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5 Best Robo-Advisers to Help Manage Your Investments

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

5 Best Robo-Advisers to Help Manage Your Investments

These days, individual investors have a lot more tools at their disposal to help manage their money like pros, even if they don’t have a lot of knowledge and experience with investing. One tool that has become very popular for individual investors in the past couple of years is the robo-adviser.

Because so many new robo-advisers have popped up and gained traction in the past year or two, it may be difficult to decide which one is best. This review of five major robo-advisers may help you select which one to use to effortlessly manage your investments.

Vanguard

Vanguard Personal Advisor ServicesVanguard expanded their investment services by launching Vanguard Personal Advisor Services to help customers save money and make better investment decisions. Vanguard Personal Advisor Services can help you meet goals like investing for retirement, saving for a college education, buying a home, or just basic wealth building for the future.

According to John Woerth, public relations spokesperson at Vanguard, “Vanguard Personal Advisor Services is a hybrid that offers the best of both worlds — the user-friendly online experience and sophisticated investment modeling of a robo-advisor, coupled with the judgment and coaching of a professional advisor.”

Vanguard Personal Advisor Services appoints an adviser to serve as your financial coach. Based on your goals, this adviser helps craft a custom, investing plan that is meant for the long haul, regardless of how the markets change.

Vanguard doesn’t offer automatic tax-loss harvesting, but they can help minimize your tax burden through asset allocation. This means being more efficient with both taxable and tax-advantaged accounts. They can also help create a tax-friendly distribution plan for retirement.

Vanguard Personal Advisor Services requires an account minimum of $50,000.

Vanguard is known for their low-cost products, and this holds true for Personal Advisor Services, as well. The annual cost is 0.30% of the assets under Vanguard’s management. For example, if you have invested $250,000, the cost would be $750 per year.

Personal Capital

Personal CapitalMany people are familiar with Personal Capital’s robust money management dashboard, including free cash-flow monitoring, asset allocation and portfolio performance, fee analysis, investment checkup, and their retirement planner. However, you may not be familiar with Personal Capital’s wealth management services.

Although Personal Capital is sometimes lumped in with robo-advisers, they claim Personal Capital doesn’t exactly fit into this category.

According to their website, they are different because they “have a team of financial advisors based in San Francisco and Denver to work one-on-one with [their] clients.”

Last year, Personal Capital reduced their minimum asset requirement from $100,000 to $25,000, making it easier for more people to get started. Plus, their web interface is very friendly for users who enjoy managing their information online.

Your money is invested in exchange traded funds (ETFs) to leverage asset allocation, tax-loss harvesting, and rebalancing. You also have access to Personal Capital’s full suite of financial planning services and a licensed team to answer questions on college planning, estate planning, home purchases, 401(k) allocation, and more.

Personal Capital charges a flat 0.89% for the first million assets under management. After the first million, this fee is reduced by 0.10% per additional million dollars.

One nice feature of Personal Capital is the ability to see a complete overview of your finances right from their dashboard.

Betterment

BettermentBetterment Robo Adviser is another popular robo-adviser that uses software and algorithms to help manage your money based on your risk tolerance.

Betterment takes the guesswork out of asset allocation by investing your money into a fully diversified index-fund portfolio made up of 12 ETFs. They also offer fractional shares, broader diversification, and tax-loss harvesting — none of which are available when purchasing ETFs directly.

There is no minimum required deposit to open a Betterment account.

If you automatically deposit $100 per month and your balance is under $10,000, Betterment’s fee is 0.35% annually. Without an automatic deposit of $100, the fee is $3 per month.

Once your account reaches $10,000, automatic deposits are no longer required and the annual fee is 0.25% per year. If your balance is over $100,000, the fee is just 0.15% annually with no recurring deposit required.

Wealthfront

WealthfrontWealthfront and Betterment have a lot of common features, like the use of modern portfolio theory to determine your diversified portfolio of ETFs. Also similar to Betterment, Wealthfront offers automatic rebalancing and tax-loss harvesting (for taxable accounts).

Wealthfront offers several types of accounts, including taxable investment accounts, traditional IRAs, Roth IRAs, Simplified Employee Pension (SEP) IRAs, IRA transfers, and 401(k) rollovers.

Unlike Betterment, Wealthfront does have a minimum amount required to open an account. However, it is only $500, down from $5,000 when the service began. There is no annual fee for the first $10,000, but the fee increased to 0.25% annually above $10,000.

Wealthfront also offers tax-optimized direct indexing for accounts over $100,000. This means Wealthfront directly purchases over 1,001 securities from the S&P 500 and S&P 1500 indices and an ETF of smaller companies. This allows for further tax-loss harvesting and reducing annual fees.

Recently, Wealthfront also began offering a 529 College Savings Plan, which is also free for the first $10,000. Nevada residents get the first $25,000 for free. After these amounts are reached, the fees are 0.43%-0.46% per year.

Charles Schwab

charles-schwabCharles Schwab, the discount stock broker, now offers robo-adviser services in the form of their product Schwab Intelligent Portfolios.

The biggest advantage of using Schwab Intelligent Portfolios is their lineup of 54 ETFs, which is significantly more than Betterment and Wealthfront’s asset classes of 12 and 11, respectively.

Schwab has also attracted a lot of attention for having a low account minimum of only $5,000 and no account fees outside of the annual ETF fees.

Tobin McDaniel, president of Schwab Wealth Investment Advisory, said, “We think our service has a unique combination of features compared to similar types of products in the industry. We’re not charging any advisory fees, our portfolios are sophisticated with up to 20 asset classes using both cap-weighted and fundamentally weighted strategies, we have live investment professionals available 24 hours a day and 365 days a year, and our service is backed by the security and stability of a firm with $2.7 trillion in assets and 40 years of experience working on behalf of investors.”

After you sign up with Schwab, you are given a 12-step survey to help determine things like your goals for investing, a timeline for retirement withdrawals, and your risk tolerance. This will help determine the right mix for your investments. The selection services for ETFs with Schwab tends to be more complex, and most portfolios are made up of a larger number of funds than with other robo-investing companies.

One of the problems with using Schwab Intelligent Portfolios is their fee structure. The Department of Labor’s recent fiduciary ruling says fees have to be level regardless of what you invest them in. Critics have pointed out that since Schwab doesn’t earn the same commission on all products, they are violating the Department of Labor’s new rules.

To further complicate things, a significant portion of their ETFs are allocated in cash. Because Schwab is earning money from this cash, their no account fees claim isn’t exactly accurate or transparent. Again, this doesn’t meet the Department of Labor’s fee level fiduciary rules.

Which Robo-Adviser Is Right for You?

Even with all of this information, it can still be difficult to determine which robo-adviser is right for your investing needs. The decision depends on several factors, including how much you have to invest, how much the service costs, and which features are most important to you. Whether you choose a robo-adviser, a traditional financial planner, or a combination of the two, or choose to do it yourself, the most important thing is you are planning for your future.

Kayla Sloan
Kayla Sloan |

Kayla Sloan is a writer at MagnifyMoney. You can email Kayla at Kayla@magnifymoney.com

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Betterment Review: Robo-Adviser with Low Fees and No Minimum Balance Requirement

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

 

Betterment Review

Investing is the key to building real wealth. However, the complexities of investing can be difficult to master on your own and hiring an adviser to help you can be pretty costly. Robo-advisers like Betterment are an investment alternative that may be able to solve both problems. Robo-advisers provide an automated process that can make investing accessible and affordable for even the most novice investors.

Betterment requires no minimum investment amount to get started and charges a reasonable fee to manage your account. The service includes trades, allocation recommendations, and more. In this post, we’re going to dig into what Betterment has to offer if you’re interested in signing up with a robo-adviser.

Here’s a breakdown of what we’ll cover:

  • How Betterment works
  • How much Betterment costs
  • The fees and gotchas
  • Pros and cons
  • How Betterment stacks up against competitors

How Betterment Works

Betterment supports multiple investment accounts, including individual and joint accounts, rollover retirement accounts, traditional IRAs, Roth IRAs, SEP IRAs, and trusts. Betterment invests your money in exchange traded funds, or ETFs for short. ETFs are bundled funds that can be made up of stocks, bonds, or commodities and traded like regular stock. Betterment uses a diverse portfolio of handpicked stock and bond ETFs.

Betterment stock ETFs include:

  • U.S. Total Stock Market – VTI
  • U.S. Large-Cap Value Stocks – VTV
  • U.S. Mid-Cap Value Stocks – VOE
  • U.S. Small-Cap Value Stocks – VBR
  • International Developed Stocks – VEA
  • Emerging Market Stocks – VWO

Betterment bond ETFs include:

  • Short-Term Treasuries – SHV
  • Inflation-Protected Bonds – VTIP
  • U.S. High-Quality Bonds (IRA and 401(k) accounts) – BND
  • National Municipal Bonds (Taxable accounts) – MUB
  • U.S. Corporate Bonds – LQD
  • International Developed Bonds – BNDX
  • Emerging Market Bonds – VWOB

To assist you in investing efficiently, Betterment offers goal-based investing, automatic rebalancing, SmartDeposit, and tax harvesting, along with a RetireGuide feature. Let’s explore each one in detail:

Goal-based Investing

The goal-based service lets you choose investment goals and then recommends investment allocations. After receiving recommendations, you can make your own personalized allocation adjustments. Betterment monitors your accounts regularly to make sure you’re on the right path to reaching your goals. If you need assistance along the way, there are support specialists who are available 7 days a week.

