Vanguard research August 2015

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1 The buck value stops of managed here: Vanguard account advice money market funds Vanguard research August 2015 Cynthia A. Pagliaro and Stephen P. Utkus Most participants adopting managed account advice realize value in some form. For a large group of participants, advice leads to higher projected retirement wealth due to increased expected returns and savings. For a smaller group, advice leads to reduced risk exposure, resulting in lower expected returns and projected retirement wealth but better portfolio diversification. Increased wealth. By using managed account advice, 6 in 10 participants increase their projected ten-year retirement wealth by an average of 30%, net of investment and advice fees. This increase can be attributed to two factors: higher expected returns because of increased equity exposure and, among a subset of participants, increased savings rates. Reduced risk. Three in 10 participants earn value from managed accounts through a reduction in portfolio risk. While participants portfolios are better diversified, that risk reduction leads to lower expected returns and retirement wealth because of reduced equity exposure. Impact on savings rates. Four in 10 participants made an active savings decision at the time they adopted managed account advice. One-third of participants chose to increase their savings rate by an average of three percentage points. Meanwhile, 7% of participants reduced their contribution rate when choosing an advice service. Reallocation of company stock. For participants with concentrated single-stock positions of 20% or more of their account balance, company stock risk was substantially reduced by using a managed account service. The average allocation to company stock fell from 46% to 4% as a result of managed account advice. Implications. A managed account advisory service can be an effective tool to improve outcomes for defined contribution (DC) plan participants. The benefit depends on the fee charged for the service relative to improvements in investment allocations and savings behavior. Plan sponsors should consider offering professional advice programs as a complement to other professionally managed vehicles, such as target-date funds. Because of the powerful effect of savings increases on wealth outcomes, managed account providers should also consider expanding efforts to promote improved savings rates.

2 Background A managed account program is a form of investment advice offered to DC plan participants for an additional fee. In this paper, we assess the relative value of such an advisory service, based on its impact on portfolio allocations, savings levels, and the investment management and advice fees paid by the participant. Under a managed account program, a plan sponsor typically selects a third-party advisor 1 to provide independent advice to participants. In most cases, a managed account service is offered to participants on a voluntary basis, not on a default basis, because of the service s additional fee. The advisor uses a plan s existing investment lineup to create a broadly diversified portfolio consistent with a participant s time horizon, risk tolerance, and other factors. Managed account services are a form of robo-advice for DC plans, where much of the portfolio allocation and management process is provided in an automated, technology-based environment. Vanguard Managed Account Program In this paper, we evaluate one managed account service, the Vanguard Managed Account Program (VMAP ). Under VMAP, Vanguard acts as the investment advisor and fiduciary for the program. Financial Engines serves as subadvisor, using their proprietary methodology to make investment recommendations to participants. At the end of 2013 (the last year included in this study), 35% of Vanguard recordkept plans used the service. A total of 69% of participants in those plans had access to this service, and 7% used the service. 2 Participants who sign up for the service cede all investment control to the third-party advisor. Participants choosing the service authorize the advisor to set their portfolios asset allocations, choose investments, and monitor and rebalance their portfolios on a continuing basis. Participants who enroll in the service are encouraged to personalize their experience by specifying their planned retirement age, risk tolerance, and/or other asset holdings. The incremental advice fee is charged as basis points against account assets. It s important to note that our findings are closely tied to the service and pricing features of VMAP, including its current fee structure, which typically begins at 0.40% on the first $100,000 in assets under management. All things being equal, managed account advice with higher fees is likely to have poorer outcomes than we show here for advice with lower fees and better outcomes. About this study To date, few studies have addressed the impact of managed account services on both saving and investment behavior. 3 This is due in part to managed account advice being viewed predominantly as an investment advisory service. In contrast, we consider the impact of advice on all the components that impact retirement wealth, including savings, portfolio expected returns and risk, and investment and advisory fees. 4 The participants in this study came from Vanguard recordkept plans that offer managed account services as a part of their DC retirement plan. Our sample includes approximately 40,000 participants who adopted the service between 2009 and To be included in the sample, participants were required to have designated an elected deferral rate both six months before and six months after joining the service. On average, the participants in this study were 46 years old and had a job tenure of around 12 years at the time of managed account enrollment (Figure 1). Their average base compensation over the study s five-year period was around $72,000, and 57% were male. 5 One objective of a managed advisory service is to address concentrated company stock positions in participant accounts. In our analysis, we split the sample into two groups based upon concentrated company stock positions. 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. 1 Plan sponsors have well-established fiduciary protections under ERISA for advice provided by a third-party advisor. Plan sponsors must still prudently select and monitor this advisor. 2 See How America Saves See Aon Hewitt and Financial Engines, Blanchett, David A., Recordkeeping fees are unaffected by managed account advice adoption and are therefore excluded from our analysis. 5 Because enrollment was restricted to the five-year period between 2009 and 2013, these participants are slightly younger and less tenured than the population of all managed account participants in Vanguard-administered plans. 2

