Vanguard auto-enrolls $1M–$10M self-directed clients in Flagship

Vanguard Group auto-enrolled its do-it-yourself clients with $1 million to $10 million in a rebuilt Flagship service tier, restoring the dedicated consultant those investors had done without for years, RIABiz first reported.

The firm delivered the news in a letter last week rather than a press release, and RIABiz reported Vanguard did not begin advertising the revamp. Chief executive Salim Ramji had signaled the change in a May 1 letter. "Since joining Vanguard, I've heard consistently from investors who valued the client care Flagship stood for," he wrote. "We are bringing back a more personalized tier of service under the Flagship name."

An RIA pitching a self-directed $1 million to $10 million household now competes with a named Vanguard consultant and a cash rate 15 basis points above smaller accounts. Flagship clients earn 3.65% APY on the Cash Plus Account, against what sub-$1 million investors get, which works out to roughly $1,500 a year more on a $1 million balance. A household that spent years being sent to a call center now has a person at Vanguard assigned to it.

Non-Vanguard funds held at Vanguard now count toward the $1 million Flagship minimum, which RIABiz describes as the first time the firm has allowed that. The minimum itself has not moved since the tier launched in 1998, when $1 million was the entry point; RIABiz notes that sum equates to about $2.09 million in today's dollars.

The benefits also include a 25% discount on TurboTax, better margin rates and access to passive income through Vanguard's Fully Paid Lending program. Jeff DeMaso, who broke the story in his newsletter Independent Vanguard Adviser, called the makeover overdue and said it appears to have advantages over the old version. "Years ago, Flagship came with better access to funds and services, plus more support," he said. "Those perks eroded to the point that IVA readers regularly asked me what Flagship still got them."

It is not yet known whether RIA custody clients who reach Vanguard through Altruist will get these preferred rates, RIABiz reported. That answer decides whether the rebuilt tier's economics reach the advisor-sold side of the firm or stay with self-directed households.