SoFi vs Vanguard

Traditionally, a few names have dominated the investment field. These companies are household names, with some having successful track records of 70 years or more.

However, over the past 15 years, robo-advisors have sprung up to challenge the industry dominance of the typical investing mainstays. Robo-advisors use computer algorithms to make investment decisions and build well-diversified portfolios for their clients. At only one-fourth of the cost, robo-advisors are cheaper than traditional managed accounts.

SoFi Invest is Better for:Vanguard Digital is Better for:
Beginning to Intermediate InvestorsHigh Net Worth Investors
Passive and Active OptionsPassive Investing
Free Human AdviceEducation Planning
IPOsExisting Vanguard Customers
InsuranceConnecting External Accounts
LoansLong-term Firm Performance
Crypto InvestingDiscounted ETF Fees
No Management FeesLow Management Fees

For people who are newer at investing and who don’t have any special financial needs, robo-advisors like SoFi Automated Investing might be the best alternatives to grow their wealth. This is due to the lower costs of robo-advisors and automated portfolio rebalancing.

Over the past few years, even traditional investment companies like Vanguard have entered the robo-advisory field. But do they have what it takes to adapt to rapid technological changes and meet the needs of today’s investors?

Sofi Vanguard
Management Fees (AUM)

0

0.20%

Security Types

Stocks, ETFs, Crypto

Stock and bond ETFs

Available Portfolios

Active or robo advisor accounts, heavily invested in SoFi’s proprietary ETFs with low expense ratios

Vanguard Portfolio

Active or Passive?

Active and Passive

Purely Passive

Investment Portfolio Risk Levels

Conservative, Moderately Conservative, Moderate, Moderately Aggressive
Aggressive

Very Conservative, Conservative, Moderate, Aggressive, Very Aggressive

Investment Advice from Traditional Advisors?

Yes, free

No

Minimum Balance

$0 to open an account, $5 to start investing

$3,000 for Digital Advisor

Education Tax-Advantaged Accounts?

No

Yes

Supported Accounts

Traditional, Roth, SEP
Inherited IRA
Individual taxable accounts
Joint accounts
Community property accounts
Checking accounts
Savings accounts
Credit cards
Loans

Traditional, Roth IRAs Individual taxable accounts Joint taxable accounts with rights of survivorship

Earned APY on Cash Accounts

Up to 1% APY on checking and savings accounts

0

Crypto Investing

Yes

No

Best Use

Trading individual securities/p>

Passive Investors who don't want to customize

Current Promotion

Click Here!

Click Here!

Modest Money Overall Rating
4.7 rating based on 5 ratings
3.1 rating based on 5 ratings

SoFi vs Vanguard: Determining Factors?

SoFi and Vanguard exemplify the competition between newer upstart robo-advisors and traditional investment companies, many of which are now providing robo-advisory services of their own.

SoFi is an online personal finance company started in 2011 by four graduate students at Stanford. Initially, the company dedicated itself to providing students with lower-cost alternatives to traditional student loans. Over the years, its services expanded to more and more financial products, and in 2018, SoFi introduced Sofi Invest.

Vanguard began operations in 1975. Founded by John C. Bogle, Vanguard is known for creating the first—and most would argue the best—passive investing index mutual funds. In 2020, Vanguard entered the robo-managed portfolio field with Vanguard Digital Advisor.

Can this old dog be taught new tricks? Modest Money evaluated SoFi vs Vanguard along five dimensions, including management fees, offered services,  access to human advisors, and minimum balance requirements to see which is a better robo-advisor.

Spoiler—Modest Money concluded that SoFi Automated Advisor was better at robo-advising than Vanguard Digital Advisor, though this may not be true in all cases. Read on to find out which is a better investment platform for you.

Factor 1: Management Fees

While they tend to be lower than accounts managed by humans, all robo-advisors have at least some management fees. Or do they?

SoFi Beats Vanguard’s Management Fees

  • SoFi does not charge management fees.
  • Vanguard charges a management fee of 0.20%, which is lower than most other robo-advisors.
  • SoFi’s free robo-managed accounts are preferable to Vanguard’s 0.20% fee.

SoFi Management Fees

SoFi Invest allows you to benefit from a robo-managed investment account without paying management fees. You can also use a SoFi Invest account to make active trades without commission or brokerage fees.

SoFi can make its automated service free for investors because they sponsor exchange-traded funds (ETFs). Some of the money you invest with them will go into SoFi ETFs. SoFi benefits from the underlying ETF fees, as does any other ETF sponsor.

On their website, SoFi discloses potential conflicts of interest posed by investing some of your money in their ETFs. SoFi ETFs are newer and may not be as liquid as established ETFs. Theoretically, this could mean getting a fair price in a down market could be more difficult.

So, you might not get as good of a price when it comes time to sell, but you are saving significantly in management fees. If you build your automated portfolio to $100,000, that savings could be $250 over typical robo-advisory costs annually and $1,000 or more over the fees a human would charge to manage your portfolio.

