Vanguard Digital Advisor "algorithm change"

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Topic Author
slyboots
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Vanguard Digital Advisor "algorithm change"

Post by slyboots » Tue Jun 09, 2020 3:50 pm

Hi everyone,

I like robo advisors. So I have been testing the new Vanguard Digital Advisor product with a small amount of money.

Today, I noticed a bunch of trades in my account. My asset allocation just went from 65% equities to 85% equities. I didn't know what was up, so I called Vanguard.

Turns out they changed their algorithm. Now, based on a more holistic picture of my risk tolerance, financial picture, etc, they have changed my "glidepath" assumption and believe I should be higher in equities now. This despite me not having changed my "moderate" risk profile.

I am highly peeved by this for several reasons:
1) There was no notice about this, and no communication after the fact. It would be nice to get an explanation without having to call them.
2) I selected the "moderate" risk profile because the asset allocation was what I was looking for (65/35). They unilaterally changed the definition of "moderate"
3) This transaction could have generated significant capital gains (thankfully it didn't)
4) When I called Vanguard, both representatives I spoke to at various points in the conversation made reference to the terms and conditions, as in, "well, in the fine print it says we can do this." Speaking as a business executive, if you have to refer to the T&C when dealing with a customer, you've lost.

So, these guys have deeply irritated me. I may just use Fidelity Go going forward.

Just sharing my experiences. Don't @ me, robo-haters.

inverter
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Re: Vanguard Digital Advisor "algorithm change"

Post by inverter » Tue Jun 09, 2020 3:56 pm

Don’t disagree with any of your points, but do think we are in uncharted territory in terms of roboadvisors on a lot of fronts.

I, for one, would not be a guinea pig on this, especially with Vanguard. :sharebeer

Iorek
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Re: Vanguard Digital Advisor "algorithm change"

Post by Iorek » Tue Jun 09, 2020 3:56 pm

Wow. I’ve seen people flag this as an issue with TDFs (that they get tweaked a lot) but that seems crazy to me. To me that’s past irritation to a loss of trust.

02nz
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Re: Vanguard Digital Advisor "algorithm change"

Post by 02nz » Tue Jun 09, 2020 4:02 pm

Yikes. That's particularly egregious given that they just launched. To make such a big change just a few months in, with no warning despite the significant tax (and other) implications strikes me as really unprofessional.

If somebody asked for opinions about going from 65/35 in March to 85/15 in June with no change in their circumstances, they'd (rightly) get a lot of questions asking whether they were just reacting to the ups and downs of the market. Vanguard doesn't seem to have come up with a better explanation.

I was researching this as a potential option for some relatives. This rules it out.

tibbitts
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Re: Vanguard Digital Advisor "algorithm change"

Post by tibbitts » Tue Jun 09, 2020 4:23 pm

This does seem like an excessively large change - normally I would expect more gradual adjustments over time.

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Re: Vanguard Digital Advisor "algorithm change"

Post by friar1610 » Tue Jun 09, 2020 4:52 pm

tibbitts wrote:
Tue Jun 09, 2020 4:23 pm
This does seem like an excessively large change - normally I would expect more gradual adjustments over time.
Just curious - what would you consider an excessively large change?

EDITED TO ADD: Please disregard my question, tibbits. I swear I saw "...does NOT seem like an excessively..." when I first read it. My apologies.

If someone changed my allocation by 20% without my OK I'd go bananas!
Last edited by friar1610 on Tue Jun 09, 2020 7:30 pm, edited 1 time in total.
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arcticpineapplecorp.
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Re: Vanguard Digital Advisor "algorithm change"

Post by arcticpineapplecorp. » Tue Jun 09, 2020 5:00 pm

slyboots wrote:
Tue Jun 09, 2020 3:50 pm
Today, I noticed a bunch of trades in my account. My asset allocation just went from 65% equities to 85% equities.

I selected the "moderate" risk profile because the asset allocation was what I was looking for (65/35). They unilaterally changed the definition of "moderate"
I don't disagree with anything you've said, but I have a few questions:

1. if you wanted a moderate portfolio, why wouldn't you just buy a balanced index fund?
while capital gains are an issue, the balanced index fund is tax efficient according to:
https://www.bogleheads.org/wiki/Tax-eff ... _placement

2. the balanced index fund is cheaper than using the robo advisor (which is 15 bps, which I assume is in addition to the expense ratios of the funds held by the robo).

3. what did you hope to gain by having a robo advisor over just having a balanced index fund for moderate growth?