Betterment portfolio

Rebalancing

If your allocation shifts, Betterment will automatically rebalance. Using our example above, for retirement the recommended allocation is moderate-risk, 10% bonds and 90% stocks. If the allocation shifts to 20% bonds and 80% stocks, Betterment would rebalance the allocation for free.

SmartDeposit

You can sync your checking account to Betterment and it will monitor your account for excess cash available that you can add to your investment. Betterment then initiates a transfer of funds and sends you an email. You can cancel the transfer if you don’t want it to go through.

Tax Harvesting

Tax harvesting is a feature of the product that can reduce your taxable income. To offset tax on gains and income, tax harvesting sells off and replaces securities that experience a loss. Tax harvesting for Betterment is completely automated and free.

RetireGuide

Lastly, the Betterment RetireGuide is a tool that tells you how on track (or off track) you are in saving for retirement. The RetireGuide can help you determine:

  • When you’ll be able to retire
  • How much money you’ll have to live on each year of retirement
  • How you can invest more efficiently
  • What the consequences are of not increasing your savings rate

Armed with this information, you can update your investment strategy to make sure you’re on the right path to turning your vision for retirement into a reality.

How Much Betterment Costs

Betterment has two costs to consider. First, there’s the fee to manage your account. Then, there’s the actual underlying cost of your ETFs.

Investment Management Fees

Betterment has a four-tier pricing structure. The annual fee spread is:

  • $0 – $10,000 account balance: Flat $3 per month fee if you don’t set up auto-deposit
  • $0 – $10,000 account balance: 0.35% annual fee if you have an auto-deposit of at least $100 per month
  • $10,000 – $100,000 account balance: 0.25% annual fee, no auto-deposit required
  • $100,000+ account balance: 0.15% annual fee, no auto-deposit required

A portion of the annual fee is charged to your Betterment account at the end of each quarter. The management fee is calculated using your average account balance. If you cancel your account, the fee is prorated, which means you only pay for the amount of time you have money in an account.

Investors with a balance below $10,000 should set up auto-deposits to avoid the flat $3 fee. Otherwise, you’re going to spend substantially more to have your investment managed by Betterment.

For example, let’s say your account balance averages $900 for the quarter.  Betterment charges one-fourth of the 0.35% annual fee (or 0.0875%) per quarter to calculate your quarterly charge. In this case, the fee would be just $0.78 if you set up an auto deposit of at least $100.

On the other hand, without auto-deposit, you’re looking at $9 per quarter ($3 per month for three months).

ETF Costs

You’ll run into an underlying ETF fee if you invest with Betterment or any other brokerage. The cost of your ETFs will vary depending on which investments you choose. However, the expense ratios of ETFs at Betterment range from 0.09% to 0.17%.

Fees and Gotchas

Other than the adviser fee and ETF costs, Betterment has no other sneaky fees to worry about. The management fee includes deposits, withdrawals, trades, transfers, rebalancing, and advising. There’s no penalty for having a $0 balance. Furthermore, you won’t be charged a management fee at all if you don’t have any money in your account.

Pros and Cons

Now that we’ve gone over the basics, here are the pros and cons of Betterment:

Pro: It’s affordable. Betterment offers an inexpensive alternative to working with a financial adviser. Plus, you don’t need to have a large amount of cash to get started.

Con: The basic plan can get costly. Although there’s no minimum balance with Betterment, watch out for the cost if you have less than $10,000 in your account. You need to have at least $100 per month to spare for your auto-deposit to avoid the $36 annual fee.

Pro: It takes the confusion out of investing. Signing up and starting with Betterment is a simple, online process. You can even test out what investment allocation Betterment will recommend for you before signing up.

Con: Lack of customization. Since Betterment is meant for someone who desires automation, you may find it less useful if you want to have the freedom to customize every aspect of your investment. That said, Betterment isn’t only for a newbie investor. If you’re a seasoned investor who wants to diversify with another account that requires minimal effort, Betterment could be a good choice.

How Betterment Stands Up to the Competition

Wealthfront is another example of a robo-adviser with reasonable fees. If you have an account with $10,000 or less, Wealthfront is free. Any investment over $10,000 has a 0.25% annual fee. You do need to have a minimum of $500 to invest.

Like Betterment, Wealthfront also uses a portfolio of ETFs. The cost of ETFs at Wealthfront averages 0.12%. If you have an account balance over $100,000, there’s a direct indexing premium feature that’s supposed to be even more tax efficient.

WiseBanyan is a robo-adviser with no management, trading, or rebalancing fees. However, there are some fine-print administrative fees. For example, the annual cost of tax harvesting is 0.25% of taxable assets capped at $20 per month. You can find a list of the other administrative fees here.

WiseBanyan has no minimum balance requirement and also uses ETFs. The average ETF expense ratio is 0.12%, and the range is 0.08% to 0.13%.

Who Will Benefit the Most from Betterment

New or experienced investors on the hunt for a low maintenance, low-cost investment opportunity may find Betterment useful. It’s also a good option for someone who has a very small amount of excess cash to start investing with since there’s no account minimum.

However, if you want to have a lot of freedom to make customized adjustments to your investments, you may encounter some roadblocks. Also, keep in mind, there is value in speaking with a financial planner one-on-one at least periodically leading up to retirement. Still, signing up for a site like Betterment is an action you can take right now to start investing if cost and knowledge are barriers.

Taylor Gordon
Taylor Gordon |

Taylor Gordon is a writer at MagnifyMoney. You can email Taylor at taylor@magnifymoney.com

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Hedgeable Review: Robo-Advisor for Investors Who Don’t Mind Risk

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

hedgeableYou may get overwhelmed when you think about wealth management. It can feel complex, and you may not consider yourself wealthy enough to justify the expense of having someone manage your investments.

In the past few years, though, wealth management services have been largely democratized by robo-advisers. Rather than paying an individual to handle your investments, robo-advisers manage your money through technology, letting algorithms do the heavy lifting.

In this post we’ll look at Hedgeable, a highly personalized digital investing platform.

What Is Hedgeable?

Hedgeable is a private wealth management platform that is accessible on your computer, tablet, and smartphone. Hedgeable actively invests across a wide range of asset classes, including exchange-traded funds (ETFs) and individual stocks. Because past performance cannot predict future returns, we have no way of knowing if this method will be successful in the future. But we do know that studies have repeatedly shown that the best-performing portfolios over time have often been forgotten.

While forgetting about your retirement account is certainly one way to passively invest, a more conscious option is investing in low-cost index funds. If, however, you are willing to take on the risk of lower returns associated with an actively managed account, Hedgeable’s personalization makes it worth examining.

Unlike other robo-advisers, Hedgeable takes and more active approach to managing client portfolios. When you sign up for an account, you take a portfolio customization quiz that asks you about your assets, goals, and risk tolerance. The quiz takes all of five minutes and then assigns you a very specific portfolio to match your needs.

You can either open a new investment account directly through Hedgeable, transfer an existing account, or roll over a 401(k), 403(b), or 457 to an IRA.

How Hedgeable Chooses Your Investments

While many robo-advising apps use modern portfolio theory to allocate money in a portfolio, Hedgeable uses an objective-based model, which relies less on what the market will do and more on what the investor wants their money to do.

The approach is three-pronged. First, it widens the amount of available asset classes. Your money may be invested in any of the following, depending on your personal risk tolerance:

U.S. Equities

International Equities

Emerging Market Equities

U.S. Fixed Income

International Fixed Income

Emerging Market Fixed Income

Commodities

Real Estate

Master Limited Partnerships

Alternatives

Absolute Return

Currencies

Short U.S. Equities

Short Emerging Market Equities

Short Fixed Income

Cash

To better understand the list above, there are a few key terms you should be familiar with. “Equities” generally means stocks or exchange-traded funds (ETFs). “Fixed Income” is typically indicative of bonds. When you “short” something, you’re betting against it.

Using all of these asset classes, Hedgeable then looks at the goal end date of your portfolio, whether or not you want to invest exclusively in a social cause such as female leadership, LGBTQ equality, or alternative energy, and your risk tolerance to decide where it should invest your money. Riskier portfolios generally have a better potential for return, while lower risk portfolios will likely bring in less, but run a lower potential for losing value.

After your money is invested in specific assets, Hedgeable doesn’t wait a year to rebalance your portfolio. Instead, it implements something called dynamic hedging. As assets become more volatile, the algorithm will cut exposure to them, moving your money into safer assets immediately. Portfolios on this platform are very much actively managed.

Users are also encouraged to take advantage of Hedgeable’s account aggregation, which allows you to link all of your financial accounts to the app. This gives Hedgeable an overall view of your cash and debts. When the app has more information, it can better allocate your money to fit your specific financial situation.

