Vanguard auto-enrolls $1 million–$10 million clients in Flagship

Vanguard auto-enrolled its do-it-yourself clients with $1 million to $10 million in assets into a rebuilt Flagship service tier last week, restoring a dedicated consultant and counting non-Vanguard funds toward the minimum, RIABiz reported. The letter went out without a press release or advertising, and RIABiz reported the outside-fund credit as the first time the firm has counted such holdings toward the threshold. Jeff DeMaso first reported the mailing in his newsletter, Independent Vanguard Adviser.

Flagship holders get a named consultant, 3.65% APY on the Cash Plus Account and better margin rates. The cash yield is about 15 basis points more than Vanguard clients under $1 million — about $300 a year on $200,000 in cash. Holders also get a 25% TurboTax discount and access to the firm's Fully Paid Lending program.

Advisors now face a direct consequence: a client can qualify for Flagship by moving $1 million of outside ETFs into a Vanguard brokerage account without owning Vanguard funds. That shrinks the asset base an advisory fee is charged on.

Flagship launched in 1998 with a $1 million minimum that still stands. Adjusted for inflation, that threshold is about $2.1 million today, RIABiz reported, so the tier reaches households at roughly half the real wealth the original threshold demanded.

CEO Salim Ramji wrote in a May 1 letter: "We are bringing back a more personalized tier of service under the Flagship name." He said investors had told him the 1990s program had stopped differing from baseline self-directed service.

One term is unresolved: whether RIA custody clients through Altruist, the custody platform Jason Wenk sold to Vanguard, get the same preferred rates, RIABiz reported. That answer decides whether the tier remains a retail account perk or extends to advisory relationships.