It's funny, the vanguard site says:
Investment options

Digital Advisor uses ETFs as its core investments for Vanguard Brokerage Accounts because of their low costs and minimum investment requirements.

When enrolled, you will receive a personalized combination of the following:

Vanguard Total Stock Market ETF
Vanguard Total International Stock ETF
Vanguard Total Bond ETF
Vanguard Total International Bond ETF
source: https://investor.vanguard.com/financial ... or-details

that's essentially their target date retirement fund (though customized allocation across those 4, so not as cookie cutter as the target date funds)

4. couldn't you just buy those yourself and save the 15 bps?

5. Are you trying to avoid rebalancing?

Something i just saw on their brochure:
Material Changes: Since Vanguard Digital Advisor’s prior brochure on March 30, 2020, Digital Advisor is adding or in the process of adding the following material changes to its service:

On or about mid-May, the methodology we use to create your investment glide path—your allocation of stocks and bonds, which gradually shifts your investments over time as youget closer to your goal—will change to be more personalized. Digital Advisor will start totake into consideration multiple factors: your selected risk attitude, when you think you will retire, your assessed loss aversion (if any), marital status, if your portfolio has low or high single stock exposure, retirement savings rate, and expected retirement incometo match you with oneof hundreds of glide paths. This aims to optimizeyour investment strategy to account for your personal circumstances and to ultimately help you work toward your retirement goal. For additional informationsee “Methods of analysis, investment strategies, and risk of loss”on page 15.

This brochure update includes other additional non-material changes including that on or about June Digital Advisor will start providing point in time guidance and recommendations for optimizing availablecash as well as emergency savings guidance...

By enrolling in the ongoing advised service, you’re granting us discretionary investment authority to purchase and sell securities on your behalf. Accordingly, Digital Advisor will assess Portfolios using an algorithm (typically on each business day that markets are open for trading, however, Digital Advisor may in its discretion for technical or market infrastructure reasons forgo an assessment on a given day) to determine whether a rebalancing opportunity exists consistent with Digital Advisor’s investment strategy. Notwithstanding the foregoing, Digital Advisor will not attempt to engage in market timing trading practices. Digital Advisor may evolve its investment strategy described below under the heading “Methods of analysis, investment strategies, and risk of loss” from time to time.

See the “Securities recommendations and risk,” “Risks associated with usage of an algorithm,” and“Investment risks”

source: https://personal.vanguard.com/pdf/vangu ... ochure.pdf
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

mhalley
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Re: Vanguard Digital Advisor "algorithm change"

Post by mhalley » Tue Jun 09, 2020 6:54 pm

The algorithm must have been made by that monkey that throws darts at the stock list, because 85% in no way is moderate. Where was the monkey at the trough?

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slyboots
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Re: Vanguard Digital Advisor "algorithm change"

Post by slyboots » Wed Jun 10, 2020 6:48 pm

arcticpineapplecorp. wrote:
Tue Jun 09, 2020 5:00 pm
slyboots wrote:
Tue Jun 09, 2020 3:50 pm
Today, I noticed a bunch of trades in my account. My asset allocation just went from 65% equities to 85% equities.

I selected the "moderate" risk profile because the asset allocation was what I was looking for (65/35). They unilaterally changed the definition of "moderate"
I don't disagree with anything you've said, but I have a few questions:

1. if you wanted a moderate portfolio, why wouldn't you just buy a balanced index fund?
while capital gains are an issue, the balanced index fund is tax efficient according to:
https://www.bogleheads.org/wiki/Tax-eff ... _placement

2. the balanced index fund is cheaper than using the robo advisor (which is 15 bps, which I assume is in addition to the expense ratios of the funds held by the robo).

3. what did you hope to gain by having a robo advisor over just having a balanced index fund for moderate growth?

It's funny, the vanguard site says:
Investment options

Digital Advisor uses ETFs as its core investments for Vanguard Brokerage Accounts because of their low costs and minimum investment requirements.

When enrolled, you will receive a personalized combination of the following:

Vanguard Total Stock Market ETF
Vanguard Total International Stock ETF
Vanguard Total Bond ETF
Vanguard Total International Bond ETF
source: https://investor.vanguard.com/financial ... or-details

that's essentially their target date retirement fund (though customized allocation across those 4, so not as cookie cutter as the target date funds)

4. couldn't you just buy those yourself and save the 15 bps?