Fees and Costs

Hedgeable’s pricing depends on the size of your portfolio. While there is no account minimum, those with the least amount of money in their accounts pay the highest fees.

While the fees on Hedgeable’s pricing page are annual fees, customers are billed on a monthly basis. For example, if a customer’s fee is 0.75% per year, they would be charged 0.0625% each month. 

Fees cover management fees, trading costs, product fees, administration, technology, analytics, and customer support.

$0-$49,999 – .75%

$50,000-$99,999 – .70%

$100,000-$149,999 – .65%

$150,000-$199,999 – .60%

$200,000-$249,999 – .55%

$250,000-$499,999 – .50%

$500,000-$749,999 – .45%

$750,000-$999,999 – .40%

$1,000,000-$9,999,999 – .30%

Customer Service and Rewards

Hedgeable has a variety of ways to get your problems resolved and questions answered. You can open up a ticket and monitor the progress the support team has made in addressing your concerns. Alternatively, you can text or do live chat with the organization’s customer support team seven days a week. On top of all this, the CIO himself holds office hours twice a week via video conferencing.

In order to increase customer retention and give users the best experience possible, Hedgeable runs a rewards program known as ?lph? clu?. You can earn points by becoming a member, funding your first account, referring new users, sharing on social media, investing specifically for retirement, adding a recurring deposit, and sticking with the company. When you are rewarded for financial activity, your points correspond with how much money you add to your account.

You can claim points for prizes such as Airbnb gift cards, VR headsets, and donations to charitable causes. The more expensive an item is, the more points it will cost to acquire it.

Pros and Cons

Pro: The quick onboarding quiz makes it very easy for users to find an appropriate portfolio and invest without doing mental gymnastics.

Con: While the user might not feel actively engaged in the process, these portfolios are very much actively managed by Hedgeable’s algorithm. Many finance experts stay away from this type of management as it is extremely difficult to do successfully.

Pro: You can start investing with any amount of money, and can do so in accordance with your values through socially responsible investments.

Con: Those with the least amount of money will pay the highest annual fees.

Pro: There is one, flat-rate, easy-to-understand fee that is only assessed once per year.

Other Investing Apps to Consider

Betterment is another investing app with a relatively low barrier to entry. There are no minimum required investments, though it does not invest in as wide of an array of asset classes as Hedgeable. Its fees are lower though, ranging from .35% to .15% annually, depending on the size of your account. Betterment does require a $100 monthly contribution or you will incur a $3 fee.

Wealthfront uses modern portfolio theory like Betterment, but offers a wider variety of potential investable assets. Wealthfront is also free until you have $10,000 or more invested; at that point your fees jump to .25% annually, making it the cheapest option of the three. To get started, though, you must open an account with at least $500.

 

Brynne Conroy
Brynne Conroy |

Brynne Conroy is a writer at MagnifyMoney. You can email Brynne at brynne@magnifymoney.com

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Stash Wealth Financial Planning Review – The Planner for HENRYs

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Stash Wealth Financial Planning Review - The Planner for HENRYs

Millennials are a lot more interested in their personal financial well-being at a younger age than the members of the two generational cohorts that came before them. But what else would you expect of the kids that came of age during the financial crisis and saddled with an average $30,000 student loan debt?

Luckily, millennials also came of age during the digital revolution, and a number of the cohort’s members have created platforms designed specifically to help millennials handle their finances.

Online financial planner, Stash Wealth, is one of those resources.

What Is Stash Wealth?

Stash Wealth is the online financial planner dedicated to serving the HENRYs (High Earners, Not Rich Yet) of the world. The startup was founded in 2013 by former Wall Street executives Priya Malani and Rob Kovalesky to serve millennial high earners they felt had been ignored by traditional firms or who may be fearful of financial management.

Stash Wealth’s services include personalized financial planning and investment management. Clients can also get personalized advice from Stash’s in-house experts — dubbed “rebels” — on topics like estate planning, investing, taxes, and accounting. For additional assistance, the company provides financial information to the general public through articles on its blog.

This review only covers Stash Wealth’s financial planning offerings, but we briefly touch on their investment management services at the end of this post.

How Do You Know If You’re a HENRY?

Stash Wealth defines a HENRY as an individual — or couple — who’s already earning about six figures annually. That’s a tough bracket to reach considering only 2.7% of millennials earned $100,000 or more in 2015, according to data from the U.S. Census Bureau. But becoming a HENRY isn’t all about income.

Stash has created a quiz to help potential clients figure out if they qualify as a HENRY. If you’re not quite there yet, Stash Wealth has a partnership with invibed, which runs a low-cost Wealth Coaching program for about $450.

How Much Does Stash Wealth Cost?

Stash Wealth’s pricing makes it clear HENRYs are their target audience. You — or you and your partner — can complete a Stash Plan for a one-time fee of $997. The Stash Plan is a financial plan for your life that will address how and when you can reach all of your financial goals.

After your plan is created, you’ll graduate to Stash Management, a full wealth management service, which you’ll be charged for based on how much money Stash is investing for you. It has two payment tiers:

  • $50 per month for those with less than $50,000 in assets managed by Stash
  • 1.2% of the assets Stash manages for you annually ($100,000 invested = $1,200 annually) if Stash is managing more than $50,000 worth of assets

If you’re an entrepreneur, you can build a Stash Plan for Entrepreneurs for $1,597, but you’ll need to call to learn more about the entrepreneur’s plan.

What Do You Get for $997?

Stash Wealth will create a customized Stash Plan, which is a financial plan customized to your current and future needs. You’ll be prompted via email to fill out two documents that will help establish your “baseline,” then you’ll have two meetings with a certified financial planning duo who will create your Stash Plan.

Even at close to $1,000 plus ongoing management fees, Stash’s completely digital service is a cheaper alternative to paying $1,100 to $5,600 a year for the average personal financial adviser.

Unlike some other online financial advisory firms, Stash Wealth doesn’t offer a payment plan. In the FAQ on the website, the company explains the reasoning is because they want to be sure they are attracting clients who truly can afford the service and qualify as HENRYs.

Stash Wealth has a particular client in mind, so their pricing isn’t comparable to competitors like LearnVest, which will run you about a third of the cost at $299 for the initial financial planning fee, and they will charge $19 for ongoing financial planning, although the LearnVest program doesn’t include investment brokerage.

How the Stash Wealth Financial Planning Process Works

Every Stash Wealth client will receive a comprehensive financial plan. MagnifyMoney reviewed the process over the course of several weeks.

Your baseline paperwork

Shortly after you make your online payment to get started, you’ll receive an email from Stash asking you to do three things:

  1. Fill out your profile.

This is one of the two PDF forms that will be attached to the email. It will ask you to fill in basic information about yourself like your name, address, employment, and income. It will also have you enter basics related to your finances such as which banks you have relationships with, who you already use for money-related items like taxes, and how much you have in your emergency fund. This form will also ask for the same information about your significant other if you’re completing the Stash Plan as a couple.

  1. Schedule your baseline meeting.

In the email, you’ll see a link to book a meeting using the online scheduler, TimeTrade. Once it’s booked, you’ll get an email confirmation in your inbox.

  1. Complete and return the Baseline Workbook.

The final thing Stash asks of you before your meeting is to fill out your Baseline Workbook. Your workbook is an 8-page document that will dive deep into your financial business. You will trace where your money goes after you get paid, check off whether you use cash or credit more often, explain what your savings are consist of, and list your debts and assets, in addition to providing other information.

Stash understands this may take a while, so they give you some time and ask that you email the document back at least a couple of days before your scheduled baseline meeting.

Your baseline meeting

This will be your very first meeting with your Stash advisers. It will take place over video chat and recap all of the information you entered into your Baseline paperwork. The meeting should take no longer than an hour. Your planners will share a screen with you during the call to show you a Baseline Results document, which was created from your information. It will show, with charts and diagrams, how you spend your money, what your money map should look like, and how you’re doing so far saving for retirement.

screen shot 1

The Stash program is intended to be educational as well, so your advisers may sound very similar to your finance professors in college. They will spend a good portion of the time explaining things like a money map (see above) or how different kinds of retirement accounts work. They’ll also make sure to ask if you understood everything and will re-explain if necessary.

The “reverse budget”

Stash will create what they call a “reverse budget.” The reverse budget calculates how much you can spend guilt-free each month after subtracting your fixed and flexible expenses. They will show you a budget with and without debt, so you’ll be able to imagine how much extra cash you’ll have on hand once your debts are settled.

The homework assignments

After this call, you’ll get some more homework to complete before your second meeting. The second meeting is meant to help align your life to your reverse budget. I was advised to open up an online savings account with Capital One 360 and nickname it “emergency fund” and to keep a checking account open at a brick-and-mortar bank. I had just closed my checking and savings account with my brick-and-mortar bank, Wells Fargo, and opened checking and savings accounts with Ally, so I didn’t take this advice. I was earning 1% on my savings account with Ally anyway, which was slightly more than the 0.75% I would have earned at Capital One.

I did, however, set up multiple savings accounts for emergency, travel, and moving costs to correspond with my savings goals.

