Bill McNabb oversees 3,000 engineers who are willing to pay for ‘dry holes’ in drilling for the next Shaybah Oil Field of financial advice.
what animates McNabb is the topic of how Vanguard will make its play for financial advice itself rather than just the ETFs as building blocks — including what sounds to be a build-it-yourself robo-advisor in the works.
“I mentioned I was really intrigued by some of the software development that we saw in Silicon Valley among the robo-advisors,” he says. “So we are working hard on how do we get that kind of capability within the firm to do more cutting edge? We have great technologists, but you know we are running big platform, legacy systems, so how do you develop something for this in three months the way you would see out of the Valley? So we actually created some teams and development methodologies to get at that. So it more by looking, studying and actually trying to do it ourselves rather than going out and buying somebody.”
Katie Hirt, spokeswoman for The Vanguard Group says Vanguard’s intrigue regarding robo-advisors hasn’t yet translated into wanting to become one or offer one to RIAs. “Bill’s point was more general, meaning that Vanguard is looking to harness technology, be more nimble, and continue to drive innovation across our businesses in order to better serve our clients. We do not currently have any plans to offer a robo for RIAs.”
As recently as May 25, Wealthfront co-founder and chairman Andy Rachleff wrote on the company’s blog why he does business with Vanguard but won’t take venture capital from a company that gives financial advice because it could be a “potential competitor.
”“I faced this dilemma up close,” he writes. “My company, Wealthfront, operates an automated investment service. We employ exchange traded funds from Vanguard as part of our managed portfolio, but we would never take an investment from a firm that offers investment advisory services. Having a potential competitor as an investor weakens the messaging we could use to explain how much they take advantage of their clients with high fees. It also creates the potential for a conflict should we ever want to specifically compete against them.”