5. Are you trying to avoid rebalancing?

Something i just saw on their brochure:
Material Changes: Since Vanguard Digital Advisor’s prior brochure on March 30, 2020, Digital Advisor is adding or in the process of adding the following material changes to its service:

On or about mid-May, the methodology we use to create your investment glide path—your allocation of stocks and bonds, which gradually shifts your investments over time as youget closer to your goal—will change to be more personalized. Digital Advisor will start totake into consideration multiple factors: your selected risk attitude, when you think you will retire, your assessed loss aversion (if any), marital status, if your portfolio has low or high single stock exposure, retirement savings rate, and expected retirement incometo match you with oneof hundreds of glide paths. This aims to optimizeyour investment strategy to account for your personal circumstances and to ultimately help you work toward your retirement goal. For additional informationsee “Methods of analysis, investment strategies, and risk of loss”on page 15.

This brochure update includes other additional non-material changes including that on or about June Digital Advisor will start providing point in time guidance and recommendations for optimizing availablecash as well as emergency savings guidance...

By enrolling in the ongoing advised service, you’re granting us discretionary investment authority to purchase and sell securities on your behalf. Accordingly, Digital Advisor will assess Portfolios using an algorithm (typically on each business day that markets are open for trading, however, Digital Advisor may in its discretion for technical or market infrastructure reasons forgo an assessment on a given day) to determine whether a rebalancing opportunity exists consistent with Digital Advisor’s investment strategy. Notwithstanding the foregoing, Digital Advisor will not attempt to engage in market timing trading practices. Digital Advisor may evolve its investment strategy described below under the heading “Methods of analysis, investment strategies, and risk of loss” from time to time.

See the “Securities recommendations and risk,” “Risks associated with usage of an algorithm,” and“Investment risks”

source: https://personal.vanguard.com/pdf/vangu ... ochure.pdf
Hi - thanks for finding that information in the fine print. The mere fact that this was in the fine print says a lot.

And as far as your other questions go, that's more along the lines of "why use a robo-advisor at all", which has been discussed extensively in other threads on this site. I don't really feel the need to defend my approach, philosophy, or strategy to you.

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ram
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Re: Vanguard Digital Advisor "algorithm change"

Post by ram » Wed Jun 10, 2020 9:36 pm

One could ostensibly argue that 65/35 at market peak is no more risky than 85/15 during a significant market dip.
FWIIW I have over rebalanced by 5 percentage points during the recent market dip.
The "aim" of any active management is to beat a passive investment strategy. As they are using the same investment vehicles that indexers use all they have in their arsenal is to fiddle with the ratios.

Added: As has been pointed out by other posters Vanguard did not become aggressive at the bottom of the market. As such I am also at a loss to understand the change.
Last edited by ram on Thu Jun 11, 2020 7:11 pm, edited 1 time in total.
Ram

tibbitts
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Re: Vanguard Digital Advisor "algorithm change"

Post by tibbitts » Wed Jun 10, 2020 11:33 pm

ram wrote:
Wed Jun 10, 2020 9:36 pm
One could ostensibly argue that 65/35 at market peak is no more risky than 85/15 during a significant market dip.
FWIIW I have over rebalanced by 5 percentage points during the recent market dip.
The "aim" of any active management is to beat a passive investment strategy. As they are using the same investment vehicles that indexers use all they have in their arsenal is to fiddle with the ratios.
But the change didn't occur during a "significant market dip", and I assume Vanguard isn't betting on their own timing abilities. Is the objective of Vanguard's robo service to "beat the market?"

vsquid
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Re: Vanguard Digital Advisor "algorithm change"

Post by vsquid » Thu Jun 11, 2020 1:42 am

slyboots wrote:
Tue Jun 09, 2020 3:50 pm

2) I selected the "moderate" risk profile because the asset allocation was what I was looking for (65/35). They unilaterally changed the definition of ..
One could argue that by using a roboadvisor you are moving the responsibility of choosing a proper asset allocation to the advisor. You answer questions about your risk profile, goals etc and they will pick the allocation that they think is the best to you. As such you shouldn’t have chosen any risk profile based on what asset allocation it indicated.

DoctorM
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Re: Vanguard Digital Advisor "algorithm change"

Post by DoctorM » Thu Jun 11, 2020 2:23 am

I have a small amount of money in digital advisor too. I didn’t have the same issue. However, I find it a cute service, however it forces me to have more international stocks as a percentage than I would prefer, and I cannot adjust that sadly. Otherwise, I would use it more than just an experiment. The graphics are nice, and I can see it being useful for some, however I too would be upset if they altered things like they did with you.