My other homework was to find my most-recent monthly statements for my credit card, my retirement accounts, and student loans and send this information to them as soon as I could.

The follow-up email includes a link to schedule your second call, which should take place in about three weeks, and will have a final workbook attached to it. A PDF copy of your Baseline Results will be attached to the email for your use.

Your Stash Plan Workbook: goal setting

Your Stash Plan Workbook will come attached to the follow-up email for your first call. It’s intended to make you think about your financial goals and how you’ll reach them. A major part of this workbook requires you to think of what you want your life to look like in retirement.

You might already keep a few basic goals in mind like saving for retirement (check) or an emergency fund (double check), but your workbook will force you to consider savings goals to which you may not have given any thought. Some examples: traveling twice a year, returning to school for a post-bachelor’s degree, taking a six-month hiatus from work in Europe, remodeling your home, or saving to care for your parents in their old age.

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You’ll rate each goal from 1 to 10 based on its importance to you, and make note of how much you think you’ll need and when you’ll need the money. For example, going back to school for a graduate or doctorate degree is about a 7 in importance to me, and I want to have about $25,000 saved for it and (ideally) start my post-college education in 2020. I also want to travel to see family members, who live in Ghana, every few years. I set that travel goal at about a 9 and allocated about $2,000 for a trip every two years.

The workbook continues to a section called “Retirement Lifestyle Goals,” which addresses any big dreams or goals you have for your life in retirement (think: buy a yacht) and asks you to put them down even if you’re not sure if you’ll be able to afford them. You’ll move on to a “Retirement Living Expense” section that asks you important questions like when you plan to retire, what your retirement income will be, and if you’re willing to delay retirement to reach all of your goals.

You’ll finish the workbook by filling out detailed information about all of your current assets, investments, and liabilities. While you’re doing all of this, be sure to gather any supplemental financial documents to send back digitally with your completed workbook. Examples include:

  • Bank and investment statements
  • Retirement account statements
  • College fund account statements
  • Employer benefits
  • Social Security Administration Statement
  • Liability statements
  • Insurance policies

Stash asks that you send in your completed Stash Plan Workbook and documents via email 10 to 14 days before your second call.

Filling out the workbook was a lot of work, but it was worth it. It took about an hour for me, and I only use one bank and one credit card and my only other debt is in student loans. Most of my time went to setting financial goals for the long life ahead of me. It was eye-opening as there were a lot of things I knew I wanted in life — like rental property — that I had yet to set a deadline or budget to. Completing the workbook helped me realize I should start saving now for almost any larger purchases I wanted to make within the next decade like a possible wedding or owning rental property. I was a little confused when it came to the investing and retirement parts of the document like retirement income but was able to complete the form using context clues.

I did have to fill out the form three times, as it had trouble saving some of the information I had input. I’m still unsure whether the problem was the way I was saving it to my computer or the form itself. In the end, it was no big deal. I typed up some of my goals in an email to supplement what the form had held onto.

Your Stash Plan meeting: how to execute your Stash Plan

Your final meeting with your advisers will explain to you exactly how to make your Stash Plan a success. During this meeting, your advisers will first check in with you to ask if anything about your financial situation has changed since you sent in your workbook. For example, I decided within the month to move to a significantly cheaper apartment, so my monthly budget had to be adjusted. My planner made note of that and sent me an updated Stash Plan with the follow-up email at no additional charge.

After your touch base, your advisers should walk you through the details of your new financial plan, which they will have up on a shared screen for you to see. They’ll speak with you about how you should budget for your savings goals and when you’ll likely reach them.

Your Stash Plan meeting: how to execute your Stash Plan

My advisers emphasized making the most of automation for my savings goals and any recurring expenses. This takes some element of human error out of the picture. I’d used automation before and found it would bite me in the ass when I forgot which date I’d set a service to credit my checking accounts. To avoid my unfortunate recurring lapse of memory, I set my automated payments for the day right after payday, and if I couldn’t change the due date, I used the budgeting app Mint, which has a bill reminder feature.

They will also give you a few suggestions for managing your new financial plan. My advisers suggested I open up a 0% balance transfer card (they recommended I use Chase Slate or Citi Simplicity) to help pay down my credit faster. They also recommended an app called Debitize, that lets you use your credit card like a debit card. The app pays off charges to your credit card with money from your checking account so you can build credit without overspending.

They also advised me to channel any extra funds I had to paying down my credit card debt faster, as it’s the highest interest debt I have. After my credit card was paid down, I was to use the extra money to build up my emergency fund.

In addition, the advisers suggested I consider adding a disability insurance policy and some estate planning documents to my life. I was told to ask my employer’s human resources department about disability insurance. For estate planning documents, they included a recommendation to a Stash Expert in the follow-up email. Finally, they explained to me what my next steps would be should I choose to graduate to Stash Management.

Next Steps: Investing with Stash Management

Once you have your financial plan set up, you’ll make the decision to either stop there or continue to Stash Management. This review only covers Stash Wealth’s financial planning offerings, but we did dig a bit deeper to look into their investment management services.

After your plan is created, you can choose to graduate to Stash Management, a full wealth management service, which you’ll be charged for based on how much money Stash is investing for you.

It has two payment tiers:

  • $50 per month for those with less than $50,000 in assets managed by Stash
  • 1.2% of the assets Stash manages for you annually ($100,000 invested = $1,200 annually) if Stash is managing more than $50,000 worth of assets

With Management, you’ll get ongoing help with financial planning. That includes your taxes, purchases, budgeting, combining finances with a significant other, planning for a baby, buying your first home, or anything else. You’ll have access to monitor your accounts and investments through an online portal, but you likely won’t have to do anything.

Stash gives you a unique ID so you can log on to the company’s online platform. You’ll grant Stash’s team permission to implement their suggestions for you like automating your savings and investing your money in the stock market. When you have a question, you can call, email, text, or even use Facebook’s messenger 24/7 to communicate with Stash.

Stash isn’t a robo-adviser like Hedgeable, Wealthfront, or Betterment. A human being will actually invest your money and communicate with you as needed.

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Pros and Cons of Stash Wealth for Financial Planning

Pro: Quick responses

I was impressed with Stash’s response time. If I had any problems filling out the PDFs or any questions, I could expect an answer to my email on the same day or within 24 hours at the latest.

Pro: Some face time

Both meetings with your financial planner will take place over a video chat, which adds a personal layer to the totally digital process. You won’t awkwardly stare at your adviser the entire time since they’ll be showing you your results or plan for most of the conversation, but I thought it was nice to put a face (and a smile) to who was handling my sensitive information.

Con: No mobile app

Stash Wealth is only accessible to you on a desktop, which can present an issue if you want to check on your plan or investment on the go. However, you do have the option to download your plan as a PDF, which most smartphones will allow you to pull up without cellular data or Wi-Fi.

Con: No budgeting software

Your Stash plan will lay out what you need to do, but it’s up to you to implement and track your progress — unless you pay for Stash Management. You can use other platforms such as the free version of competitor LearnVest or budgeting services YNAB or Mint to manage your financial information, goals, and more, but it would be convenient to have a budgeting platform to show you your awesome new plan right away.

Con: No credit score information

You’ll need to download a separate app it you want to monitor your credit score. Unlike other popular budgeting apps like Mint, or a credit monitoring service like Credit Karma, you won’t be able to see any information related to credit score or credit report information with Stash Wealth.

Other Financial Planning Platforms to Consider

There are a host of other robo-advisers and online financial planning tools that target millennials cropping up to choose from that you may prefer over Stash Wealth.

LearnVest

LearnVest Premium is a more-affordable alternative for those looking for personalized financial advice from an expert. If you sign up for LearnVest’s premium service, you’ll complete a process similar to Stash’s, where you’ll meet twice with an adviser who will create a plan for you and then have the option to pay for ongoing support. LearnVest costs $299 for the initial setup, then $19 a month for email access to a personal financial planner, in addition to the budgeting and goal setting features online dashboard features. With LearnVest, you won’t get investment advice.

XY Planning Network

The XY Planning Network is a network of fee-only financial advisers who focus specifically on Gen X and Gen Y clients. There are no minimums required to get started as a client, and advisers in the XY Planning Network are not permitted to accept commissions, referral fees, or kickbacks. In other words, no high-pressure sales pitches or hidden agendas. Just practical financial advice doled out at a flat monthly rate. The organization is location independent, offering virtual services that enable any client to connect with any adviser regardless of where the client resides.

Garrett Planning Network

A national network featuring hundreds of financial planners, the Garrett Planning Network checks many key boxes for millennials. All members of the Garrett Planning Network charge for their services by the hour on a fee-only basis. They do not accept commissions, and clients pay only for the time spent working with their adviser. Just as important for millennials, advisers in the Garrett Planning Network require no income or investment account minimums for their hourly services.

Mvelopes

Mvelopes is an app that provides a spinoff of the cash envelope budgeting system popularized by Dave Ramsey. Like Stash Wealth, its basic version is free and allows you to link up to four bank accounts or credit cards. Mvelopes has a second tier called Mvelopes Premier. It costs $95 a year, and you can link an unlimited number of bank accounts and credit cards, among other features. Mvelopes’ top tier, Money4Life Coaching, adds one-on-one coaching tailored to your financial needs, as Stash Wealth Premier does. However, there is no price for this tier specified on the website.