3 Eighty-eight percent of participants had less than 20% of company stock in their portfolios, while 12% of participants had a concentrated position of 20% or more of holdings in employer stock. We analyzed these two groups separately. Figure 1. Demographic characteristics Participants who adopted managed account service Defining value Managed account participants All Managed account participants (<20% company stock) Managed account participants (>=20% company stock) Number of participants 40,388 35,574 4,814 Percentage of sample 88% 12% Age (average) Tenure at service adoption (average) Average 5-year base compensation $71,687 $71,819 $70,714 Male (%) 57% 56% 65% Characteristics at time of service adoption. The value of managed account advice can take several forms (Figure 2). One measure of value is an increase in expected retirement wealth, net of investment and advice fees. This increase in expected wealth typically arises from an increase in portfolio equity exposure or from higher contribution rates resulting from the advice service. Value may also come from reducing investment risk. Managed account advice may reallocate a participant portfolio to a lower-risk allocation based on the participant s circumstances, such as age and risk tolerance. However, reducing the participant s risk exposure, while potentially psychologically valuable to the participant, will result in a lower projected retirement wealth because of lower expected returns and the additional cost of the advisory service. Value can also arise through another form of diversification: eliminating single-company-stock risk in a portfolio. 6 Singlestock holdings raise portfolio risk substantially and investors generally aren t compensated for assuming single-stock risk. For plan sponsors concerned about the fiduciary risk associated with offering company stock, managed account services may be a way of encouraging diversification of participant accounts. There are more subjective ways participants realize value by using a professional advisory offering. One is personalization. This is when the service allows users to personalize their experience by selecting their expected retirement age and level of risk, and it allows them to add outside assets to the overall asset allocation evaluation. In our sample, 35% of all participants personalized the service in some manner. Another possible benefit is the enhanced sense of security associated with using a financial advisor. While we didn t evaluate personalization and subjective measures in this study, these benefits should be considered when evaluating the value of a managed account service. The value of advice needs to be weighed against the potential cost of a managed account service. One cost component is the fee for the advice program itself. Another component is the change in the costs of the underlying investments held by the participant as a result of the advisory process. Those costs can be higher or lower depending on the advisor s recommendations. Figure 2. Components of value Increase in retirement wealth Decrease in risk exposure Decrease in stock-specific risk Ability to personalize advice Increase in subjective satisfaction 6 In this analysis, we didn t quantify the actual reduction in risk, we only show the change in company stock allocation. 3

