Vanguard Digital Advisor Review: A Low Costs Champ

Vanguard Digital Advisor is a low-cost robo-advisor that stands out with its time-tested index fund approach that carries on the brokers long history of cutting fees for investors. In this Vanguard Digital Advisor review, we'll take a closer look at the pros and cons and how the robo-advisor works so you can decide if it’s a fit for you.

This advisor is a good fit for: Hands-off investors seeking a low-cost investment solution.

Top perks

Low fees

Vanguard Digital Advisor®'s all-in costs are 0.20%, which is a comprised of a targeted advisory fee (0.15%) and the expense ratio charged for investing in the funds held in your portfolio. Vanguard Digital Advisor®'s costs are among the lowest we've seen among robo-advisors.

Time-tested index fund investments

Vanguard pioneered the passive index fund 45 years ago with the idea that you don't need to do anything extraordinary (or pay extraordinary fees) to achieve excellent investment results. Vanguard has been able to deliver on this approach with its highly-coveted index funds.

What could be improved

No access to real-live advisors

If you want access to a real-live investment advisor or personal financial planner, you may be better off with one of Vanguard's more feature-packed competitors. Several other robo-advisors have human advisors, though they're generally far more expensive than Vanguard Digital Advisor®.

High minimum investment

To be fair, a $3,000 minimum investment isn't high from a historical perspective. Though it is on the higher end of the spectrum in the current age of zero-minimums. Obviously, this isn't an obstacle if you have $3,000 or more you're ready to invest, but Vanguard's price of admission is one of the highest among our top robo-advisors.

To enroll in Vanguard Digital Advisor®, you'll need a Vanguard brokerage account with at least $3,000 in it that is either a standard individual (taxable) account or a traditional or Roth IRA.

Once you enroll, Vanguard will invest your assets in a portfolio of four different Vanguard exchange-traded funds (ETFs). Allocations are custom-matched to your age, risk tolerance, and other factors. Vanguard Digital Advisor's four ETFs are:

• Vanguard Total Stock Market ETF
• Vanguard Total International Stock ETF
• Vanguard Total Bond Market ETF
• Vanguard Total International Bond ETF

Vanguard Digital Advisor® has a $3,000 minimum initial investment, which is on the higher end for robo-advisors we've seen. Many of its competitors have much lower minimums -- or none at all.

Vanguard Digital Advisor® is just a robo advisor in the purest sense of the word. Competitors offer services like automated tax strategies (tax-loss harvesting), virtual meetings with financial planners, and more. But, like most Vanguard products, Vanguard Digital Advisor® isn't intended to be a full-featured robo advisor. For a bare minimum of expense, Vanguard will construct a portfolio of basic index funds that will be a good match to your investment needs.

That said, Vanguard also offers several personal finance resources that clients might find valuable. It has a debt payoff calculator tool that can help customers get on the path to paying off credit card and other types of debt. In short, Vanguard Digital Advisor® aims to keep investing simple, but focuses on its clients' overall financial well being.

Retirement

In addition to standard brokerage accounts, Vanguard Digital Advisor® is available in both traditional and Roth IRA accounts for retirement savers who want to put their investment strategies on auto-pilot.

It's worth mentioning that the index funds used by Vanguard Digital Advisor® are essentially the same as Vanguard's target-date retirement funds. A target-date retirement fund is one that invests your money in an age-appropriate asset allocation, and then gradually adjusts your investment allocation as you get close to your "target" retirement date.

Vanguard Digital Advisor® takes this a step further. It doesn't only consider your age, it also uses other factors to construct your portfolio, like your personal risk tolerance. Essentially, Vanguard Digital Advisor® creates a custom-allocated Vanguard target-date retirement fund, which costs about the same as Vanguard's standard target-date funds.

Access to financial advisors

Vanguard Digital Advisor® doesn't include access to human financial advisors, which isn't so surprising considering the ultra-low fee structure. Some of Vanguard's competitors offer financial advisors, typically with a somewhat higher fee structure or a premium membership.

Vanguard is known for its low-cost investment options, and Vanguard Digital Advisor® is no exception. The Robo-advisor has a 0.20% all-in fee, which includes 0.15% targeted advisor fee and the expense ratio fees you'll have to pay for the underlying ETFs. -- this means on a $10,000 investment portfolio, you'll pay $20 in fees.

Vanguard offers customer service by phone Monday-Friday from 8 a.m. to 8 p.m. EST. While robo-advisory clients tend to need less support than standard brokerage clients, some of Vanguard Digital Advisor®'s competitors offer 24/7 phone support, as well as app-based, email, or other forms of customer service.

There's no such thing as a perfect robo-advisor, and Vanguard Digital Advisor® is no exception. It's is a solid product for people who simply want to put their investment strategy on auto-pilot, but its lack of features is perhaps its biggest shortcoming.

One possible alternative for investors with relatively large amounts of available cash is Schwab Intelligent Portfolios. Its fee structure is similar, but it has a few more features. For example, Schwab offers automatic tax-loss harvesting, which can be a big perk for investors with large taxable brokerage accounts. Here's a quick side-by-side comparison of some of the key differences:

Better yet, head over to our best robo-advisors page for a rundown of all of our top picks.

• You have at least $3,000 to invest.
• You are investing for retirement or aren't too concerned with tax-saving strategies within your investment account.
• You want to automate your investments with a low-fee approach that should generate excellent long-term returns.
• You aren't concerned with speaking with real-live financial advisors.