Vanguard Aims to Attract Younger Investors With New Robo Service
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What is the main topic discussed in this episode?
Here's your money briefing for Tuesday, June 16th. I'm J.R. Whalen for The Wall Street Journal. Over the past few years, financial firms have rolled out automated robo-advisory services to try and attract younger investors and help them build savings and manage retirement accounts. Joining the trend is Vanguard, which administers more than 1,500 401k retirement plans.
Sort of the next frontier, and what a lot of employers are now trying to do, is to help people who want to be engaged in the process to come up with something more customized and more suited to their individual needs.
What new robo-advisory service is Vanguard launching to attract younger investors?
That's our retirement reporter, Ann Tergesen. Coming up, she'll explain what robo-advisory services can and can't help customers do.
Baby boomers hold trillions of dollars in assets, and as all that money starts getting transferred over to a younger generation, Vanguard Group hopes to capitalize on their need for financial assistance. Soon, it'll be rolling out a new automated, or robo, investment service. Our retirement reporter Anne Tergesen joins us with more. So Anne, what specifically will Vanguard's new robo service assist investors with?
How will Vanguard’s robo service position itself between target-date funds and full financial advisors?
It's a service that's intended to be sort of a middle ground. It's in between a target date fund where you just put your money in and the fund decides to generically invest you in a certain percent of stocks and bonds. So it's a middle ground between that and sort of more of a full service financial service advisory service where a financial advisor might help you with a whole huge range of things that you might need help with. This is meant to be a middle ground. It's intended for... Generally, for either younger investors or people with relatively less complicated financial lives, it's not intended for people who are in retirement and might need help with trying to figure out how to turn their nest egg into a regular source of income.
So it's intended for people who are still saving for retirement at a basic level. It's going to help them figure out how much they need to be saving in order to meet their retirement goal. The company very soon plans to roll out sort of an addition to that, which will help people decide if they have debt, how to best pay it off, especially if they have more than one source of debt. And then ultimately in the future, the company wants to sort of expand that in order to help people who have the capacity to
What specific features will Vanguard’s robo offering provide for saving and debt management?
put money somewhere. And the question is where, you know, should I prioritize saving for retirement or saving for another goal? Or should I prioritize paying down debt? So they want to help people answer those questions.
Now, this new robo service looks like it's part of a wave of efforts by investment houses and employers to get young people to understand the value of putting away money.
Within 401k, there's been really great strides made over the past 10 years towards automating things, right?
Who will be eligible to access Vanguard’s robo service and how will it be rolled out to 401(k) plans?
So first of all, if you're not in the 401k plan and you join a company, they will automatically enroll you and they'll automatically enroll you maybe at 3% of your pay. And in a lot of cases, companies will automatically raise that contribution rate. So it's been great because for people who aren't engaged in the whole process, that's been a way to sort of help them, right? do the right thing for themselves without even having to rely on them taking any initiative. But sort of the next frontier and what a lot of employers are now trying to do is to help people who want to be engaged in the process to come up with something more customized and more suited to their individual needs. So this is an example of this drive for better customization.
And Vanguard, of course, does it at a very low price.
Now, where will these services be available within Vanguard?
What limitations does the new robo service have compared with Vanguard’s full-service advisory option?
So they're going to be available to people who have 401ks at Vanguard and also to people who are customers of Vanguard's retail brokerage firm. And within 401k, I should say that, you know, these services will be rolled out over the coming months to 401k plans. And the plans themselves will have to decide whether they want to make them available to participants.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:05–0:41
2
What new robo-advisory service is Vanguard launching to attract younger investors?
0:41–1:22
3
How will Vanguard’s robo service position itself between target-date funds and full financial advisors?
1:22–2:34
4
What specific features will Vanguard’s robo offering provide for saving and debt management?
2:34–3:02
5
Who will be eligible to access Vanguard’s robo service and how will it be rolled out to 401(k) plans?
3:02–3:52
6
What limitations does the new robo service have compared with Vanguard’s full-service advisory option?
3:52–4:33
7
How might Vanguard’s brand and scale affect the adoption of its robo-advisory service?
4:33–6:20
Speakers
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