4 Overview of changes For a given participant, the impact of managed account advice comes from the interplay of several factors: savings behavior, portfolio composition, and fees. Independently, each of these elements is influenced by the managed account service (Figure 3): Figure 4. Changes before and after advice adoption All participants who adopted managed account service Before service adoption A. Personal savings rates After service adoption One-third of participants increased their savings rates, 7% decreased them, and the remaining majority maintained contribution rates at the same level. Half of participants saw an increase in equity exposure, while 4 in 10 experienced a decrease. A total of 59% of participants saw their expected rate of return rise, and 31% saw expected returns fall as portfolio risk was reduced to an age-appropriate level. 33% Less than 6% 34% 6% to 9% 33% More than 9% B. Asset allocation (distribution of average portfolio) 27% Less than 6% 34% 6% to 9% 39% More than 9% Some participants saw the average cost of their fund holdings rise as the advisor added some active strategies to portfolios. But 60% saw a reduction in average fund fees as the advisor shifts participants to lower-fee, better-performing options, particularly index funds and lower-cost active funds. All participants incurred a separate fee for advice. In some cases, the fee for advice is offset by the reduction in expense ratios due to portfolio reallocation. On average, expense ratios were reduced by 0.06% for all participants. This reduction, attributed to portfolio reallocation to lower-priced funds, offset approximately 16% of the fee for advice. 7 56% U.S. equity 6% International equity 20% Bond 11% Cash 7% Company stock C. Expected returns 54% U.S. equity 23% International equity 20% Bond 2% Cash 1% Company stock Figure 3. Behavioral effects All participants who adopted managed account service Deferral (savings) rates Total equity Expected exposure returns Expense ratios VMAP fees 34% Less than 5% 64% 5% to 7% 2% More than 7% 8% Less than 5% 92% 5% to 7% Increase 33% 52% 59% 35% 100% Decrease D. Expense ratios No change Total 100% 100% 100% 100% 100% Another way to examine these effects is to look at participant behaviors before and after service adoption. As a result of the managed account advice, more participants deferred more than 9% of salary to their DC accounts, international equity diversification improved (at the expense of cash and employer stock), expected returns improved, and fund expenses fell (Figure 4). 9% Less than 0.10% 38% 0.10% to 0.20% 25% 0.20% to 0.30% 14% 0.30% to 0.40% 14% Greater than 0.40% 10% Less than 0.10% 46% 0.10% to 0.20% 35% 0.20% to 0.30% 8% 0.30% to 0.40% 1% Greater than 0.40% 7 The advice fee varies by assets managed and plan features but typically starts at 0.40% on the first $100,000 of managed assets. 4

5 The value of managed account advice To summarize the interplay of these effects, we used the change in participants projected ten-year real retirement wealth as a benchmark for evaluating advice. This allowed us to observe the true effect of managed accounts, independent of the participant s starting account balance or asset allocation. Our analytical approach to project ten-year real retirement wealth was based upon changes in contributions, returns, and fees paid. For each managed account participant, two projected ten-year retirement wealth calculations were computed. The first was based on contribution, investment, and fee parameters six months before service adoption, and the second was based on the same parameters six months after service adoption. The difference in these projections was used to determine the relative change in projected ten-year retirement wealth. (See Appendix A for a more detailed discussion of the methodology.) On average, the use of managed accounts led to to a substantial increase in retirement wealth. Managed account participants experienced a relative increase of 15% in projected retirement wealth (Figure 5). To illustrate the variation of effects across different participant circumstances, we divided the group into ten equal groups, or deciles, based on the change in retirement wealth. Participants in decile 10 had the largest increase in net retirement wealth; participants in decile 1 had the largest decrease. The change in projected ten-year wealth is a sum of individual components. For example, in decile 8, the change in retirement wealth due to managed account advice was 21%. This figure was calculated as follows: +8% was from higher contributions, +16% was from higher expected returns, +0.16% was an increase due to lower expense ratio funds used by the advisor, and 2.74% was the reduction due to managed account advice fees paid over a decade. Participants in the top six deciles (deciles 10 through 5) experienced a net increase in retirement wealth after paying investment and advice fees as a result of the managed account service. Much of this increase was driven by increased expected real returns, but increases in annual contributions also added to the growth in wealth. The participants in decile 4 and decile 3 experienced modest declines, due both to the fee paid for the service and the lower expected returns following risk reduction in the portfolio. Participants in the bottom decile, decile 1, experienced the largest decrease in wealth largely because of a decrease in contributions. Figure 5. Managed account advice and retirement wealth Managed account participants with less than 20% in company stock before service adoption Decile Annual contributions Increase wealth Decrease wealth Expected real return Expense ratio Advice fee Change in projected 10-year retirement wealth 10 61% 45% 0.57% 4.19% 101% Average 15% The values in this table represent the relative difference in retirement wealth before and after service adoption. 5

