Vanguard Digital Advisor Review 2024 (2024)

One of the main jobs of a robo-advisor is to direct your savings into a diversified portfolio of securities to help you reach your financial goals. You might not really need anything fancy to accomplish this task. In fact, you could open an online brokerage account right now and build a diversified portfolio much like a robo-advisor would provide for you.

But that would take time and a certain amount of expertise. People lead busy lives, and many, if not most, are willing to pay a company to do the job for them. Hence, the proliferation of robo-advisor platforms over the past decade or so.

For new investors who are looking at robo-advisors for the first time, choosing a platform with the lowest fees possible should be one of the most important criterion. Young investors, then, should take a good, long look at Vanguard Digital Advisor, which meets nearly all of their needs while charging less than nearly any other competitor.

At the same time, Vanguard Digital Advisor isn’t for everyone. If you want to be able to chat with a human advisor about your financial situation, check out Vanguard Personal Advisor Services.

Most robo-advisors begin with a basic questionnaire to understand who you are and what you need, and Vanguard Digital Advisor is no different in this respect. When creating your account, you’ll start by answering a few questions that include standard things like your station in life—age, marriage status, income—and how much you spend and save.

Most interestingly, you’ll answer a series of questions to gauge your risk tolerance. Rather than ask abstract questions about how much you’re willing to gain or lose on a particular investment, Vanguard Digital Advisor offers several scenarios with an interactive slider so you can actually test your mettle.

From there, you’ll provide a range of when you expect to retire, and the platform will give you an estimate of your Social Security earnings (you can enter your own amount, if you wish) and indicate whether you’re planning on earning extra income in retirement.

Once this process is complete, Vanguard Digital Advisor presents you with a review of your retirement goals, replete with savings projection charts and a determination of whether you’re on the way to fully funding your goals. You then select a tax-advantaged retirement account or a taxable brokerage account to pursue your goals, though there is a $3,000 minimum balance requirement. Employers can also enlist Digital Advisor’s services for their employees; eligible 401(k) accounts only have a $5 minimum balance.

Vanguard Digital Advisor populates your investment portfolio with Vanguard exchange traded funds (ETFs). How much of your balance is allocated to each ETF depends on your risk tolerance and financial goals.

The four ETFs employed by Vanguard Digital Advisor for a middle-aged male with a moderate risk tolerance included the following:

• Vanguard Total Stock Market ETF (VTI), expense ratio 0.03%
• Vanguard Total International Stock ETF (VXUS), expense ratio 0.07%
• Vanguard Total Bond Market ETF (BND), expense ratio 0.03%
• Vanguard Total International Bond Market ETF (BNDX), expense ratio 0.07%

Expense ratios are accurate as of February 2023. For more information about Vanguard funds and to obtain a prospectus, please visit their site. *

Vanguard’s strategy ensures your portfolio will be cheap and easy-to-understand. Contrast this approach with the likes of Wealthfront and Betterment, which are liable to add around a dozen funds to their users’ portfolio, some of which may come with higher expense ratios.

Like other robo-advisors, Vanguard Digital Advisor keeps tabs on your portfolio and automatically rebalances the funds should you end up owning too much of a particular asset class, depending on your risk tolerance and financial goals.

Alas, not all of Vanguard Digital Advisor is so delightful. The $3,000 minimum balance requirement can be daunting for some, especially when beginner-friendly competitors like Acorns or Ellevest require $5 or less to start, and there aren’t many of the features that you’ll find at other robos, like tax-loss harvesting.

You also won’t have access to real-life financial advisors, even for a fee, to answer your questions.

This service comes at a low price, but determining just how low may be a little complicated.

Vanguard charges an annual gross advisory fee of 0.20%, which is less than Betterment and Wealthfront and much less than tiered programs like Ellevest and Acorns for low balances. For instance, $3,000 invested in Acorns’ middle tier costs $36 a year but would come out to roughly $6 with Vanguard Digital Advisor.

Unlike other robos, Vanguard Digital Advisor includes the expense ratios of the ETFs held in your account in its annual fee, which often effectively drops its advisory fee closer to 0.15%. With other platforms, you pay these expense ratios in addition to any advisory fees they charge.

Many robos try to over complicate their services in an effort to justify their fees. More funds in your portfolio, for instance, does not necessarily mean better returns. Vanguard Digital Advisor, on the other hand, takes a different tack. The low-fee operator will put you in the ETFs you need to be in to reach your goals while charging less than most of its competitors. Though it’s often overlooked, nixing your fees to the bone will allow you to more easily build up savings over time thanks to compounding returns. The Digital Advisor interface itself is simple to set up and use.

But you’ll receive more than just value. Through a few questions, the robo nicely illustrates where you currently stand on your quest toward financial independence and what you need to do to complete the journey. This process also demystifies what it’ll take to live in retirement without fear of running out of money.

While low fees are paramount, at least some extras would be welcomed. The service is still in its infancy, so hopefully more features are rolled out over the following months (like ways to direct your idle cash to build an emergency fund) that will help savers save.

The biggest issue, though, is the $3,000 minimum required to invest. This robo service is best for those just starting out, and those just starting out happen to be the ones least likely to be able to part with $3,000.