HOLLYWOOD, Fla., Jan. 25, 2016 /PRNewswire/ -- Vanguard CEO Bill McNabb called on financial advisors to seize the opportunity presented by forces transforming the advice industry and show how they can add value for investors.
During a speech at the ETF.com "Inside ETFs" conference, Mr. McNabb said financial advice is evolving, driven by changing demographics, technology, and a more powerful consumer. It's a time of change, but also "tremendous opportunity" for advisors, he said.
"Financial advice is having a moment," Mr. McNabb said. "The rise of more technology-based solutions has made advice part of a national conversation in the financial press and in the popular media. The best advisors are seizing this moment to tell their story."
Mr. McNabb said there are five critical considerations for advisors.
We are in a low-cost revolution. Today's investor expects to pay less for investment funds and services. Robo offerings are creating a new pricing floor. A traditional advisory firm can provide the in-person, individualized services that a robo advisor cannot. However, traditional advisors cannot hang their hat on that fact alone.
Advisors must adapt to a changing industry. Financial advice is evolving and technology is part of that evolution. Most advisors have been using financial technology tools for years. How can advisors further automate routine elements of their practice and digitize and mobilize some of the client experience?
In some ways, the world is not as complex. Investments are becoming more commoditized. Portfolio construction also is becoming commoditized. These functions can now be largely automated through model portfolios and even through target-date funds. That's no longer a differentiated selling point for advisors.
In other ways, the world is not a simple. For most investors entering retirement, advice is the answer. And with the Baby Boom generation now entering retirement, demand for advice is great. The questions retirees face are increasingly complex. Rules of thumb and single-product solutions rarely provide a complete answer.
Advisors must tell their story. To differentiate themselves, advisors must explain their value proposition.
Vanguard is a strong believer in advice and financial advisors, and has been helping advisors to tell their story for many years, Mr. McNabb said. Most recently, the firm published research showing how advisors can add up to 3% in net portfolio returns over time for their clients with Vanguard Advisor's Alpha™, a wealth management framework that focuses on portfolio construction, behavioral coaching, asset location, and other relationship-oriented services.*
"These elements create real value for clients," Mr. McNabb said. "It's a truly compelling story."
A leader in ETFs
Vanguard offers 68 low-cost ETFs in the United States, with more than $483 billion billion in assets, an increase of 13.2% from year end 2014. Vanguard continues to be among the leaders in ETF cash flow and assets. Investors entrusted more than $75 billion to our ETFs in 2014 and more than $76 billion in 2015. The firm manages some of the industry's largest ETFs, including the $57.4 billion Vanguard Total Stock Market ETF (VTI), $40.4 billion Vanguard S&P 500 ETF (VOO), and $34.5 billion Vanguard FTSE Emerging Markets ETF (VWO).
Vanguard is one of the world's largest investment management companies. As of December 31, 2015, Vanguard managed more than $3.4 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers more than 300 funds to its more than 20 million investors worldwide. For more information, visit vanguard.com.
All asset figures as of December 31, 2015, unless otherwise noted.
*Vanguard research shows that an advisor can help an investor potentially earn more in net portfolio returns over time by following the Vanguard Advisor's Alpha™ principles discussed in detail in our recent research paper. This research isn't an exact science. The potential earnings of up to 3% more aren't added over a specific time frame but can vary each year and according to your situation. The added value can materialize quickly and dramatically—especially during times of a rapidly rising or falling market, when you may be tempted to abandon your well-thought-out investment plan—or it may be added slowly. Source: Francis M. Kinniry Jr., Colleen M. Jaconetti, Michael A. DiJoseph, and Yan Zilbering, 2014. Putting a value on your value: Quantifying Vanguard Advisor's Alpha. Valley Forge, Pa.: The Vanguard Group. vanguard.com/advisorvalue
Advice services are provided by Vanguard Advisers Inc., a registered investment advisor.
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U.S. Patent Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623.
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