6 The managed account participants in decile 10 were younger and had the lowest starting account balances (Figure 6, top panel). They realized the largest increase in projected retirement wealth, due in part to the effects of higher contributions on a lower starting balance. Participants in other deciles had higher starting balances. So, if contributions increased, the change had a smaller effect. On average, participants in the top five deciles increased their contributions, with the top decile increasing the most (Figure 6, bottom panel). On average, participants in the bottom decile decreased their contributions three percentage points, falling from 10% to 7%. This combination of lower savings and higher advisory fees led to the sharp drop in projected retirement wealth. Across all deciles, equity exposure was age-related. The youngest adopters had the highest exposure, and the oldest adopters had the lowest. Managed account services address the more extreme asset allocation choices made by participants who constructed their own portfolios initially. Figure 6. Demographic and financial characteristics A. Demographics, income and account balances At time of service adoption Decile Change in retirement wealth Age Percentage decile male Tenure Average base pay ( ) Account balance % 42 49% 8 $67,151 $31, $68,366 $63, $69,412 $64, $72,596 $71, $74,444 $83, $75,338 $92, $71,781 $70, $70,500 $70, $75,786 $108, $72,838 $92,729 B. Savings and investment characteristics Before and after service adoption Decile Change in retirement wealth Personal deferral rate Expected real returns Equity allocation % 5% to 10% 4.4% to 6.6% 47% to 82% to to to to to to to to to to to to to to to to to to to to to to 73 6

7 Measuring wealth: Stochastic versus static returns In our projection of retirement wealth, we used deterministic or static returns for ease of presentation and communication. But returns are volatile, so our method may overstate the positive benefit of increased returns or the negative impact of lower returns. To illustrate the difference between static and stochastic returns, we computed the change in net retirement wealth using a stochastic simulation of expected returns for the average participant in decile 7 (see Figure 6). The average decile 7 participant moved from approximately a 60% stock portfolio to an 80% stock portfolio. Therefore, we generated ten-year expected returns for portfolios with 60% stock/40% bonds and 80% stock/20% bonds using the Vanguard Capital Markets Model (VCMM), a proprietary financial simulation tool. We used these values to compute the change in projected tenyear retirement wealth 10,000 times. Figure 7. Stochastic model of projected retirement wealth Distribution of net value for the average decile 7 participant Net value using static expected return 12% Net value using stochastic model of expected returns 11% 40% 30% 20% 10% 31% 11% 18% 10% Based upon the distribution on the right (Figure 7), a participant would experience a net increase of 11% in retirement wealth on average. This is only slightly lower than the estimate of 12% generated using a static return calculation. Fifty percent of participants (within the box) would fall within a range of 3% to 18%. A quarter of participants may experience even higher wealth gains, while a small percentage of participants may experience a loss in wealth. 0% 6% 10% 3% Another way to address the debate over stochastic versus static modeling is to use a measure known as expected growth rate (see Appendix B). The expected growth rate method yields similar results. Impact on company stock A total of 12% of the study s managed account participants held concentrated positions in company stock. One benefit of a managed account service is the reduction in single-stock risk. Before adopting managed account advice, nearly one-third of participants in this sample held more than 50% of their accounts in company stock (Figure 8, see next page). One in 7 participants held more than 80% of their assets in company stock. After adopting the advice service, allocations to company stock were reduced to only 4% on average. The majority of participants held less than 10% of their retirement account assets in company stock. On average, this group of participants increased their projected retirement wealth by 4% using managed account advice (Figure 9, see next page). Unlike participants with less or no company stock, the overall magnitude of the change was lower across all deciles. More participants experienced modest changes. Most of the benefit of the advice for this group was in the reduction in diversifiable single-stock risk. IMPORTANT: The projections and other information generated by the VCMM regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Distribution of return outcomes from VCMM, derived from 10,000 simulations for U.S. equity returns and fixed income returns. Results from the model may vary with each use and over time. For more information, please see the last page of this research paper. 7

8 Figure 8. Change in company stock exposure Managed account participants with 20% or more in company stock before service adoption 100% 87% Average company stock holding: Before managed accounts: 46% After managed accounts: 4% 32% 0% 22% 15% 10% 8% 6% 4% 5% 6% 2% <0.5% <0.5% <0.5% 3% <0.5% 0% to 10% 11% to 20% 21% to 30% 31% to 40% 41% to 50% 51% to 60% 61% to 70% 71% to 80% 81% to 90% 91% to 99% 100% Post service adoption Pre service adoption Figure 9. Advice, retirement wealth, and company stock Managed account participants with 20% or more in company stock before service adoption Decile Annual contributions Increase wealth Decrease wealth Expected real return Expense ratio Advice fee Change in projected 10-year retirement wealth 10 45% 25% 0.53% 3.45% 66% Average 4% The values in this table represent the relative difference before and after service adoption. 8

