Vanguard made waves on Wednesday, Aug. 26, but not by ushering in another round of fee cuts. Rather, the index fund giant has the wealth management community abuzz because it announced the acquisition of Altruist.

For those that aren’t familiar, Altruist is a tech-centric wealth technology and custody platform that does in fact serve registered investment advisors (RIAs). Vanguard has been an Altruist investor since 2020 and while financial terms of the deal weren’t disclosed, there are some terms that are clear: Vanguard is making it clear it’s ready the compete with the “Big 4” of advisor custody firms, those being BNY Pershing, Charles Schwab, Fidelity and LPL Financial.

“Altruist combines a purpose-built platform, specialized talent, established advisor relationships, and deep expertise translating advice into better workflows and experiences,” according to the Pennsylvania-based buyer. “Under Vanguard’s ownership, Altruist will be even better positioned to help advisors across the industry serve more clients, improve investors’ outcomes, and bring high-quality financial advice to more people.”

Custody Competition Ramping Up

Is there a new sheriff in advisor custody town? That remains to be scene, but Vanguard’s earnest entrance into the arena cannot be taken lightly. Fun fact: By some estimates, this is merely the second acquisition in Vanguard history, indicating the company clearly sees value in Altuist and spreading its wings in the custody realm.

Some experts are already describing the Vanguard buy as disruptive to the custody market – one long dominated by the likes of Fidelity and Schwab.

Like those rivals, Vanguard is highly connected to advisors via offerings such as index funds and exchange traded funds (ETFs) as well as model portfolios. Those relationships have delivered fruit for Vanguard. Advisor satisfaction and trust are among the reasons why the fund giant has $4.6 trillion in ETF assets under management and is one of the world’s largest issuers of those products.

However, the Altruist acquisition ups the advisor ante for Vanguard. While the target doesn’t disclose the total assets it custodies, it works with more than 6,000 advisors. Said another way, Vanguard may be acquiring increased connectivity with the wealth management community and since it already has that in spades, it’s that much more of a formidable competitor.

Likely a Smart Buy by Vanguard

One issue Vanguard likely is and needs to be aware of is that Altruist’s cult-like following in the advisory community is the result of the company previously not being tied to an asset manager. Said another way, Vanguard would do well to not compel Altruist to give it preferential treatment on the platform.

Advisors, many of whom have high praise for Altruist, will notice and that could strain relationships. Perhaps it won’t happen. On that note, Vanguard may be proven wise to allow Altruist to continue functioning as an autonomous entity and that’s exactly the plant.

“Following closing, Altruist is expected to operate as a standalone business, retaining its leadership, brand, advisor focus, and distinct operating model under Vanguard’s ownership,” adds the buyer. “This structure is intended to preserve the speed, entrepreneurial culture, and proximity to advisors that have shaped Altruist’s growth, while giving the company greater resources to invest and innovate. Vanguard will benefit from the ability to get closer to independent advisors and their clients, as well as from direct access to Altruist’s innovative technology and advisor platform which will allow the company to better serve its investors.”