Topic Author
slyboots
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Re: Vanguard Digital Advisor "algorithm change"

Post by slyboots » Thu Jun 11, 2020 6:10 am

vsquid wrote:
Thu Jun 11, 2020 1:42 am
slyboots wrote:
Tue Jun 09, 2020 3:50 pm

2) I selected the "moderate" risk profile because the asset allocation was what I was looking for (65/35). They unilaterally changed the definition of ..
One could argue that by using a roboadvisor you are moving the responsibility of choosing a proper asset allocation to the advisor. You answer questions about your risk profile, goals etc and they will pick the allocation that they think is the best to you. As such you shouldn’t have chosen any risk profile based on what asset allocation it indicated.
I agree, though not 100%. Yes, with any advisory arrangement, the asset allocation is proposed by the advisor. But the client does need to agree to this allocation, no? So Vanguard proposed, and I accepted. But then they changed their mind without telling me. That's the issue.

Topic Author
slyboots
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Re: Vanguard Digital Advisor "algorithm change"

Post by slyboots » Thu Jun 11, 2020 6:11 am

DoctorM wrote:
Thu Jun 11, 2020 2:23 am
I have a small amount of money in digital advisor too. I didn’t have the same issue. However, I find it a cute service, however it forces me to have more international stocks as a percentage than I would prefer, and I cannot adjust that sadly. Otherwise, I would use it more than just an experiment. The graphics are nice, and I can see it being useful for some, however I too would be upset if they altered things like they did with you.
To me the ultimate robo-advisor (which does not exist, as far as I can tell) would do the following:
- Tunable asset allocation, per your note above
- Tax loss harvesting
- Good planning tools
- Quicken integration (yes, this is my quirky criterion)

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Re: Vanguard Digital Advisor "algorithm change"

Post by KingRiggs » Thu Jun 11, 2020 7:50 am

slyboots wrote:
Thu Jun 11, 2020 6:10 am
vsquid wrote:
Thu Jun 11, 2020 1:42 am
slyboots wrote:
Tue Jun 09, 2020 3:50 pm

2) I selected the "moderate" risk profile because the asset allocation was what I was looking for (65/35). They unilaterally changed the definition of ..
One could argue that by using a roboadvisor you are moving the responsibility of choosing a proper asset allocation to the advisor. You answer questions about your risk profile, goals etc and they will pick the allocation that they think is the best to you. As such you shouldn’t have chosen any risk profile based on what asset allocation it indicated.
I agree, though not 100%. Yes, with any advisory arrangement, the asset allocation is proposed by the advisor. But the client does need to agree to this allocation, no? So Vanguard proposed, and I accepted. But then they changed their mind without telling me. That's the issue.
They told you. In the terms and conditions. If you know the asset allocation you desire, just go buy it. By agreeing to a robo, you cede control.
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Re: Vanguard Digital Advisor "algorithm change"

Post by galawdawg » Thu Jun 11, 2020 7:56 am

I'm sure you have done a service to other Bogleheads by reporting on this issue with Vanguard's digital advisor. As has been mentioned, if you know your desired asset allocation, I'd suggest you just go to a two/three/four fund portfolio (depending on whether you want to hold international equities and/or bonds). In terms of cost, that is the most effective, followed by target date or blended index funds.

And holding the individual funds gives YOU the control over your asset allocation and when and how to rebalance.

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Re: Vanguard Digital Advisor "algorithm change"

Post by tibbitts » Thu Jun 11, 2020 8:13 am

slyboots wrote:
Thu Jun 11, 2020 6:10 am
vsquid wrote:
Thu Jun 11, 2020 1:42 am
slyboots wrote:
Tue Jun 09, 2020 3:50 pm

2) I selected the "moderate" risk profile because the asset allocation was what I was looking for (65/35). They unilaterally changed the definition of ..
One could argue that by using a roboadvisor you are moving the responsibility of choosing a proper asset allocation to the advisor. You answer questions about your risk profile, goals etc and they will pick the allocation that they think is the best to you. As such you shouldn’t have chosen any risk profile based on what asset allocation it indicated.
I agree, though not 100%. Yes, with any advisory arrangement, the asset allocation is proposed by the advisor. But the client does need to agree to this allocation, no? So Vanguard proposed, and I accepted. But then they changed their mind without telling me. That's the issue.
No, the client doesn't have to agree to the percentage allocation. But once the adviser determines a percentage allocation it doesn't make sense to make such a large change overnight. Even when index funds have changed the index they are based on, there's been a transition period and gradual movement to the new index.