9 After managed account adoption, participant portfolios were better diversified (Figure 10). Equity holdings were better diversified, reflecting a reallocation of concentrated company stock holdings to both U.S. and international funds. In addition, bond allocations were increased and cash holdings were decreased. Figure 10. Advice and company stock allocations Managed account participants with 20% or more in company stock before service adoption Before advice adoption 33% U.S. equity 4% International equity 10% Bond 7% Cash 46% Company stock After advice adoption 49% U.S. equity 24% International equity 20% Bond 3% Cash 4% Company stock Implications Managed account advice services significantly improve the projected retirement wealth outcomes for the majority of participants who use them. They continue to be an effective tool that participants can leverage to improve their retirement preparedness. The primary benefit to the participant comes from higher expected returns because of the reallocation of investment portfolios. In most cases, these higher returns more than offset the fee paid for the advice. Managed account advice also leads to reduced risk for 3 in 10 participants. Risk is typically reduced to a more age-appropriate level. However, reduced risk exposure also leads to a reduction in expected returns and projected retirement wealth. The additional advice fee also further reduces wealth. It s possible to argue that this shift to a lower risk level doesn t constitute adequate value and that participants should make portfolio changes without relying on another party. However, given the prevalence of inertia in retirement decision-making, we believe that participants are highly unlikely to adjust portfolio risk levels on their own without a managed account, target-date fund, or similar rebalancing service. Across all participants, managed account advice also eliminates extreme equity allocations and improves international and fixed income diversification. These are the broad benefits of professional diversification of assets. One way to further enhance value from managed account advice is to strengthen savings advice. Higher contribution rates improved retirement outcomes and more than offset the incremental costs of advice in one-third of our sample. Extending this effect to a broader universe would further enhance the value of advice. 9

10 Appendix A: The analytical approach Projected ten-year retirement wealth was calculated using a participant s elected deferral rates and portfolio and investment parameters six months before and after managed account enrollment. Assumptions: A participant s base pay was averaged over the fiveyear study period. In some cases, base pay wasn t available in all years, so the average was based upon the available data. Base pay was assumed to grow 1% annually over the ten-year period. Annual dollar contributions were calculated by multiplying an adopter s elected deferral rate by his average base pay. The deferral rate was assumed to remain constant over ten years and annual dollar contributions were capped at $20,000 per year. This cap value represented a reasonable single estimate of 402g and catchup limits from 2009 to 2013 and impacted less than 5% of the sample. Expense ratios were extracted from Vanguard s internal financial reporting system and reflected the year of service adoption in most cases. In other cases, the most current expense ratios were used. Missing expense ratios were populated with the average of all values within a specific fund classification. Expected ten-year real returns were estimated using the Vanguard Capital Markets Model (VCMM). The value for U.S. equities returns was used for all single-stock funds. Projected returns were calculated using estimated real returns for four major asset classes: U.S. equities, international equities, bonds, and cash. 8 Appendix B: Expected growth Achieving higher expected returns generally requires an investor to take more risks. Describing higher expected returns as more desirable without acknowledging that more risk-taking is required to achieve these higher returns overstates their actual value. Even if expected returns remained constant, the increased risk would decrease the long-term growth of the portfolio. More volatile returns mean that the cumulative effect of compounding is reduced. An alternate method to estimate portfolio returns and account for the risk-return trade-off is to calculate expected growth. The formula for expected growth is: Expected growth = Expected return ½ (portfolio variance) The term ½ (portfolio variance) can be viewed as a risk penalty. Expected return is penalized for any increase in the risk profile of the portfolio. As a result, an increase in any expected return because of managed account adoption needs to account for any increased risk in the portfolio. The expected growth rates for the bifurcated sample are shown on the next page (Figure 11). The results are consistent with the broader findings in the paper. On average, the expected growth rate for participants with less than 20% in company stock increased by 15%. The rate for participants with concentrated company stock holdings was smaller at only 2%. Equation: The change in projected retirement wealth reflects the percent increase or decrease in the ending projected account balance, using managed accounts relative to the projected ending account balance had enrollment not occurred. Expressed as an equation: Change in projected 10yr retirement wealth = ((Projected 10yr ending balance) Post Projected 10yr ending balance Pre ) Projected 10yr account balance Pre IMPORTANT: The projections and other information generated by the VCMM regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Distribution of return outcomes from VCMM, derived from 10,000 simulations for U.S. equity returns and fixed income returns. Results from the model may vary with each use and over time. For more information, please see the last page of this research paper. 8 Estimated ten-year real returns obtained from Vanguard Capital Markets Model. (U.S. equity 7.3%, international equity 8.1%, bonds 2.4%, cash 1.3%.) 10

