Vanguard’s Altruist Buy: Friend or Foe to Advisors
An enigma is a person, thing or situation that is mysterious, puzzling or hard to understand, which describes how many retirement plan advisors and most of the 401(k) industry view Vanguard—the recent $4.3 billion Altruist acquisition potentially increases the riddle. Describing Russia, Winston Churchill once quipped, “They are a riddle wrapped in a mystery inside an enigma.” Meaning Russia’s actions were hard to predict but could be understood through its own national interests, which perhaps best describes how to understand Vanguard.
A major move was to hire an outsider, Salim Ramji from BlackRock, in 2024 to run the company, a first for Vanguard, who seems to be more focused on expanding wealth management and ancillary services. It recently hired Harry Dalessio from Empower and Prudential to lead workplace strategy and product.
The implications of the Altruist acquisition, which will have greater consequences for the wealth business than defined contribution plans, is brilliantly analyzed by Wealth Management’s Alex Ortolani and Diana Britton. But Altruist is less well known among RPAs and not really a force in the DC ecosystem.
Altruist is a modern financial technology platform and digital custodian that helps independent financial advisors run their practices more efficiently, making financial advice more affordable. They are a custodian that competes with Schwab and Fidelity, offering an all-in-one tech stack for independent RIAs, including onboarding, portfolio management and trading, as well as AI-enabled practice management tools.
No longer dependent on other platforms, Vanguard can now control shelf space, and though custodians have thin margins, just like 401(k) recordkeeping, it is more about distribution and mindshare. Not known for its technological innovation, Vanguard’s addition of Altruist instantly puts it ahead of competitors like Fidelity and Schwab, allowing it to overlay other services.
So is Vanguard a friend or foe to RPAs and wealth advisors interested in DC plans and a partner in the DC ecosystem?
Unlike other DCIOs, it does not pay any revenue sharing to other record keepers and does not pay many, if any, distributors for shelf space. It does not even have a person dedicated to national accounts, and maybe it does not need to with the triumvirate that ensures success for DCIOs:
Vanguard’s robo advisors, Personal Advisor Services and Digital Advisor, have $344 billion, 800,000 accounts and 2,000 internal advisors, which are perfect tools for less wealthy DC participants. Though its DC plans only include 5 million participants in just 1,500 plans, much less than Fidelity and Empower, it administers $710 billion in workplace retirement assets. Like Schwab and Capital Group, which also have less than 10 million DC participants, Vanguard has a unique distribution and brand, especially with the end user.
Though it continues to outsource small plan record keeping to Ascensus, it took over sales almost two years ago, creating its own network of DC record keeping wholesalers— it recently supported a few advisors who work with TPSU, perhaps signaling a greater willingness to engage and support RPAs. Vanguard does not normally attend industry roundtables, either, maybe wanting to keep its cards close to the vest.
The Altruist platform is a tech-enabled, low-cost, and efficient way for Vanguard to serve participants below the high-net-worth threshold, including mass-affluent clients. Combined with Vanguard’s robo advisor and internal resources, they could be attractive partners to the 7,000 or so RPAs looking to grow their wealth practices and the almost 60,000 wealth advisors who have significant DC assets.
The convergence of wealth and retirement at the workplace is redefining the DC business for record keepers and advisors just as indexing and TDFs have done for DCIOs. Providers with wealth resources to leverage the convergence are either willing to partner with the advisors who brought them the plan or look to compete. Is the Altruist acquisition a way for Vanguard to capture more participant assets or partner with advisors?
Like Russia, it will depend on which direction it believes will best benefit its own interests. Vanguard does not play by traditional industry rules.
