraud, provided you have been following its recommendations for keeping your account secure.
Education
If you’re looking to learn about finance and investments, Vanguard offers a wide range of educational articles and videos. For account-related questions, there’s also a frequently asked questions page on the company website.
Commissions and Fees
Digital Advisor waives its advisory fees for the first 90 days after an account is set up. After the first 90 days, a credit system actually makes Vanguard cheaper than other robo-advisors that have similar annual fees but use non-proprietary funds with expense ratios.
For users that choose a Total Market All-Index Investment setting, a credit of approximately 0.05% will result in a net advisory fee of 0.15%. For the ESG All-Index Investment setting, approximate net advisory fees of between 0.09% and 0.11% will be charged. Finally, customers using an Active/Index Investment setting will see fees within an approximate range of 0.11% to 20%.
There are no additional fees aside from the advisory fee for Digital Advisor. The average underlying fee for ETFs is 0.05%, but these fees are credited back to your advisory fee if the funds are Vanguard or affiliated funds. Clients don’t get discounts on any other Vanguard products or services; however, there are also no termination fees if an account is closed.
For clients trying to direct their own investments, Vanguard has a separate fee schedule available.
*The figures above were compiled using Vanguard’s fee calculator estimating expense ratio credits for a standard all-index portfolio. Expense ratios are paid separately at the ETF level at most robo-advisories, so this column reflects a better comparable to Vanguard Digital Advisor’s competition.
The Bottom Line
A pioneer in low-cost index funds, Vanguard has expanded its automated investment offerings in recent years to cater to an even larger number of investors. Those capable of investing at least $3,000 get access to a range of automated portfolios, plus a number of customization options, including tax-loss harvesting and ESG investments. In addition to its low-cost investment options, Vanguard Digital Advisor also includes an incredible lineup of goal-planning tools where you can sync outside bank and brokerage accounts for consideration in goal planning.
Vanguard Digital Advisor consistently ranks highly among the lowest-cost robo-advisors thanks to its system of crediting underlying expense ratios against the management fee. The added features, enhanced goal-planning, and other tools come with no change to the fee schedule. Simply put, Vanguard Digital Advisor packs a lot of value for the dollar for investors looking to automate a portfolio along the passive investing lines Vanguard originally pioneered.
How Does Vanguard Digital Advisor Help You Save Money on Taxes?
Vanguard Digital Advisor starts with taxes in mind by using data from externally synced accounts to inform portfolio construction and ensure it is as tax-efficient as possible. Taxable accounts are further monitored daily for tax-loss harvesting opportunities and the algorithms are set up to avoid running afoul of wash sale rules.
What Are Vanguard Digital Advisor Fees?
Vanguard Digital Advisor charges no advisory fee for the first 90 days and then an annual fee of up to 0.20% or 0.25% of the assets being managed (depending on customizations selected). This fee covers the cost of all transactions, transfers, and rebalancing needed within your portfolio. It includes underlying fund expense ratios on any Vanguard-affiliated funds, which average just 0.05% for ETFs in an all-index portfolio.
What Are the Requirements to Use Vanguard Digital Advisor?
To use Vanguard Digital Advisor, clients must be at least 18 years of age, be a United States resident (or have an APO/FPO/DPO mailing address), and have an existing Vanguard brokerage account with a balance of at least $3,000. Investors also can’t be or live in the same household as a board member, executive, or person able to influence policy in a publicly traded company. Investors can also deposit a minimum of $3,000 to open a new account to use Digital Advisor.
Is Vanguard Digital Advisor FDIC Insured?
Money held at Vanguard Digital Advisor is not FDIC insured, but funds held at Vanguard are covered by Securities Investor Protection Corporation (SIPC) insurance. However, it’s important to note that this insurance does not protect against investor losses—it only protects investors if Vanguard or one of its funds fails. Funds held in Vanguard's Cash Plus account are FIDC insured up to $1.25 million for individuals and $2.5 million for joint.
Is Vanguard Digital Advisor Safe?
Vanguard Digital Advisor is generally considered safe. While it does not offer FDIC insurance, as it is not a bank, it does carry SIPC insurance above the standard $500,000 limit. The second-largest investment management firm in the world, Vanguard also uses robust security measures to protect clients' personal and investment information.
How We Review Robo Advisors
Providing readers with unbiased, comprehensive reviews of digital wealth management companies, more commonly known as robo-advisors, is a top priority of Googlawi. We used our 2023 consumer survey to guide the research and weightings for our 2024 robo-advisor awards. To collect the data, we sent a digital survey with 64 questions to each of the 21 companies we included in our rubric. Additionally, our team of researchers verified the survey responses and collected any missing data points through online research and conversations with each company directly. The data collection process spanned from Jan. 8,to Feb. 9, 2024.
We then developed a quantitative model that scored each company to rate its performance across nine major categories and 59 criteria to find the best robo-advisors. The score for each company’s overall star rating is a weighted average of the criteria:
- Account Services: 10.00%
- Account Setup: 5.00%
- Customer Service: 5.00%
- Fees: 15.00%
- Goal Planning: 21.00%
- Portfolio Contents: 17.00%
- Portfolio Management: 17.00%
- Security and Education: 5.00%
- User Experience: 5.00%
Additionally, during our 2023 research, many of the companies we reviewed granted our team of expert writers and editors access to live accounts so they could perform hands-on testing.
Through this all-encompassing data collection and review process, Googlawi has provided you with an unbiased and thorough review of the top robo-advisors.
Read more about how we research and review robo-advisors.
Separately, our research team conducted a survey of 205 U.S. adults aged 18 to 72 who are current clients of one of 18 robo-advisors. While the information collected did not influence the development of our ratings model, it was instrumental in gathering the valuable insights published in Googlawi's 2023 Robo-Advisor Consumer Survey.
Participants in our 2023 Robo-Advisor Survey opted in to an online, self-administered questionnaire from a market research vendor. Data collection took place between Aug. 30 and Sept. 15, 2023, with 11 video interviews conducted with volunteer respondents from Sept. 7 to Sept. 17, 2023. Multiple quality checks, including screeners, attention gauges, comprehension evaluations, and logic metrics, among others, were used to ensure only the highest quality responses were included.