As financial planning continues its rise, more and more advisors are getting the CFP certification, and an increasing number of firms – from insurance companies to wirehouses to RIAs and everything in between – have been incorporating financial planning into their offering to varying degrees. And now it looks like a new player is entering the space, likely to make a big splash: Vanguard.
In fact, the new “Vanguard Personal Advisor Services (VPAS) offering may have the potential to do to financial planning what their launch of the index fund has done to investment management: create a core, low-cost, basic "indexing" solution to everyone, above which any advisor must rise to deliver value and justify their cost. And priced at a 0.3% AUM fee with a $100,000 minimum (that may soon drop to $50,000), the “Vanguard Financial Planning Indexing” solution may be very disruptive to both “robo-advisors” and today’s traditional advisors as well.
Ultimately, this won’t be the end of individual financial planners – in fact, Vanguard’s move, including the decision to use real human advisors who are CFP certificants and not be a "robo-advisor" – validates the importance of financial planning and the value of getting it from a real human being. Yet at the same time, the sheer size that Vanguard already has creates the potential for it to instantaneously reach the requisite volume of clients to achieve both operational and marketing scale. For individual advisors to survive and thrive, it will become more necessary than ever to gain further expertise, specialize, establish niches, and create ways to differentiate themselves from the new low-cost financial planning “indexing” Vanguard solution.