You can click here for up to $250 in promotions when you open a SoFi Invest Account. By downloading the app, you could receive up to $1,000 in extra bonuses.

Vanguard Management Fees

Vanguard charges an annual management fee of 0.20% of your assets under management (AUM). But there’s a bonus: they will rebate you the underlying ETF fees of any Vanguard ETFs that make it into your portfolio. With Vanguard Digital Advisor, you can expect your portfolio to be heavily weighted with Vanguard ETFs.

This could lower your effective management fees to around 0.15%, almost half that of other robo-advisors, but still not as good as SoFi’s no management fees.

To open a Vanguard Digital Advisor account, you can click here and get your management fees waived for the first 90 days.

SoFi’s Management Fees are Cheaper

Vanguard is inexpensive, but SoFi is free, giving the latter the decisive win in the management fees category.

Factor 2: Human Advisors

Robo-advisors are great at maximizing returns and minimizing risk, but the one thing they can’t do is provide tailored financial advice and answer questions. Even if it’s only once every few years, investors often like to bounce their financial goals and questions off actual human beings.

SoFi Beats Vanguard for Financial Advisors

  • SoFi provides investors with free access to financial planners.
  • You can’t get access to human advice through Vanguard Digital Advisor.
  • SoFi is an industry leader in making human advice available to all customers.

SoFi Human Advisors

SoFi makes access to human financial advisors free across its platforms. These are credentialed financial planners that can help you with your investment and financial planning needs.

You can schedule initial and follow-up consultations with a SoFi financial planner through SoFi Invest’s online calendar.

Here are some topics SoFi financial planners can help you with:

  • Investment strategies that balance your goals with your risk tolerance
  • How to maintain good spending habits
  • Understanding where you are now and how to meet future financial goals
  • How to build an emergency fund while still investing for the future
  • How to properly leverage debt to repay loans while still saving long-term

Whether you need it or not, having access to credentialed financial planners is important and, compared to the rest of the robo-advisors, almost totally unique on SoFi’s part.

Vanguard Human Advisors

Using Vanguard Digital Advisor doesn’t get you access to certified financial planners. If you use Vanguard Personal Advisor Services, a different product, you can access human financial advice, but you’ll need a minimum balance of $50,000 to sign up, and your management fee will increase to 0.30% AUM.

If you go with Vanguard Personal Advisor Services, you will have access to the following:

  • A personalized financial plan based on your goals
  • Ongoing access to credentialed advisors with a fiduciary responsibility to act in your interest
  • Support for financial needs, including tax-advantaged retirement and education savings

Compared to other traditional platforms, which often charge a 1% management fee, Vanguard Personal Advisor Services is a good deal as far as its 0.30% management fee goes. An initial investment of $50,000, however, is out of reach for many investors.

SoFi Has Better Options for Robo-Advisor Accounts

SoFi has better options offering access to financial planners for its robo-advisory customers than Vanguard does. Higher net worth investors may want to, however, go with Vanguard for more robust advisor support, albeit at significantly higher fees.

Factor 3: Minimum Account Balance Requirements

People starting down the investment trail probably don’t have much money saved up. And in today’s world, no one should have to save up to access a good investment platform.

SoFi Trounces Vanguard in Minimum Balance Requirements

  • There is no minimum balance to open and maintain a Sofi Invest account.
  • Vanguard Digital Advisor requires a minimum investment of $3,000.
  • In terms of balance requirements, SoFi is a better option than Vanguard for investors who don’t have a lot of money upfront.

SoFi Minimums

You don’t have to put any money down to open a SoFi Invest account, and you can invest sums as low as $5. And don’t worry if you don’t have enough money to purchase that higher-priced stock you’ve been eying. SoFi allows fractional investing on both its automated and active investment accounts.

So, how do robo-advisors like SoFi get away with providing service to people who don’t have a lot of money? After all, is it hardly worth a brokerage’s time to offer you service and advice unless you are investing thousands of dollars?

The increasingly automated nature of the markets means that discount brokers like SoFi can make money from the many small transactions of its members. A high percentage of SoFi’s revenue comes from its loan programs. This benefits you by allowing you to pay less for your SoFi Invest account than you would at equivalent robo-advisors.

Vanguard Minimums

Vanguard Digital Advisor requires a minimum of $3,000 to open an account. This is not terrible, as far as traditional financial firms go, which often require $5,000 or more to start an investment account. But when lined up with robo-advisors like SoFi, these balance requirements exceed the boundaries of what newer companies require.

Vanguard Digital Advisor also doesn’t let you open an account if you are retired or within a year of retirement.

Both restrictions—the $3,000 minimum requirement and the prohibition against retiree investing—leave many people out as potential customers.

