Blog : DC Retirement | August 14, 2025

How power tools helped me appreciate the case for managed account subadvisors

Senior Advice Strategist,
Vanguard Workplace Solutions

Kurt Fauerbach

Senior Vice President and
Head of Workplace Retirement
Edelman Financial Engines

Wei Hu

Vice President of
Financial Research and Strategy
Edelman Financial Engines

I had a shining moment as a home improvement DIY titan. Let me paint the scene: I had just bought my first house, an 85-year-old twin with some, as you might call them, “opportunity areas.” I was single, no kids, and no homework. It was the perfect time to undertake a full basement renovation, including demolition, waterproofing, framing, drywall, and numerous other steps that I’ve either suppressed or forgotten due to the (likely mishandled) toxic chemicals. One year and only a few nonpermanent injuries later, I had an entirely acceptable basement to show for my efforts.

Why am I telling you all of this? Partly, of course, to burnish my reputation as the long lost third Property Brother, but more importantly, to help introduce my topic today: an examination of the subadvised managed account structure.

Whether you're taking on home renovations or offering managed accounts to retirement plan participants, there's a case to be made for hiring an outside expert. Don't get me wrong, there's also a case for a homegrown approach. In fact, the proprietary Advice from Vanguard solution is where I've spent most of my time over the last five years. For Vanguard, given different client needs and preferences, we see the case for both, which is why our recordkeeping platform features both a proprietary advice offer and our subadvised Advice powered by Edelman Financial Engines (EFE) offer.

In honor of the recent 20th anniversary of the collaboration between Vanguard and Edelman Financial Engines, I thought it would be a great time to connect with Kurt Fauerbach, EFE’s senior vice president and head of Workplace Retirement, and Wei Hu, EFE’s vice president of Financial Research and Strategy. Here’s what I learned:

Let's start at the beginning. Who is Edelman Financial Engines? And how did EFE come to be one of the largest players in DC managed accounts?

Kurt Fauerbach: Edelman Financial Engines was cofounded by Nobel Prize winner Bill Sharpe in the mid-1990s with a clear mission: to provide institutional grade investment advice to all retirement plan participants, regardless of their account balance. The vision was to leverage the emerging internet to deliver this advice even though it was a novel concept at the time. To give you a sense of how early this was, we were using platforms like AOL to reach more people.

By 2004, we realized that the most effective way to offer meaningful help to retirement savers was through discretionary advice services in employers benefits packages. This spurred our strategic relationship with Vanguard and integration with Vanguard's industry leading recordkeeping services, which made it possible for even more people to access financial advice through their company's 401(k) plan.

Wei Hu: We learned early on, starting in 1998 with our first online advice client, that people needed advice on how to save and invest for retirement. And many weren't willing or knowledgeable enough to implement changes themselves.

It became apparent that people needed a managed account service where they could hand over the investment responsibility to a trusted entity. The relationship between the employee and employer is crucial here. Participants can trust that their employer has vetted Vanguard, who has in turn vetted EFE, ensuring that they receive reliable and effective investment advice.

How did Vanguard and EFE come together to launch the Vanguard Managed Account Program (VMAP), with EFE as subadvisor?

Kurt: Vanguard and EFE have long held similar investment philosophies, with an emphasis on low cost, diversification, and avoiding market timing, a view that has also resonated with investors, with EFE advising on over $77 billion of Vanguard funds across its full advisory suite, including target-date funds, index funds, and active funds.¹

Working together to help achieve the best possible outcomes for plan sponsors and their employees is a hallmark of our strategic relationship. EFE and Vanguard have collaborated numerous times to creatively address challenging issues with plan design to best serve participants. —Kurt Fauerbach

The way we treat and provide service to participants is centered around acting in their best interests. This alignment is deeply intertwined with how both firms operate. Vanguard understood this vision and was an early investor in EFE in the early 2000s, which further demonstrated commitment to partnering with us. Working together to help achieve the best possible outcomes for plan sponsors and their employees is a hallmark of our strategic relationship. EFE and Vanguard have collaborated numerous times to creatively address challenging issues with plan design to best serve participants.

Two-part question: How has the industry changed over the last 20 years? And what are the most important things EFE has learned about providing advice to retirement plan participants?

Wei: One big change was the Pension Protection Act, which paved the way for default investments, including target-date funds and managed accounts as qualified default investment alternatives. This change complemented other automatic features of 401(k) plans, such as autoenrollment and savings escalation, removing friction and better positioning participants for retirement.

Kurt: When it comes to providing advice, the challenge isn't just offering a service and leaving it at that. It's about continually refining and improving it. Reaching people effectively is crucial. And we've seen success in this area with strong rates of engagement and personalization: 87% of employees who use the Vanguard Managed Account Program have personalized their retirement plan either by adjusting their retirement age or risk tolerance or by incorporating outside assets into their investment allocation.²Vanguard and EFE have also explored new ways of reaching participants, including calling them to answer questions they may have about their advice service.