11 Figure 11. Expected growth rates before and after service adoption A. Managed account participants with less than 20% in company stock before service adoption Expected growth Decile Before After Absolute difference Relative difference % 5.8% 1.8% 47% Average B. Managed account participants with 20% or more in company stock before service adoption Expected growth Decile Before After Absolute difference Relative difference % 5.8% 0.7% 13% Average References: Aon Hewitt and Financial Engines, Help in Defined Contributions: 2006 through Blanchett, David, 2014 The impact of Expert Guidance on participant savings and investment behaviors. GAO (United States Government Accountability Office), (k) plans: Improvements can be made to better protect participants in managed accounts. Hewitt Associates and Financial Engines, Help in Defined Contributions: 2006 through Madamba, Anna and Stephen P. Utkus, Managed accounts and participant portfolios. Vanguard Center for Retirement Research, Malvern, PA. institutional.vanguard.com Vanguard, How America Saves 2014: A report on Vanguard 2013 defined contribution plan data. Vanguard Center for Retirement Research. institutional.vanguard.com 11

12 Connect with Vanguard > institutional.vanguard.com Vanguard research > Vanguard Center for Retirement Research Vanguard Investment Strategy Group IMPORTANT: The projections and other information generated by the Vanguard Capital Markets Model regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. VCMM results will vary with each use and over time. The VCMM projections are based on a statistical analysis of historical data. Future returns may behave differently from the historical patterns captured in the VCMM. More important, the VCMM may be underestimating extreme negative scenarios unobserved in the historical period on which the model estimation is based. The Vanguard Capital Markets Model is a proprietary financial simulation tool developed and maintained by Vanguard s primary investment research and advice teams. The model forecasts distributions of future returns for a wide array of broad asset classes. Those asset classes include U.S. and international equity markets, several maturities of the U.S. Treasury and corporate fixed income markets, international fixed income markets, U.S. money markets, commodities, and certain alternative investment strategies. The theoretical and empirical foundation for the Vanguard Capital Markets Model is that the returns of various asset classes reflect the compensation investors require for bearing different types of systematic risk (beta). At the core of the model are estimates of the dynamic statistical relationship between risk factors and asset returns, obtained from statistical analysis based on available monthly financial and economic data from as early as Using a system of estimated equations, the model then applies a Monte Carlo simulation method to project the estimated interrelationships among risk factors and asset classes as well as uncertainty and randomness over time. The model generates a large set of simulated outcomes for each asset class over several time horizons. Forecasts are obtained by computing measures of central tendency in these simulations. Results produced by the tool will vary with each use and over time. For more information about Vanguard funds, visit institutional.vanguard.com or call to obtain a prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing. The Vanguard Group has partnered with Financial Engines Advisors LLC to provide subadvisory services to the Vanguard Managed Account Program and Personal Online Advisor. Financial Engines Advisors LLC is an independent, federally registered investment advisor that does not sell investments or receive commission for the investments it recommends. Advice is provided by Vanguard Advisers, Inc. (VAI), a federally registered investment advisor and an affiliate of The Vanguard Group, Inc. (Vanguard). Eligibility restrictions may apply. 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, Financial Engines, nor their respective affiliates guarantee future results. All investing is subject to risk, including the possible loss of the money you invest. Vanguard Research P.O. Box 2600 Valley Forge, PA The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corporation, Distributor. VMAPRES

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