Vanguard's Lesson on Great Client Communication

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If you ask a group of advisors what they do really well, most often client communication tops the list.

The reality? For most advisors, how they communicate with clients is stuck in the past, a throwback to the pre-Internet days of the 1980s and early 1990s. That’s why advisors can learn from Vanguard, whose advice platform is adding $5 billion in assets a month, in part by making videoconferencing a core part of how it communicates with clients.

The Vanguard advice story

When you look at how advisors communicate today, the focal point is regular face-to-face updates and annual reviews, supplemented by periodic phone calls. While advisors have replaced printed newsletters that go out in the mail with online newsletters; and some send out weekly emails, for the large majority of advisors, the most important way that they communicate with clients is still their face-to-face meetings. As a result, when it comes to their personal interaction with clients, most advisors make little or no use of technology. Contrast that with the success of Vanguard’s Personal Advisor Services in using a hybrid digital and personal approach to deliver advice. Fueled in part by research that 60% of Baby Boomers use an advisor to inform their investment decisions, Vanguard began piloting this service in the 2013, offering personal advice to clients with at least $100,000. With a particular focus on investors planning for retirement, for an annual fee of 30 basis points, clients get:

  • Advice

Vanguard provides an ongoing relationship with an advisor, delivered by phone and videoconferencing over their computer. There is no limit to how often clients can contact Vanguard advisors with questions.

  • Financial planning

During the onboarding process, clients and advisors work to create a goal-based financial plan. A key focus of this plan is on retirement planning, with a customized, tax-sensitive, total-return drawdown strategy aligned with clients’ financial goals. Some of the issues that advisors discuss include maintaining clients’ lifestyle in retirement, incorporating Social Security benefits and planning for future medical costs, college tuition for family members and bequests.

  • Portfolio construction and rebalancing

Using principles of strategic asset allocation and implemented with Vanguard funds, a diversified, low-cost and tax-efficient portfolio is developed for each client. And as markets move, portfolios are rebalanced every 90 days, creating an opportunity for advisors to reach out to clients.

During its initial two year pilot, assets in Personal Advisor Services grew to $7 billion. In May of 2015 Vanguard lowered the minimum for this service to $50,000. Clients at that level of assets were assigned to a pool of advisors that they could contact with questions. Clients with accounts over $500,000 were assigned to a dedicated advisor who became their ongoing point of contact.

In March of this year, less than two years after lowering their minimum, assets in Vanguard’s Personal Advisor Services program had grown to $65 billion. Since then, they have grown by $5 billion a month, reaching $93 billion by the end of September.