UpperNwGuy
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Re: Vanguard Digital Advisor "algorithm change"

Post by UpperNwGuy » Thu Jun 11, 2020 8:28 am

Why do people use robo advisors? If it's because they find managing their own portfolio to be too complicated, then my advice is to simplify the portfolio to the necessary degree of simplicity that they can manage it themselves without relying on any kind of advisor.

stan1
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Re: Vanguard Digital Advisor "algorithm change"

Post by stan1 » Thu Jun 11, 2020 8:34 am

If I want a fixed asset allocation I'd probably still choose Life Strategy funds today as my second choice if I didn't want to manage it myself (my first choice). For some history almost all target date funds at every fund company have added more equities over the last decade, too. I'd fully expect all robovisors to do that over time especially as side by side comparisons of robovisor performance become more routine.

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Re: Vanguard Digital Advisor "algorithm change"

Post by KSActuary » Thu Jun 11, 2020 10:42 am

If you want a fixed allocation, just buy Vanguard Balanced and adjust overall allocation by adding either more S&P 500 or Emerging Markets.

02nz
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Re: Vanguard Digital Advisor "algorithm change"

Post by 02nz » Thu Jun 11, 2020 10:47 am

ram wrote:
Wed Jun 10, 2020 9:36 pm
One could ostensibly argue that 65/35 at market peak is no more risky than 85/15 during a significant market dip.
FWIIW I have over rebalanced by 5 percentage points during the recent market dip.
The "aim" of any active management is to beat a passive investment strategy. As they are using the same investment vehicles that indexers use all they have in their arsenal is to fiddle with the ratios.
But they weren't at 85/15 during the dip and 65/35 at market peak - it's actually the other way around. If OP started when this product launched, then it was 65/35 around the March dip, now 85/15 near the peak. That's not good.

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slyboots
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Re: Vanguard Digital Advisor "algorithm change"

Post by slyboots » Thu Jun 11, 2020 12:40 pm

UPDATE: to their credit, Vanguard did just send an email announcing their algorithm change.

You may have noticed your stock and bond allocations changed earlier this week. This is due to Vanguard Digital Advisor™ further personalizing the methodology we use to create your investment glide path. With this personalized methodology, your allocation of stocks and bonds will gradually shift your investments over time as you get closer to your goal.

Scooter57
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Re: Vanguard Digital Advisor "algorithm change"

Post by Scooter57 » Thu Jun 11, 2020 12:46 pm

Can you double check that this wasn't a mistake. I have been given misinformation by Vanguard staff in the past that was contradicted the next time I called in.

That is such an egregious change that I would call in several times and ask to go up the ladder of accountability, i.e. talk to the rep's manager.

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Re: Vanguard Digital Advisor "algorithm change"

Post by abuss368 » Thu Jun 11, 2020 12:49 pm

It is a new service that is being rolled out. Guaranteed bugs and fixes will continue. In time, Vanguard will do what it does best: corner and own the market, drive down costs, and scale the business.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

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Re: Vanguard Digital Advisor "algorithm change"

Post by DaftInvestor » Thu Jun 11, 2020 1:44 pm

Huh. Interesting. Glad they at least followed up with a "We are still tweaking stuff so we may have just majorly shifted your AA" message. Although they say "Gradually shift over time" - what they did to you (20% change) is hardly gradual.

Thanks for the heads up. I will continue to trust no-one to manage my money - robots included :)

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Re: Vanguard Digital Advisor "algorithm change"

Post by 02nz » Thu Jun 11, 2020 1:48 pm

slyboots wrote:
Thu Jun 11, 2020 12:40 pm
UPDATE: to their credit, Vanguard did just send an email announcing their algorithm change.

You may have noticed your stock and bond allocations changed earlier this week. This is due to Vanguard Digital Advisor™ further personalizing the methodology we use to create your investment glide path. With this personalized methodology, your allocation of stocks and bonds will gradually shift your investments over time as you get closer to your goal.
You missed a sentence: "Thank you for being a beta tester for Vanguard Digital Advisor!" :P

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Re: Vanguard Digital Advisor "algorithm change"

Post by slyboots » Thu Jun 11, 2020 7:31 pm

DaftInvestor wrote:
Thu Jun 11, 2020 1:44 pm
Huh. Interesting. Glad they at least followed up with a "We are still tweaking stuff so we may have just majorly shifted your AA" message. Although they say "Gradually shift over time" - what they did to you (20% change) is hardly gradual.

Thanks for the heads up. I will continue to trust no-one to manage my money - robots included :)
I have to admit, I'm starting to sour on robo-advisors. The whole reason I wanted to use a robo was for the automation - automated emotion-free buying at the dips, automated dispassionate selling at the highs, automated tax loss harvesting, no fiddling with the asset allocation. But every service I have tried is flawed in some way.