The Final Verdict

Stash Wealth is a great deal if you’re a HENRY, but it’s definitely not a program for everyone. It forces you, as a young high earner, to swiftly exit any present hedonist mindset you may have and consider your future seriously.

For me, it demonstrates how important it is to take advantage of extra funds and invest them into your future while you’re young, handsome, wealthy, and only have yourself to think about. But if you’re not making enough to have an extra $1,000 stashed away for financial planning, there are less-expensive alternatives you can use on your way to HENRY status.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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The One Financial Resolution You Need in 2017: Automation

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

The One Financial Resolution You Need in 2017: Automation

“Out of sight, out of mind” isn’t typically the kind of advice you get from a financial professional. However, taking some financial decisions off of your mind and out of your hands can be one of the smartest money decisions you’ll ever make. We’re talking about the power of automation. Automating most or all of your recurring financial decisions can be a huge help when it comes to saving, investing, and digging yourself out of debt.

Even better, many popular financial resolutions for the new year — paying off debt, building an emergency fund, investing, saving for a large purchase, and building your credit score — are easy to automate.

What Is Automation?

Dr. Barry Schwartz, a behavioral economist and author of The Paradox of Choice: Why More Is Less, says we may be naturally programmed to live in the here and now and think about the future when we get there. By learning to use tools and life hacks to automatically make choices for our financial well-being, we’re removing one of the biggest barriers toward financial health: ourselves.

“People have a hard time thinking accurately about risk, and they have a very hard time giving adequate weight to the future,” says Dr. Schwartz. “Automated investment would address both of these problems. But, of course, the software would have to be doing the right thing for the client rather than the company.”

When you automate, you eliminate the opportunity for that negative feeling to affect your decisions because you won’t be actively making that payment.

7 Ways Automation Can Help You Keep Your 2017 Resolutions

If your goal this year is to learn budgeting, save up for a large purchase, or simply try to better manage your finances, automation can be a huge help.

  1. Automate Your Budget

Creating a budget is the easy part. Following it becomes the real challenge.Try these two automation hacks to stick with your budget in 2017.

Create a bank account for your allowance

  1. Open up a secondary checking account with your bank, but don’t get a debit card for this one. The account will act as your “reserve” account. You’ll keep your fixed and flexible spending money there and schedule bills to be paid from this account.
  2. Figure out how much money you can freely spend each week (after your bills are paid).
  3. Set up an automatic weekly transfer from your reserve account to your “spending” account (main checking account) for that amount.

It will be like getting a weekly allowance to spend on whatever you want, just like in middle school.

Use apps that do the math for you

Sometimes all we need is a little nudge to follow through with our goals. Budgeting apps like Level Money, Budgt, or Daily Budget can be the reminder you need to keep to your budget each day. The apps take into account your income, fixed expenses, and savings goal to come up with a daily spending number.

Level Money will connect to your bank accounts and generate the number automatically, while Budgt and Daily Budget require you to enter your spending manually, then generate what you have left to spend for the day. The apps will notify you daily with how much cash you can spend each day and still stick to your budget.

  1. Automate Routine Expenses

This one is for anyone who has ever walked into a grocery store to buy a gallon of milk but walked out with bags full of things they didn’t really need.

You can save time and money on groceries by avoiding the grocery store. That doesn’t mean you have to stop buying groceries and splurge on dining out. Automate your grocery shopping with services such as AmazonFresh or Fresh Direct. The services cost about $150 to $200 annually. With these services, you are able to compare prices and add and subtract items from your cart to stay on budget, then schedule your delivery time.

You could also try a meal delivery service like HelloFresh or Plated to deliver fresh ingredients coupled with recipes for meals weekly. Using these services, dinner for two costs about $10 to $15 a person. If you’re a couple that dines out often, scheduling weekly meal delivery and cooking could help you cut back significantly on spending.

If you live in an urban area like New York or Los Angeles, you may have several other options for grocery delivery available to you.

  1. Automate Your Savings

Automation makes it easy to set aside funds for an emergency fund or a large purchase such as a down payment for a home.

….at work

If you get paid via direct deposit, check with the human resources department at your place of employment to see if you can split your paycheck into different accounts. If you can, send the amount you want to save from each check into your savings account. If your pay is inconsistent, you may be able to set this amount as a percentage of your pay.

If your human resources department doesn’t offer that option or you simply want to handle it on your own, you can set up an automatic transfer to your savings account and schedule it for the dates you get paid.

…on your smartphone

You can also try automated savings software such as Digit, Qapital, or Simple.

Digit, backed by Google’s venture arm, analyzes your spending habits then uses an algorithm to determine how much it can transfer to your Digit savings account and how often to make transfers. When you need the money, you can have it transferred in one business day by sending a text.

Qapital lets you set savings goals and rules to match them, then automatically transfers money toward your goal when the rule applies. For example, you can set a savings goal to purchase $200 tickets to a music festival, then set a rule to round up all purchases you make with your debit card to the next dollar and save the difference. Qapital will transfer the difference to the account designated for your festival tickets.

Some new digital banks have added budgeting tools. Simple, for example, calculates a “safe-to-spend” number so you know how much you can spend freely.

  1. Automate Your Investments

You don’t have to be a financial whiz to invest your money. If you plan to start investing this year, you can do so passively with automation.

An important and easy way to do this is to automate savings to your retirement account(s). If you contribute to a 401(k) or an IRA through your employer, you can set a contribution as a percentage of each paycheck. Some plan providers allow you to automate annual contribution increases. This way, you’re automatically saving more each year without having to do any extra legwork. Even an annual increase of 1% or 2% can drastically improve your savings outlook.

If you use robo-adviser services like Betterment or Stash, set up auto deposits for your accounts and let them grow. Acorns is a great tool for beginners to automate investing. Acorns rounds up each of your transactions to the nearest dollar, then invests the difference.

You can find more details about these apps, such as what fees they might charge to manage your investments, here.

  1. Automate Your Student Loan Payments

If you resolved to stay on top of your student loan payments this year, setting up automatic payments could be tremendously helpful. Automating your payment can help ensure you pay on time each month. With most servicers, you’ll get the added benefit of .25% off interest on your loans.

If you want to pay back your loans faster, you can automate an additional payment to all of your accounts when you set up direct debit. If you can’t set up an automatic additional payment to a specific loan, you can set alerts with a calendar or a budgeting app to remind you to make an additional payment to your loans on payday.

  1. Automate All Your Bills

You can automate most recurring bills like your rent, credit card payment, auto loan payment, utilities, and subscription services to avoid missed payments. This tactic can also help time your payments to ensure you have enough money in your accounts to cover them. There are several options to help schedule bills you know need to be paid each month.

Choose whichever of the following methods work best for you:

  • Set up automatic bill pay through your bank’s online banking platform.
  • Use a budgeting app like Mint, Level Money, or YNAB to link to your accounts and schedule automatic payments.
  • Set up an automatic debit with each individual service provider through their online platform or over the phone.

If you pay an individual each month for something like rent or shared utilities, you can pay them via automatic bill pay to their bank account, or set up automatic payments using a tool like PayPal.

  1. Automate Your Credit Makeover

If your goal is to improve your credit, paying bills on time and lowering your utilization rate are the two most powerful things you can do.

Debitize lets you use your credit card like a debit card. The app automatically transfers money from your checking account to pay off charges to your credit card with money. You’ll be using your credit card, then paying it off in full each month. Even better, it’s more difficult to overspend, since you’ll be using up the funds in your checking account.

If you’re building or rebuilding your score with a secured card or a new credit card, you can try this “set it and forget it” method:

  1. Figure out what 20% of your credit limit is. Example: 20% of $200 is $40.
  2. Find something that you pay for each month that costs less than that. This might be a payment for a streaming service such as Hulu, Netflix, or Spotify.
  3. Set up your account to take the payment from your credit card each month.
  4. Set up your checking account to pay your credit card balance each month.
  5. Watch your score grow with a credit monitoring service like Mint or Credit Karma.

When your score reaches the high 600s or mid-700s, you’ll have an easier time qualifying to borrow large amounts for an auto loan or a mortgage.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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The Ultimate LearnVest Premium Review — Online Financial Planning for $299 Upfront, $19/Month

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

The Ultimate LearnVest Premium Review

If you’re young, or simply don’t have an extra $1,100 to $5,600 a year on average lying around waiting to pay a financial planner, it can be difficult to know where to turn for financial guidance. Fortunately, several online financial planning companies have made financial planning more affordable. LearnVest is one of many such companies that have cropped up in recent years to provide the service at a lower cost.

What Is LearnVest?

LearnVest is an online financial planning company that was founded in 2009 with a mission to give young professionals access to affordable financial planning services. The platform combines budgeting tools with resources for financial information and the opportunity to gain access to an online financial planner if you upgrade your package. The startup went on to raise $75 million in venture capital until it was finally acquired in 2015 by Northwestern Mutual. The merger allowed LearnVest to develop and expand its offerings. Since its founding, the platform has developed into a more affordable way for members of either gender to gain access to a financial planner and to create and manage a personal financial plan.

