The Van­guard Cy­borg Takeover

March 28 — April 3, 2016 ▶ ▶ The No. 1 mu­tual fund com­pany wants waants to own ▶ ▶ The star­tups rtups “are are go­ing up again­sta­gain st firms­fi­firms with chea chea­pap ad­vice tril­lion tril­lion­sns of­dol­lar­so­fof dol­lars of as­sets as­sets”

Bloomberg Businessweek (North America) - - Markets / Finance -

Van­guard Group has grown to $3.4 tril­lion ion in inn as­sets by bby dom­i­nat­d­dom­i­nat-i ing sales of low-cost loow-cost in­dex mu­tual funds, the he ul­ti­ma­teult­ti­mate do-it-your­self in­vest­ments. ents.. Now it’s seized an early lead d in a new busi­ness: in­ex­pen­sive fi­nan­cial­fi­nan ncial ad­vice.

Au­to­mated,matedd, Web-based “robo ad­vis­ers”dvis­ers” such as the star­tups Bett Bet­ter­ment­ter­ment and Wealth­frontalthf front have at­tractedd a loot lot of at­ten­tion in the in­vest­ment vest­m­ment in­dus­try. But Vang­guard’s Van­guard’s new Per­son­al­son­aal Ad­vi­sor Ser­vices plat­form, which com­bines om­bi­ines tech with hu­man man ad­vis­ers reached by phonep phone or video chat,at, iss is draw­ing more money.oneyy. From its of­fi­cial launch auncch last May through De­ceem­ber, De­cem­ber, it brought in $121 $12 bil­lion in as­sets. . That’s Thaat’s four times the e am­mount amount held by ei­therr Bett­ter­ment Bet­ter­ment or Wealth­front hfront and more thanan twwice twice as much as th thehe au­to­mat­ededad­vice plat­form­latfo orm Charles Schw Sch­wab­h­wab in­tro­duced­ced in n early 2015.15.

Van­guard’sard’s s mas­sive scalee is one ad­van­tage:ge: Morem More than 90 per­centent off clients had an­other conn con­nec­tion nec­tion to the com­pany,pany y, such as a re­tire­ment ac­count. The ad­di­tion of real peo­plele peo­ple maym may be help­inghel help­ingi as w well. ““ThereT is some­thing about about­money­money that t is dif­fer­ent from book­ing a ho­tel,” s says Na Nancy Koehn, a Har­vard Busi­ness Schoo School pro­fes­sor. “Peo­ple have anx­i­etyy anx­i­ety abou about money. I think the hu­man eele­men el­e­ment mat­ters even if you don’t usse use it.”

Robo- Robo-ad­vis­er­advviser a apps and web­sittes web­sites gui guide in­vestors tthroug through a se­ries of qu­ues­tio ques­tions about theirr their age, salary, fi­fi­fi­fi­fi­fi­nan­cial fi­nan­cial gogoals, goals, a and risk tol­er­ance.tol­er­an­nce. Th They then usu­al­lly usu­ally inve in­vest in one of sev­er­al­sev­er­ral mo model port­fo­lio port­fo­lios,os, wh which are maade made up of a mix off of low-c low-cost ex­chan ex­change-trad­ed­nge-tra in­dex ffunds. funds. The pro­gram pro­gramsms au­tomataut ically buuy buy and sell fund shares to keep as­sets inn in balan bal­ance, while gr­rad­ual grad­u­ally ad­justin ad­just­ingng the mix to low­err risk a as the in­vestor aages. ages. W While a hu­man in­vest­ment ad­viser may c charge 1 per­cent of as­sets per year, robo ro­bos may charge 0.25 per­cent or les less. The Sch­wab In­tel­li­gent Portfo Port­fo­lios ser­vice is free—it earnssearns reven rev­enue in part by in­vest­ing clientts’ clients’ mo money in Sch­wab- Sch­wab-man­aged­man­aged ETFSS. ETFS. Van­guard is a lit­tle moree more expe ex­pen­sive, at 0.30 per­cent per year. Aft­ter Af­ter ans an­swer­ing ques­tions on­line, new cu­us­tom cus­tomers must speak to an ad­viser emm­ploye em­ployed

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