Plus, no matter what, I'll still have non-robot taxable accounts that will need to be rebalanced on a regular basis (because I'm not going to just sell everything, incur capital gains, and dump the money into a robot).

Crap, I might be turning into a Boglehead

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Re: Vanguard Digital Advisor "algorithm change"

Post by arcticpineapplecorp. » Fri Jun 19, 2020 9:39 pm

i wouldn't trust a digital advisor at least until 2045. That's when the singularity is scheduled to arrive.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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Re: Vanguard Digital Advisor "algorithm change"

Post by rkhusky » Sat Jun 20, 2020 8:44 am

I wouldn’t use a robo-advisor if I had a taxable account, unless it had knowledge of all my relevant accounts, offered TLH, accounted for tax ramifications, and recognized wash sales.

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Re: Vanguard Digital Advisor "algorithm change"

Post by azanon » Mon Jun 29, 2020 12:56 pm

I logged into it and confirmed the same thing - a switch of 20% equities. If you ask me, that's an absolute disaster. They should have never started the pilot without having the asset allocation strategy set in stone. I'd have wanted some sort of detailed explanation why the drastic change.

I could never recommend this service if this is how they're going to do business.

I'm wondering if the Personal Advisory Service's clients should expect the same massive shift in strategy?

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Re: Vanguard Digital Advisor "algorithm change"

Post by superinvestor » Mon Jun 29, 2020 1:01 pm

All these threads about PAS and whatever advisors are very funny to me. It's like someone letting their friend drive their car and then getting mad at how they drive. If you know better, why not do it yourself?

02nz
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Re: Vanguard Digital Advisor "algorithm change"

Post by 02nz » Mon Jun 29, 2020 1:13 pm

superinvestor wrote:
Mon Jun 29, 2020 1:01 pm
All these threads about PAS and whatever advisors are very funny to me. It's like someone letting their friend drive their car and then getting mad at how they drive. If you know better, why not do it yourself?
Criticism of a sudden, previously unannounced move of 20% into equities is perfectly legitimate. An advisor service may or may not be right for you, but the fact someone chose to use it, to point out the perfectly obvious, doesn't mean they lost all any right to criticize the product.

To stick with your analogy: I'm not going to complain if my friend is driving a little faster or slower than I would. But if they start running red lights, then heck yeah I'm going to say something.

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Re: Vanguard Digital Advisor "algorithm change"

Post by azanon » Mon Jun 29, 2020 1:51 pm

superinvestor wrote:
Mon Jun 29, 2020 1:01 pm
All these threads about PAS and whatever advisors are very funny to me. It's like someone letting their friend drive their car and then getting mad at how they drive. If you know better, why not do it yourself?
False analogy - it's not even close really.

If you pay for a service - any service - you should have a say in the quality of that service, be it your financial advisor, your yard care service, your stylist, etc. And a shift of 20% equities only a few months after launch, with no explanation, is a dead giveaway that they're not going about this very professionally.

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Re: Vanguard Digital Advisor "algorithm change"

Post by alex_686 » Mon Jun 29, 2020 2:28 pm

slyboots wrote:
Tue Jun 09, 2020 3:50 pm
2) I selected the "moderate" risk profile because the asset allocation was what I was looking for (65/35). They unilaterally changed the definition of "moderate"
I don't think this is what happened. I think that the market has changed the definition of what "moderate" is. Bond yields have fallen while duration (risk) has increased. I can make a decent case that remaining at (65/35) would be the riskier bet.

As other have mentioned, you are handing over the reins to a professional team. I would hope they would have deep analytical skills and that they would update their algorithm as markets evolve.
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Re: Vanguard Digital Advisor "algorithm change"

Post by 02nz » Mon Jun 29, 2020 2:37 pm

alex_686 wrote:
Mon Jun 29, 2020 2:28 pm
slyboots wrote:
Tue Jun 09, 2020 3:50 pm
2) I selected the "moderate" risk profile because the asset allocation was what I was looking for (65/35). They unilaterally changed the definition of "moderate"
I don't think this is what happened. I think that the market has changed the definition of what "moderate" is. Bond yields have fallen while duration (risk) has increased. I can make a decent case that remaining at (65/35) would be the riskier bet.

As other have mentioned, you are handing over the reins to a professional team. I would hope they would have deep analytical skills and that they would update their algorithm as markets evolve.
One would hope, and one would also hope that "updating algorithms as markets evolve" isn't a euphemism for market timing or performance-chasing. I'm not saying it is, but Vanguard's execution here isn't confidence-inspiring. As I said, I was considering this service for a relative when I read this thread, and it totally ruled it out for me.