How It Works

LearnVest offers both a paid and unpaid version of its services. The free version gives you access to the company’s online budgeting tool and dashboard to help you manage your budget, similar to popular budgeting platforms like Mint and YNAB.

You can also peruse LearnVest’s Knowledge Center, where you’ll find a wealth of articles and videos with information about several financial topics.

If you are looking for personalized financial advice from an expert, you’ll need to sign up for the paid version, called LearnVest Premium. For an initial payment of $299 plus $19/month, the premium service comes with access to a personal financial planner in addition to the online dashboard features.

MagnifyMoney tapped staff writer Brittney Laryea to test out LearnVest’s financial planning service, LearnVest Premium, and review it here. Find out more about LearnVest and Brittney’s review below.

The LearnVest Premium Review

As a 22-year-old recent college graduate, I am in that important stage in life. I reviewed LearnVest from the perspective of someone who has never gotten professional financial advice before and is looking to get her financial life in order as she starts her career. My experience will certainly be different from, say, a single mother or an elderly couple facing retirement. But I tried to demonstrate how each element of the LearnVest experience works so anyone reading will get a sense of what they offer.

The LearnVest Premium Review

The Fees

For $299 up front, you’ll get access to a personal financial planner who will set up a time to speak with you on two separate occasions and work with you to create a personal financial plan. You can split the $299 payment into two payments of $149 or three payments of $99. After the two initial phone calls, you’ll pay LearnVest $19 each month for “ongoing support” from your planner via email.

At $299, LearnVest is certainly delivering when it promises to offer affordable financial planning services. The average financial planner charges an initial fee of $500 to $2,000 and then about $50 to $300 monthly for ongoing service.

$19 per month for ongoing financial planning is only a little more than Spotify premium customers pay for monthly subscriptions.

So far so good. But what are you really getting for that money?

Creating My “Smart Profile”

The first thing you’re prompted to do when you sign up for LearnVest Premium is to fill out your financial profile, which is called your “Smart Profile.”

Creating My “Smart Profile”

You’ll enter basic financial information for your planner such as your annual income, goals, and current budget if you have one. This is also when you would link all of your accounts — checking, savings, credit card, retirement, student loans, etc. — to your profile if you haven’t already done so. In addition to prepping your information for your planner, filling out the financial profile helps put your current finances in perspective in relation to your financial goals. This part was intuitive and took less than 15 minutes for me complete.

After that, I was eager to schedule my call with my planner, which I was prompted to do after filling out the Smart Profile.

The First Call: Strategy Session

The goal of the first call is to lay the foundation for what will become your complete financial action plan with your planner. But you won’t receive the actual plan until your second call. During the first call the planner gets an idea of your financial situation. Your final plan takes all of the details that you discuss with your planner in this first conversation and shows the smaller steps you’ll need to follow to reach your financial goals. For me, those were things like paying off my student loans and saving up for retirement, but for others it could be things like saving up to buy a new home or for your kid’s college education.

The First Call: Strategy Session

During the call, you’ll speak with your planner over the phone, while you both look at the plan-to-be in your LearnVest dashboard. The first thing my planner did was verify all of the information that I entered into my Smart Profile. He then asked if there were any other accounts or information that I needed to add or clarify. Your planner may also ask about your current insurance policies and important financial documents such as a regular or living will or power of attorney.

At the end of the call, you should have a general idea of the plan-to-be, and your planner may assign some follow-up homework for you to complete before your next call (ideally, about a week later) such as sending additional information that will help them create your action plan. Your planner may also assign you a challenge — which you can see when you log in to your dashboard. The challenge may be to practice a budget for the week or to create a bank account.

My experience:

My first call was enjoyable, and we spoke for about an hour. My planner was patient as I clarified and adjusted information I entered into my Smart Profile.

After we sorted out my personal accounts and debts, my planner asked about my short- and long-term financial goals such as saving for an emergency fund or for travel. I’d given some thought to retirement before. I actually already started contributing to a 401(k) through my employer. I think of travel as more of a luxury, and definitely not a necessity. If I had extra money and the ability to travel, then I would, but everything else comes first. This would be the first time I’d specifically set aside funds to travel in the future. Keeping my savings goals in mind helped to inform the budget he would create for me. The planner made sure to factor in the monthly $19 for LearnVest’s ongoing support into my overall expenses.

Then he calculated a tentative weekly spending budget based on my outlined plan. The weekly spending number was the amount I could spend each week and still accomplish all of my monthly goals. It’s determined by splitting up what was left of my flexible spending over the number of weeks left in the month.

One aspect I appreciated was that my planner gave me three different budgets with varying levels of spending flexibility. I chose the budget that gave me the tightest weekly spending allowance, meaning more of my money was going toward my goals each month.

budget strategy

He also gave me a few financial tips during the first call. I’ve listed a few below, although there were many more.

  • Freezing (in a bag of water, in my freezer) or hiding my credit card to trick myself into not using it to help with paying down the balance.
  • Opening high-yield checking and savings accounts with an online bank. My planner recommended Ally Bank, where I could earn 1% on my savings, versus the 0.01% I earned at Wells Fargo. Luckily, I was already in the middle of switching to Ally from Wells Fargo. His encouragement gave me the extra boost I needed to get it done.
  • Setting up two checking accounts — one as a regular checking account but without a physical debit card linked to it, the other a “spending” account that was linked to my debit card. Then I was to set up an automatic weekly transfer of my weekly budget into the spending account to use. This way, it would be impossible to go over my budget without deliberately transferring funds over to my spending account.
  • Think about insurance options. He also explained to me the importance of having different types of insurance plans that many don’t get through an employer such as renters insurance or life and disability insurance. The explanation was helpful, and easy enough to understand. But I have to admit, I didn’t follow the advice. I hadn’t yet considered paying for what I see as “extras” like renters insurance or life and disability insurance. I rent, but I don’t own anything of substantial value so, for me, renters insurance is a waste. I figure I’ll just get it when I have something more valuable than my rice cooker to protect. One of my parents pays for a small life insurance policy that I’ve had since high school, and I’m young so here’s hoping I don’t suddenly become disabled while I look into it. I’ll likely start paying for disability insurance in February 2017.

After we covered those details, we scheduled a follow-up call, which would take place about a month later.

The Homework

After our talk, my planner sent me a follow-up email with my homework for the week. I had two assignments: to open new checking and savings accounts and to double-check my existing insurance policies and coverage amounts.

He also assigned me a “challenge,” which are little tasks your adviser sets up for you on the LearnVest website. You can see your challenges when you are logged in to your LearnVest dashboard, and you’ll get email reminders when the deadline for the challenges are close. You can check off your challenges as you complete them, or mark them as missed. Be honest; your adviser will ask you about them in the follow-up call.

action program

My first challenge was to practice the weekly spending budget he created for me during the initial call. The added challenge was to use cash only (so that I could physically see what I would be spending). Having the challenge helped me to keep my budget in mind; however, I didn’t complete it. My 22nd birthday was that week, and I take my birthday celebrations pretty seriously.

Since my weekly budget was determined by splitting up what was left of my flexible spending over the remaining weeks of the month, I just subtracted what I used up on my birthday celebrations and determined a new weekly budget for the rest of the month.

The Second Call: Getting My Action Plan

This is the call that solidifies your financial action plan. During the second call, your planner will explain to you all of the ins and outs of following the plan they have created for you to follow based on information from the first call.

The second call will be about a week or two later, depending on your scheduling availability and that of your planner. I scheduled my follow-up call at the end of our previous conversation for two weeks later, but I had to reschedule via email because I had other obligations come up. Rescheduling was painless and completed in less than 24 hours. My planner responded to my initial email with the times he would have available coming up, I emailed back with the time that worked for me best, and I was booked.

My experience:

Because I had to reschedule our initial follow-up call, our second call was about a month later. By then, I was used to my new weekly budget and felt good and ready to begin my new action plan. Before we got to my actual action plan, my planner checked in with me to see how I did with my suggested weekly budget.

He even gave me the option to switch to one of the other versions he created with a little more flexible spending, but a longer road to my savings goals. I struggled a bit with my birthday spending and a few emergencies, but I knew those were outliers and I could easily stick to the weekly allotment in a regular week.

I chose to stick with my budget. He also asked me if anything about my financial situation had changed since we’d last spoken. One thing did change: I planned to move into a cheaper apartment the following month. My planner made a note to adjust my action plan accordingly and said the final plan would include the update. Afterward, he talked me through how to implement the action plan he created for me.

Toward the end of our conversation, he explained important financial documents I should have at any age such as a living will and where I could look for resources to complete them in my dashboard. In the dashboard, under the “Program” tab is a section called “Planner Picks” that has the company’s approved recommended resources.