SoFi Has No Minimums

SoFi Invest’s lack of minimum balance requirements opens the door to significantly more customers than Vanguard Digital Advisor’s $3,000 requirement.

Factor 4: Services

The overall breadth of services is another critical factor to consider when deciding between investment companies. Sometimes you may choose an investment company that doesn’t have everything you need under one roof because the rates are lower. Operating multiple investment accounts can be onerous and present complications at tax time.

If you can find all the financial services you need with only one or two providers, it is in your interest to do so.

SoFi Offers More Services than Vanguard

  • SoFi Offers most financial services.
  • Vanguard offers education accounts.
  • Despite Vanguard’s education accounts advantage, SoFi offers more overall financial services than Vanguard.

SoFi’s Services

You can open the following types of SoFi Invest accounts:

  • Traditional Individual Retirement Account (IRA)
  • Roth IRA
  • SEP IRA
  • Inherited IRA
  • Individual taxable accounts
  • Joint accounts
  • Community property accounts

These account types are a good mix of taxable and tax-advantaged accounts, although tax-advantaged accounts for education are noticeably missing from this list. Still, if you are not trying to open an investment account to pay for your children’s future educational expenses, SoFi’s offerings have you well-covered.

In addition to opening investment accounts with SoFi, you can access the following other services.

  • Checking accounts
  • High-yield savings accounts
  • Credit-score tracking
  • Credit cards
  • Personal loans
  • Student loan refinancing
  • IPO investing
  • Crypto investing
  • Home loans
  • Student loans
  • Renters insurance
  • Homeowners insurance
  • Car insurance
  • Life insurance
  • Career counseling
  • Financial counseling
  • Estate planning

SoFi’s financial offerings grow year by year. To learn more about SoFi’s financial services, you can read this SoFi review.

Vanguard’s Services

Vanguard Digital Advisor supports the following account types:

  • Individual or joint tenants with rights of survivorship (JTWROS) taxable accounts
  • Traditional IRAs
  • Roth IRAs

As with SoFi, you can also roll over your employer-sponsored 401K into a qualifying IRA, but this is not a different account type, which is why Modest Money doesn’t itemize rollover accounts separately.

Vanguard also offers the ability to link your non-Vanguard accounts to Digital Advisor, to help them better optimize your portfolio in terms of both goals and risk.

You can access more account types and services with other brokerage services, such as Vanguard Personal Advisor.

Vanguard does allow you to open a 529 Education Plan, though this plan would be external to Vanguard Digital Advisor. The average expense ratio of Vanguard’s 529 plan is 0.30%, and it is rated “Silver” by Morningstar, putting it in the middle of the pack as far as education plans go.

SoFi Offers More Services than Vanguard

SoFi offers more investing, financial, and insurance options than almost any other company Modest Money has reviewed, yet their costs for each of these services remain low. Vanguard Digital Advisor’s services are limited, though you can open a separate 529 plan with Vanguard, an advantage over SoFi in education planning.

SoFi Invest vs Vanguard Digital Advisor: The Bottom Line

With its lack of management fees, commission-free investing, and wide swath of overall financial services, SoFi will be a better product for most investors, especially those just starting and who need to access multiple financial products.

Vanguard is an institution, however, and some people might prefer to grow their money with the name that literally invented index investing. Investors in Vanguard will pay higher fees.

As far as index funds go, Vanguard is still an industry leader. But with SoFi Invest and other robo-advisors, you will still likely find yourself invested in Vanguard funds and ETFs.

SoFi Invest is Better for:Vanguard Digital is Better for:
Beginning to Intermediate InvestorsHigh Net Worth Investors
Passive and Active OptionsPassive Investing
Free Human AdviceEducation Planning
IPOsExisting Vanguard Customers
InsuranceConnecting External Accounts
LoansLong-term Firm Performance
Comprehensive Financial ProductsDiscounted ETF Fees
No Management FeesLow Management Fees

SoFi

SoFi is a community experience. Not only can you access low-cost investing options, but you can also get checking and savings accounts, credit cards, and even insurance and loan products.

SoFi Invest also has a good mix of active and passive options, making it the ultimate customizable investment experience.

If this comprehensive suite of financial products sounds good to you, you can click here to open a Sofi Invest account.

Vanguard

If you are already a Vanguard brokerage customer, you may not want to open an external robo-advisor account. Add Vanguard’s Digital Advisor to your account to build a fully automated portfolio appropriate to your risk tolerance level.

You will need a minimum of $3,000 to access Vanguard Digital Advisor. Vanguard does offer a tax-advantaged education account in the form of its 529 plan.

To open a Vanguard Digital Advisor account, you can click here and receive the first 90 days free of management fees.

Jeremy Biberdorf

About the Author:

Jeremy Biberdorf is the founder of Modest Money. After working many years in the website marketing industry, he decided to take on blogging full time and also get his finances headed in the right direction. Also check out his contributions to Equities.com and Benzinga.