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Re: Vanguard Digital Advisor "algorithm change"

Post by afan » Mon Jun 29, 2020 7:36 pm

I understand the disappointment.
I would never use a robo, or hire anyone else to invest for me. If I had used a robo, this would make me close the account.

It would be perfectly reasonable to be outraged if they had promised to maintain your asset allocation.
Instead, they promised to use an allocation they thought was appropriate.

Not sure what else to say. Either you want someone else managing your money, in which case you should be grateful that they updated their algorithm, or you want an asset mix that you get to pick, in which case you don't want a robo.
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Re: Vanguard Digital Advisor "algorithm change"

Post by 123 » Mon Jun 29, 2020 9:44 pm

slyboots wrote:
Tue Jun 09, 2020 3:50 pm
...So I have been testing the new Vanguard Digital Advisor product with a small amount of money....
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Re: Vanguard Digital Advisor "algorithm change"

Post by KEotSK66 » Tue Jun 30, 2020 7:26 am

vg offers a number of funds with stable conservative/moderate allocations between 35/65 and 65/35

those funds have done fine for decades

no evolving, no adjusting, no algorithms, no studies, no forecasts

i've been reading the "bonds are toast" and "stocks will save you" threads for 25 years
"i just got fluctuated out of $1,500", jerry

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Re: Vanguard Digital Advisor "algorithm change"

Post by WillRetire » Tue Jun 30, 2020 8:10 am

OP:

Your anger is justified. Under no circumstances is 85% equities a moderate AA. Register a complaint with Vanguard and FINRA.

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Re: Vanguard Digital Advisor "algorithm change"

Post by vineviz » Tue Jun 30, 2020 8:16 am

WillRetire wrote:
Tue Jun 30, 2020 8:10 am
OP:

Your anger is justified. Under no circumstances is 85% equities a moderate AA.
You may think that the OP’s anger is justified, but there’s no way to substantiate the assertion that “(u)nder no circumstances is 85% equities a moderate AA”.

85% equity is aggressive for some investors and conservative for others. It’d be very conservative for an investor whose only goal is saving for a retirement in 40 years, for instance.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Vanguard Digital Advisor "algorithm change"

Post by tibbitts » Tue Jun 30, 2020 9:32 am

KEotSK66 wrote:
Tue Jun 30, 2020 7:26 am
vg offers a number of funds with stable conservative/moderate allocations between 35/65 and 65/35

those funds have done fine for decades

no evolving, no adjusting, no algorithms, no studies, no forecasts

i've been reading the "bonds are toast" and "stocks will save you" threads for 25 years
Vanguard has made significant changes to many of its active and passive balanced funds over the years, so I wouldn't say you can be assured of no changes no matter what path you take, but this latest change does seem to be excessive.

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Re: Vanguard Digital Advisor "algorithm change"

Post by sixtoeight » Tue Jun 30, 2020 9:44 am

The whole Vanguard DIgital Advisor thing sounds very gimmicky to me. Basically they're using the 3-fund but balancing it for FOR YOU using algorithms at a small fee. Basically you can do the same, for free. Granted the small advantage is that algorithms may detect changes in the market but really, you can just do it yourself if you stay on top of the market.

Also, my understanding is Fidelity Go isn't a robo advisor. There are actually real people doing the balancing for you. Is this correct?

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Re: Vanguard Digital Advisor "algorithm change"

Post by KEotSK66 » Tue Jun 30, 2020 10:03 am

tibbitts wrote:
Tue Jun 30, 2020 9:32 am
KEotSK66 wrote:
Tue Jun 30, 2020 7:26 am
vg offers a number of funds with stable conservative/moderate allocations between 35/65 and 65/35

those funds have done fine for decades

no evolving, no adjusting, no algorithms, no studies, no forecasts

i've been reading the "bonds are toast" and "stocks will save you" threads for 25 years
Vanguard has made significant changes to many of its active and passive balanced funds over the years, so I wouldn't say you can be assured of no changes no matter what path you take, but this latest change does seem to be excessive.
significant ?

the addition of int'l classes and elimination of the AA fund in the LS line were tweaks which haven't done much, and weren't expected to do much

the balanced index fund hasn't changed

i think wellesley (and wellington ?) experienced a shift away from utilities

any changes were telegraphed years ahead of time...in anticipation of an investible vehicle, a cost-effective vehicle, or both

the managed payout line/fund has undergone tremendous change, but that's another story
"i just got fluctuated out of $1,500", jerry

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Re: Vanguard Digital Advisor "algorithm change"

Post by WillRetire » Tue Jun 30, 2020 10:07 am

vineviz wrote:
Tue Jun 30, 2020 8:16 am
WillRetire wrote:
Tue Jun 30, 2020 8:10 am
OP:

Your anger is justified. Under no circumstances is 85% equities a moderate AA.
You may think that the OP’s anger is justified, but there’s no way to substantiate the assertion that “(u)nder no circumstances is 85% equities a moderate AA”.