Action Plan and a $2.5 Million Surprise

My planner delivered my action plan to me via my LearnVest dashboard. It was a PDF file of about 20 pages that I could download to my computer if I wanted. It was super simple to understand and split into three parts:

  1. A recap of my current financial situation
  2. My financial goals
  3. The action steps that would help me to reach my goals over time

The Recap

The recap restated my weekly spending number (that’s the amount I was allowed to spend each week) and still accomplish all of my monthly goals.

The Goals Summary

The goals part broke down each of my stated savings and debt goals and showed how I would go about reaching them over five years.

The Goals Summary

The goals changed over time to reflect when smaller goals like my emergency fund and credit card payoff would be complete. Of course, this part also included my retirement needs.

I was shocked at his calculation: I would need to save more than $2.5 million to maintain my current income in retirement. To get there, I would need to continue contributing 10% towards my 401(k) and bump that contribution up by 2% every year or any time I get a raise. The idea here is that I would save more as I earned more over time. Sounds doable enough. Finally, it listed what estate documents I needed, such as a living will and beneficiary forms. To be honest, I haven’t completed my living will yet. You can upload these documents to your dashboard once they are completed.

The Action Steps

The final part outlined the action steps that I would take monthly to reach my goals. It briefly reviewed my monthly budget and showed how I should set up my accounts so that each month of successful budgeting would contribute to my overall goals.

I had a few more challenges assigned to me, such as learning to categorize my purchases and create goals in the dashboard. My planner sent a follow-up email after both calls recapping what we discussed. Moving forward, I would have ongoing support from him via email and had a copy of my plan available to me in my LearnVest dashboard.

For now, I’m following the plan as best as I can. The first month was rough with moving expenses and holiday expenses, but I’m confident I’ll be able to beat my weekly spending target and pay down my debts even faster when life settles down a bit.

What Is Meant by “Ongoing Support”?

Ongoing support from LearnVest means that you can reach out to your planner for help or advice via email, anytime. Your planner will also continue setting up challenges for you in your dashboard and may, on occasion or when you email them, ask you about your progress.

I follow up with the challenges when they are assigned to me, but I’ve only had to contact my planner once via email to clarify my insurance needs. Other than those little questions, I don’t have much of a reason to contact the planner since my entire plan is on my dashboard, and I have a feeling I’ll be following the same plan for a while.

Pros and Cons

Pro: Quick Responses

Having email access to your planner actually works out pretty well. I was impressed when I emailed my planner late in the day with a question and he got back to me via email in less than 24 hours.

Pro: Online and Mobile

LearnVest is accessible to you on the computer and in an app for your mobile device. Having both platforms makes it easy and convenient to check your progress toward your goals or edit your budget whenever or wherever.

Pro: Challenges

Each time your planner sets up a new challenge for you, you’ll get an email. They will be challenges such as watching an educational video, practicing a shopping fast for a month, or automating contributions to one of your savings accounts. The challenges help in a couple of ways. They are a reminder to log in to your dashboard if you aren’t prone to doing so on your own. The challenges also serve as a way for your planner to contact you and keep you motivated with creative short-term financial goals.

Con: No Face Time

Both meetings with your financial planner will take place over the phone. You can’t video chat or otherwise see the person to whom you are giving your financial information face to face, which may make some feel cautious or uncomfortable. Your planner may do as mine did and exchange some polite banter or offer to answer any questions you may have about LearnVest or the process to help you feel more comfortable.

Con: No Credit Score Information

You’ll need to download a separate app it you want to monitor your credit score. Unlike other popular budgeting apps, such as Mint, you won’t be able to see any information related to credit score or credit report information with LearnVest.

Con: Can’t Split Transactions on Mobile

The LearnVest mobile app’s budgeting software doesn’t allow you split up one transaction into multiple categories. So if you spent money on both clothes and food in one location, you’ll have to log in at a desktop computer to split the transaction.

Con: No Investment Management

Unlike the robo-advisers out there and some other financial planning platforms, LearnVest doesn’t manage your investments. You can check out this article for a few robo-advisers if investment management interests you.

Other Financial Planning Platforms to Consider

There are a host of other robo-advisers and online financial planning tools that target millennials cropping up to choose from that you may prefer over LearnVest.

Stash Wealth

A newer online financial planning platform, Stash Wealth, operates very similarly to LearnVest, but is aimed at what it calls H.E.N.R.Ys (High Earners Not Rich Yet). It costs $997 to get started, then $50/month to continue the service. Stash Wealth does do more of the work for you — like setting up automation for your savings and checking your tax information — so you don’t pay any taxes that you don’t have to pay. Once you’re ready, they start investing your money for you in accordance with your goals.

XY Planning Network

The XY Planning Network is a network of fee-only financial advisers who focus specifically on Gen X and Gen Y clients. There are no minimums required to get started as a client, and advisers in the XY Planning Network are not permitted to accept commissions, referral fees, or kickbacks. In other words, no high-pressure sales pitches or hidden agendas. Just practical financial advice doled out at a flat monthly rate. The organization is location independent, offering virtual services that enable any client to connect with any adviser regardless of where they reside.

Garrett Planning Network

A national network featuring hundreds of financial planners, the Garrett Planning Network checks many key boxes for millennials. All members of the Garrett Planning Network charge for their services by the hour on a fee-only basis. They do not accept commissions, and clients pay only for the time spent working with their adviser. Just as important for millennials, advisers in the Garrett Planning Network require no income or investment account minimums for their hourly services.

Mvelopes

Mvelopes is an app that provides a spinoff of the cash envelope budgeting system popularized by Dave Ramsey. Like LearnVest, its basic version is free and allows you to link up to four bank accounts or credit cards. Mvelopes has a second tier called Mvelopes Premier. It costs $95 a year, and you can link an unlimited number of bank accounts and credit cards, among other features. Mvelopes’ top tier, Money4Life Coaching, adds one-on-one coaching tailored to your financial needs as LearnVest Premier does. However, there is no price for this tier specified on the website.

The Final Verdict

LearnVest Premium is a convenient and cheap alternative to an in-person financial adviser if you need a little additional help planning your finances or a convenient reminder to stick to your budget, but it’s not worth the $299 + $19 a month if you just want to keep an eye on your spending. For the latter, stick to the apps that do it better, like Mint and YNAB.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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Featured, Investing

How to Jumpstart an Underperforming 401(k)

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

retirement growing plant

A recent study from Schwab Retirement Plan Services found that “saving enough money for a comfortable retirement is the most common financial stress inducer for people of all ages.” Some 40% of survey participants stated that building adequate retirement savings was more stressful than the prospect of losing a job.

It’s hard to blame them. Watching that nest egg grow bit by bit over the course of several decades can be a challenge. And when your main retirement savings vehicle sputters and stalls, performance-wise, it’s difficult to know whether it might be time for a tune-up — or if you are better off leaving it alone.

If your plan is underperforming, and your balances are lower, it could be time to take some specific steps to correct the problem, and get that plan moving in an upward direction.

To get you motivated, MagnifyMoney reached out to finance and investment experts for effective strategies to turbo-boost those flatlining 401(k) plans. Here’s a look at what they said:

Kick it into overdrive when you hit 50.

The more cash you steer into your 401(k) plan, the more money you have working for you toward your retirement. That’s important, as compound interest builds more retirement wealth with more money in your 401(k) plan. “That’s why you need to take advantage of the 401(k) plan catch-up contribution,” says Shanna Tingom, co-founder and a financial planner with Heritage Financial Strategies, in Gilbert, Ariz. In a word, catch-up contributions allow retirement savers, usually older ones, to increase their 401(k) contributions.

Catch-up provisions enable plan participants who hit the 50-year-old mark before the calendar year is over to contribute extra “catch-up” 401(k) plan contributions on a pretax basis. In 2016 and 2017, for example, the catch-up limit stands at $6,000, in addition to the standard contribution limit of $18,000.

As Tingom puts it, “Too many people forget to increase their contribution when they turn the big 5-0.”

Get more aggressive, especially when you have more than 10 years until retirement.

The older investors get, the more conservative they may want to become with their retirement investments. But that could be a mistake, as Americans live longer and healthier lives and could need their nest eggs to last for decades beyond retirement. Forrest Baumhover, a fee-only financial planner with Westchase Financial Planning in Tampa, Fla., says he often sees retirement savers getting too conservative with their investments.

“You’ve got to look at your investment goals, and make sure your 401(k) selection matches those goals,” Baumhover advises. “Many people leave their money in the default money-market accounts and wonder why their plan performance isn’t going anywhere.” Studies show that investors who steered $100,000 into the Standard & Poor’s 500 stock index in 1987, would have earned over $1 million 25 years later. But a similar investment in the Barclays U.S. Aggregate Bond Index would have only accumulated $560,900, according to The Wall Street Journal, citing data from Morningstar.

Yes, stocks do represent a higher risk than bonds — the S&P 500 fell by 38% in 2008 — but historically, stocks make up the loss, and then some. Of course, if you are within a few years of retirement, it could be unwise to invest your entire portfolio in riskier stocks. Speak with a financial adviser who can help you determine the right mix of investments for your age, risk tolerance, and time horizon.

Keep a sharp eye on expensive fees.

