News release

Vanguard Research Finds Financial Advice Improves Portfolio Diversification For 9 In 10 Investors

VALLEY FORGE, PA (February 11, 2020)—In a new Vanguard white paper, The value of advice: Improving portfolio diversification, researchers Cynthia Pagliaro and Steve Utkus demonstrate the material impact of financial advice on the construction of individual investors’ portfolios. Analyzing the asset allocations of more than 44,000 Vanguard self-directed investors who adopted Vanguard Personal Advisor Services, the researchers found the implementation of advice improved portfolio construction for nearly 90% of the investors by addressing equity risk-taking, increasing international exposures, and reducing cash holdings.

“We found that cognitive and behavioral biases, along with a lack of financial literacy, among most investors resulted in undisciplined equity risk taking, an overweight in U.S. equities, and uninvested cash,” said Cynthia Pagliaro, senior researcher in Vanguard’s Investment Strategy Group. “Advice remedied these common portfolio construction errors and will ultimately improve outcomes for investors.”

Equity Allocation

Equity risk-taking is the most fundamental decision an investor makes when constructing a portfolio. Before adopting advice, the distribution of equity allocations among investors varied widely, suggesting they were inattentive to or uncertain about appropriate equity risk-taking levels relative to their financial goals.

More than two-thirds of investors experienced a more than 10% change in their equity distribution following the implementation of advice, including 30% who saw their equity allocations increase or decrease by more than 30%. Only 31% of investors required a minor equity change of less than 10%.

Home Bias

When investors overweight U.S. equities, they miss out on opportunities to realize the benefits of global diversification. Prior to advice adoption, 65% of investors had no international allocation and eight in ten had 10% or less of their portfolio in international investments. After adopting advice, the median international allocation increased from 0% to 35%.


Cash is not a strategic allocation, yet for a number of reasons, such as risk aversion, procrastination, or a lack of financial literacy, many investors hold excessive levels of it. Among the portfolios analyzed, three in ten investors held more than 10% of assets in cash positions before the implementation of advice, while 11% held cash positions of more than 50%. Advice significantly reduced cash holdings, with most of the assets reallocated to bonds; the average bond allocation increased from 23% to 37% of the portfolio.

The “Value of Advice” Series

This second installment of the “Value of Advice” series follows an initial paper that introduced a three-part framework—portfolio, financial, and emotional outcomes—for more comprehensively assessing the value of advice. Subsequent papers focused on the financial and emotional dimensions are slated for publication in 2020.

The “Value of Advice” series presents new insights by analyzing real-world metrics based on administrative and survey data from Personal Advisor Services clients. Introduced in 2015, Personal Advisor Services is Vanguard’s advice service that marries a dynamic digital experience, sophisticated capital markets modeling, and the behavioral coaching capabilities of a human advisor. Clients are afforded a personalized and complete plan designed to meet their individual investment goals, along with ongoing portfolio rebalancing, tax efficient management, customized progress reports, and a relationship with an advisor. Personal Advisor Services manages $161 billion, as of December 31, 2019.

Vanguard has long believed financial advice can help investors achieve better outcomes, whether it is delivered directly from Vanguard, through financial advisors, retirement plans or consultants. As an advocate and partner for advice practitioners, Vanguard leverages more than four decades of experience to address fundamental financial planning and wealth management situations and needs. “The Value of Advice” series builds upon Vanguard’s distinctive portfolio of advice and wealth management thought leadership, most notably including Advisor’s Alpha, a research series that outlines and quantifies the value of relationship-oriented advisory services, such as behavioral coaching. Vanguard will continue to invest in advice research, services, and support for investors and advisors around the world.


About Vanguard

Vanguard is one of the world’s largest investment management companies. As of December 31, 2019, Vanguard managed $6.2 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers 424 funds to its more than 30 million investors worldwide. For more information, visit

All investing is subject to risk, including the possible loss of the money you invest.

Diversification does not ensure a profit or protect against a loss.

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 or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.

Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.