85% equity is aggressive for some investors and conservative for others. It’d be very conservative for an investor whose only goal is saving for a retirement in 40 years, for instance.
Thank you for your opinion.

The definitions of conservative, moderate, aggressive as those terms pertain to AA vary slightly from one firm or advisor to another, but AA definitions do not change with age. The recommended AA might change with age.

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Re: Vanguard Digital Advisor "algorithm change"

Post by tj » Tue Jun 30, 2020 12:38 pm

sixtoeight wrote:
Tue Jun 30, 2020 9:44 am
The whole Vanguard DIgital Advisor thing sounds very gimmicky to me. Basically they're using the 3-fund but balancing it for FOR YOU using algorithms at a small fee. Basically you can do the same, for free. Granted the small advantage is that algorithms may detect changes in the market but really, you can just do it yourself if you stay on top of the market.

Also, my understanding is Fidelity Go isn't a robo advisor. There are actually real people doing the balancing for you. Is this correct?
As far as I know, fidelity go is a robo. There's a hybrid option for higher fee.

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Re: Vanguard Digital Advisor "algorithm change"

Post by vineviz » Tue Jun 30, 2020 1:04 pm

WillRetire wrote:
Tue Jun 30, 2020 10:07 am

The definitions of conservative, moderate, aggressive as those terms pertain to AA vary slightly from one firm or advisor to another, but AA definitions do not change with age. The recommended AA might change with age.
I'm sure you realize that these two sentences contradict each other: if the optimal allocation for Investor A is 70/30 and the optimal allocation for Investor B is 100/0, then clearly it must be true that the 85/15 allocation is "aggressive" for one of them but "conservative" for the other one.

Terms like "aggressive" and "conservative" only have meaning in relation to some benchmark, and that benchmark can be very different for different investors.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Vanguard Digital Advisor "algorithm change"

Post by alex_686 » Tue Jun 30, 2020 1:22 pm

vineviz wrote:
Tue Jun 30, 2020 1:04 pm
Terms like "aggressive" and "conservative" only have meaning in relation to some benchmark, and that benchmark can be very different for different investors.
To extend, risk is time varying. Low risk assets can morph into high risk ones over time.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.

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Re: Vanguard Digital Advisor "algorithm change"

Post by VaR » Tue Jun 30, 2020 9:38 pm

What were the allocation percentages for "moderate" at other retirement horizons? OP, what retirement horizon did you enter? 30 years? 40?

I could imagine some other bug where the original asset allocations were incorrect.

Are you married and is there by any chance a difference in age between you and your spouse? Or are you retiring at an non-standard age - i.e. not between 65-70.

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Re: Vanguard Digital Advisor "algorithm change"

Post by tibbitts » Tue Jun 30, 2020 10:10 pm

KEotSK66 wrote:
Tue Jun 30, 2020 10:03 am
tibbitts wrote:
Tue Jun 30, 2020 9:32 am
KEotSK66 wrote:
Tue Jun 30, 2020 7:26 am
vg offers a number of funds with stable conservative/moderate allocations between 35/65 and 65/35

those funds have done fine for decades

no evolving, no adjusting, no algorithms, no studies, no forecasts

i've been reading the "bonds are toast" and "stocks will save you" threads for 25 years
Vanguard has made significant changes to many of its active and passive balanced funds over the years, so I wouldn't say you can be assured of no changes no matter what path you take, but this latest change does seem to be excessive.
significant ?

the addition of int'l classes and elimination of the AA fund in the LS line were tweaks which haven't done much, and weren't expected to do much

the balanced index fund hasn't changed

i think wellesley (and wellington ?) experienced a shift away from utilities

any changes were telegraphed years ahead of time...in anticipation of an investible vehicle, a cost-effective vehicle, or both

the managed payout line/fund has undergone tremendous change, but that's another story
I would categorize the elimination of the AA fund in LS funds and change to international was very significant. It could be that for quite some time going forward, bonds and stocks perform similarly. If so will you categorize the allocation changes we're discussing as "haven't done much"?

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