Let’s say I’m a plan sponsor weighing advice options for my plan. What should I be thinking about when it comes to a subadvised relationship? What makes it a good fit, and what are the trade-offs?

Wei: Plan sponsors should consider choosing a high-quality advisor they trust and that their participants will trust. The fact that Vanguard has selected us and conducts due diligence every year adds a higher level of credibility and trustworthiness.

However, one potential downside of a subadvised relationship is the ongoing need for integration between the two companies. Participants moving between the two web experiences may sometimes see changes to the look and feel. Vanguard's and EFE's technology systems are very well integrated, which helps us work together on enhancements to avoid gaps in the participant's experience.

Kurt: Selecting VMAP also offers plan sponsors the advantage of having only one entity to review, evaluate, and monitor under ERISA obligations, providing a single point of contact and ease of administration. Additionally, the ability for plan sponsors to stay within the Vanguard recordkeeping system allows for significant efficiency. And we continually leverage each other's resources to implement enhancements. This is a collaboration that we firmly believe provides the potential for better outcomes for retirement plan participants.

Any predictions on what might be similar or different about our industry five years from now?

Kurt: The importance of financial advice has never been more apparent than in recent months, as volatility whipsawed portfolios and near-retirees found themselves caught up in huge market shifts. Considering both the economic landscape and Vanguard and EFE's strategic alignment on delivering the best possible outcomes, I predict that we'll continue to partner and strengthen our offering going forward.

Wei: With more people retiring, there will be a greater focus on retirement income. VMAP's Income Beyond Retirement solution is one of the biggest advancements in the 20 years of our collaboration, and I look forward to continuing to see it improve and grow.

Kurt and Wei, thanks so much for your insights. It’s impressive, and a bit humbling, to hear about what EFE has been able to learn and accomplish over more than 25 years.

I typically like to end my interviews with a few takeaways, and, as my wife would enthusiastically tell you (with an equally enthusiastic eye roll), I value routines and consistency. Here’s what’s running through my mind:

Conversations like this one with EFE are a good reminder that partnering with other leading providers is one powerful way that Vanguard can help drive positive retirement and financial wellness outcomes for plan participants.

Choice is so valuable. I think it's wise for recordkeepers, and beneficial for plan sponsors and consultants, to offer more than one managed account option. There are strengths and features of any offer to consider, and plan sponsors deserve the opportunity to select one that best meets the needs of their plans and participants. For Vanguard, our two advice options—Advice from Vanguard and Advice powered by Edelman Financial Engines—mean we can offer plan sponsors choice on everything from methodology to wellness tools to support for plan design features for an advice program that fits their plan's unique blueprint.

Reflecting on my fleeting career as a DIY stud, maybe it's not as black-and-white as saying I've hung up my tool belt for good. Rather, it's about the power of choice, like the benefits of choice in advice providers. When it comes to home renovations—and advice programs—it's not about one-size-fits-all. It's about finding the right tool for the job. I can dust off the power tools when I want to do fun stuff like shooting nail guns, and, when there's a chance of electrocution or asphyxiation, I can call in the outside experts.

Thanks, as always, for spending a few minutes with me. If you have questions, comments, or suggestions for future blog posts, please send me an email at TheAdviceGuy@Vanguard.com.

Questions?
Comments?
Ideas for future blog posts?

Email the Advice Guy

Sources:

¹Edelman Financial Engines, July 2025.
²Edelman Financial Engines, March 2025.

Notes:

All investing is subject to risk, including the possible loss of the money you invest.
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.
The Vanguard Group has partnered with Financial Engines Advisors L.L.C. (FEA) to provide subadvisory services to the Vanguard Managed Account Program and Personal Online Advisor. FEA is an independent, federally registered investment advisor that does not sell investments or receive commission for the investments it recommends with respect to the services which it is engaged in as subadvisor for Vanguard Advisers, Inc. (VAI). Advice is provided by Vanguard Advisers, Inc. (VAI), a federally registered investment advisor and an affiliate of The Vanguard Group, Inc. (Vanguard). Vanguard is owned by the Vanguard Funds, which are distributed by Vanguard Marketing Corporation, a registered broker-dealer affiliated with VAI and Vanguard. Neither Vanguard, FEA, nor their respective affiliates guarantee future results. Vanguard will use your information in accordance with Vanguard’s Privacy Policy.
Investments in target date funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in target date funds is not guaranteed at any time, including on or after the target date.
For more information about Vanguard funds, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.
Diversification does not ensure a profit or protect against a loss.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, in the U.S., which it awards to individuals who successfully complete CFP Board s initial and ongoing certification requirements.

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