December 2, 2020 | Vanguard Perspective

"How America Invests" reveals affluent client behaviors

At Vanguard, your relationship with us is a critically important partnership, with the shared mission of giving your clients their best chance for investing success. In that spirit of partnership, you now have access to our new research report, How America Invests, and a complementary advisor action guide.

This research report and our action guide reflect our commitment to you, who’ve long expressed a desire for actionable insights based on our proprietary client data. With How America Invests, you’ll have a window into real investors’ behaviors. We consider this effort an experiment to inform and refine future research.

Our How America Saves report, which explores the investing behavior of employer-plan participants, is in its 19th year of publication. We believe the scope of How America Invests is a natural extension of this level of passion for understanding investor behavior. That’s why we’re committed to developing and sharing this new research with you, as well as the real-world tools and insights that can help you advance your practice and demonstrate your value to clients.

Get the raw data and actionable insights

In this research, we identified and analyzed the behaviors of 800,000 Vanguard affluent investor households (those with $500,000 or more in Vanguard accounts) with a median account balance of about $1 million. The data reveals potential engagement opportunities as you identify similarities and differences between Vanguard affluent investors’ behaviors and those of your clients.

You can dive deep into the comprehensive data in the full How America Invests research report or jump straight to the practical applications in our How America Invests 2020: Advisor Action Guide.

You’ll also find our action guide reflects our research-backed service model, Vanguard Advisor’s Alpha®, for how you can add value through:

  • Constructing optimized portfolios to help your clients reach their goals.
  • Focusing on behavioral coaching.
  • Incorporating high-value financial-planning techniques, such as estate and retirement planning, so you can personalize client services to meet their needs.

For example, the research suggests that there is significant opportunity for you to offer guidance on more complex tasks that cannot be automated, such as comprehensive financial planning, behavioral coaching, and sophisticated financial solutions that address clients’ particular financial needs.

Learn how your clients compare

The report covers five years of data including the strong market growth from 2015 to 2019. But favorable markets don’t capture those periods when investors are fearful and perhaps most prone to behavioral mistakes. So the report also provides a quick look at the investor reaction to the sharp market decline in the first quarter of 2020, resulting from the effects of the COVID-19 pandemic.

For example, as market volatility increased amid the COVID-19 pandemic early this year, affluent Vanguard investors increased their trading activity. However, even with the increased trading behavior, these investors kept asset allocations largely intact between December 2019 and June 2020.

Affluent investor asset allocation changes in 2020

Two pie charts show that there was little difference in allocation to equity, fixed income, and cash between December 2019 and June 2020. Only 1% of investors who traded abandoned equities completely, while 45% of those trading conducted rebalancing activities.

Source: Vanguard.

Our research also reveals that affluent Vanguard investors show a willingness to diversify holdings geographically, holding a healthy mix of domestic and international stocks and bonds. Advised Vanguard investors are even more likely to maintain international exposure, with an average domestic allocation of 66% compared with 83% for self-directed investors.

Domestic and international mutual fund and ETF assets

Affluent Vanguard investors in 2019

A pie chart depicts affluent Vanguard investors’ allocations to domestic versus international equities and bonds. As a group, the investors dedicated 59% of their portfolios to domestic equities. They committed 13% to international equities. Domestic bonds took up 23% of their portfolios. International bonds made up 5% of their portfolios.

Source: Vanguard.

The above examples are two of the many informative findings you’ll discover in these new reports.

Put this new, proprietary research and action guide into practice

Notes:

  • Vanguard ETF Shares are not redeemable with the issuing fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
  • All investing is subject to risk, including the possible loss of the money you invest. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
  • Bond funds are subject to the risk that an issuer will fail to make payments on time and that bond prices will decline because of rising interest rates or negative perceptions of an issuer’s ability to make payments.
  • Investments in stocks and bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.
  • Diversification and rebalancing do not ensure a profit or protect against a loss.