Make sure the funds you are selecting are low cost, says Jeremy Torgerson, a money manager at nVest Advisors, in Brownsville, Texas. “Every 401(k) fund list should have a chart of the expense ratios of each fund,” Torgerson says. “Excessive fund fees — anything over 2%, especially — can really drag down your return over several years.” According to a 2014 study by the Center for American Progress, which cites government and industry plan data, the average American career professional loses $70,000 due to excessively high 401(k) plan fees over the course of their working years.

“The corrosive effect of high fees in many of these retirement accounts forces many Americans to work years longer than necessary or than planned,” the report states. Aim for low-cost exchange-traded funds, or index funds, which track major investment benchmarks, like the S&P 500, and offer management fees of well under 1%.

Get professional advice.

Too many people go it alone on with their 401(k) plans, and thus make poor choices on where and when to invest their money, warns Ed Snyder, a certified financial planner with Oaktree Financial Advisors, in Carmel, Ind. “An advisor can help you make choices and to stay the course during times of market volatility when you may have otherwise bailed out on your investments,” Snyder says.

The data backs up that sentiment. According to Vanguard Funds, a financial adviser using Vanguard’s own “best practices” can add 3% in net portfolio returns annually to an average investor’s portfolio. At 3% each year, for 30 or 40 years in the workforce, that can added hundreds of thousands of dollars to a 401(k) plan participant’s retirement savings.

And the good news is that hiring professional help doesn’t mean you necessarily have to fork over a percentage of your investment returns forever. There are low-cost alternatives to traditional financial advisers. You could hire a fee-only planner who charges on an hourly basis, or seek out services like Betterment or Wealthfront, which offer retirement investment advice at a fraction of the cost of traditional investment advisers.

Learn when to do nothing.

There’s a lot to be said for the vaunted “buy and hold,” long-term investment model. With this model, 401(k) savers (ideally working with a good money manager) choose several appropriate, low-cost mutual funds that fit their risk profile, their investment goals, and their asset allocation needs, and let the funds grow without worrying what the stock market is doing. Time and the miracle of compound interest are great retirement portfolio builders — if only 401(k) savers would leave them alone to grow, without buying and selling in an effort to time the markets.

Clearly, Americans are having problems getting their 401(k) plans on the performance fast track. Fix that issue by using the tips above to get your retirement plan into higher gear — the sooner, the better.

Brian O
Brian O'Connell |

Brian O'Connell is a writer at MagnifyMoney. You can email Brian here

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Investing, Reviews

Blooom Review: A Check-up for Your Employer-Sponsored Retirement Plan

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Blooom Review

While robo-advisers that manage your taxable investment accounts are plentiful throughout the market, companies that focus on managing your 401(k) have been more scarce.

Blooom is trying to change that.

Blooom is a Registered Investment Advisor service that specializes in managing employer-sponsored retirement plans. Blooom uses technology to analyze the health of a customer’s employer sponsored retirement plan (a401k, 403b, or TSP).

In this review, we’re going to discuss important aspects of Blooom’s service, including prices for its services and other fees, the fine print, and pros and cons to consider before signing up for an account.

What Blooom Does

Blooom is available to all investors with employer-sponsored plans whether they are just starting to contribute to their 401(k) account or they have been long-time contributors. There is no minimum account balance required.

Once you sign up for an account, Blooom suggests and makes adjustments that can improve your portfolio and grow your account. Blooom will always send you an email whenever it makes investment adjustments.

Once you sign up for an account with Blooom and connect your retirement account(s), its automated system and licensed advisers will:

  •    Analyze your fund options
  •    Adjust allocation as you get closer to retirement
  •    Make sure you’re on track to meet your retirement goals

How Much Blooom Costs

Since Blooom is a fiduciary, that means the company is required by law to act in your best interest in terms of managing your account.

Blooom charges customers a monthly fee based on the size of their account. Blooom offers a free analysis for accounts of any size and an affordable flat fee each month to continue its services, which you can cancel at any time.

  • $5 per month to manage accounts with less than $20,000
  • $19 per month to manage accounts between $20,000 and $500,000
  • $99 per month to manage accounts larger than $500,000.

Blooom fees are based on a “pay as you go” structure, so you can cancel at any time. As long as you cancel 48 hours before the end of the month, you won’t be charged for the following month.

Blooom doesn’t charge any hidden fees, but it reminds customers that the investments in their 401(k) have underlying expenses.

comparison between current and ideal

Fine Print

Blooom says it will adjust your 401(k) within the first 30 days after you sign up to be a client and will continue to adjust it every 90 days. Clients who use Blooom still have full control over their 401(k) account and allocations and can make or request changes at any time.

Blooom can assist clients with old 401(k)s, but it cannot change your contribution amount or initiate any withdrawals since that is outside the scope of the service it provides. While Blooom manages employer-sponsored plans like 401(k), 457, 403(b), 401(a), and TSP, it does not manage IRAs or Roth IRAs at this time.

Clients can think of Blooom as the middleman providing sound management advice and guidance for their employer-sponsored accounts.

You’ll still house everything with your broker and maintain control over contributions, but Blooom will lend a professional helping hand to make sure your account grows properly and you don’t miss out on any beneficial opportunities to improve wealth.

Pros and Cons

Pro: Extensive 401(k) management. Blooom provides a much-needed service since. There are many robo-advisers available for taxable accounts but few available to manage employer-sponsored accounts like 401(k)s, which are the most common retirement savings accounts among people who have a traditional employer.

Con: Monthly fee. While the monthly fee starts off small, it can add up once your account balance grows, and it’s important to make sure you’re getting enough value out of the service to justify paying the monthly fee.

Pro: Free analysis. A trial run is always nice. Blooom provides complimentary account analysis services so potential clients can get a feel for Blooom’s service and determine how beneficial it can be to them.

Con: Blooom only manages select employer-sponsored plans. While Blooom is a suitable option to manage your 401(k), if you have an IRA or a Roth IRA, you’ll have to get it managed with another robo-adviser.

Pro: No account minimum. This makes Blooom available to a wider range of investors who may not have large account sizes just yet.

Con: Simple service, but even simpler profile risk categories. While Blooom provides a streamlined management service for employer-sponsored plans, it also only determines your asset allocation by two categories: your age and stock/bond ratio. Some clients may seek more in-depth research or a more specific strategy from a company that charges a monthly fee for its service.

Pro: No contracts and full control. Clients can cancel at any time since the service is month-to-month, and they can also make allocation changes if they want to alter Blooom’s strategy.

Con: No mobile app. Since Blooom doesn’t have a mobile app, clients can’t check their accounts on the go and will need to log on to the site from a desktop or laptop each time.

Competitors

While Blooom offers a unique and somewhat rare service, it isn’t the only one offering to manage 401(k) accounts. Some employer-sponsored plans come with perks like 401(k) advice and guidance, so you can check with your brokerage firm first before paying a third-party company to assist with managing your 401(k).  Let’s look at what some of Blooom’s  competitors offer.

Feex

Feex is a free service that highlights the fees associated with your investment brokerage accounts like your IRA, 401(k), 403(b), and helps you reduce them. Feex is dedicated to make sure you keep as much of your own money as possible.  Feex provides a concierge service to help you rollover your old 401(k) which includes a free analysis service to determine how to reduce your fees and whether or not you should do a rollover.

FutureAdvisor

FutureAdvisor manages college savings plans and many Fidelity 401(k)s. It also manages IRAs and other taxable accounts for a fee. Unlike Blooom, FutureAdvisor has an investment minimum that currently sits at $10,000. However, its free college savings and Fidelity 401(k) management services are free aside from annual management fees of 0.50%. There is also a maximum age requirement, so the company doesn’t accept clients over the age of 68.

Personal Capital

Personal Capital is a popular wealth management platform that provides asset allocation and performance services upon request. It also provides fee analysis services, which calculate your total fee percentage and how the fees you pay compare to a fee benchmark. Personal Capital is a handy app to use to view the full picture regarding your investment portfolio, but it only offers guidance in regard to your actual 401(k) and employer-sponsored plans as opposed to the direct management service that Blooom offers.

Who Will Benefit from Using Blooom

Blooom’s service is ideal for individuals who’d like to take a hands-off approach when investing in their employer-sponsored retirement plan and who don’t mind paying a monthly fee to ensure better results. Blooom’s ability to analyze and manage employer-sponsored accounts no matter where they are held will make it that much easier for clients to sign up and benefit from the service. Just do the math to be sure it makes sense to be paying the monthly fee and that it isn’t just eating away at your gains.

Photos courtesy of Blooom press kit

Chonce Maddox
Chonce Maddox |

Chonce Maddox is a writer at MagnifyMoney. You can email Chonce at chonce@magnifymoney.com

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Investing, Reviews

Wealthfront Review: Tax Efficient, Low Monthly Fees, First $10,000 Managed for Free

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Businesswoman hand typing on laptop keyboard and analyzing business report, working over wooden desk in office in vintage color filter wealthfront

Robo-advisers like Wealthfront are online wealth management platforms that offer automated investment advice and portfolio management. Because robo-advisers rely heavily on algorithm-based guidance, they are often more affordable than working with a financial adviser one-on-one. Wealthfront charges no advisory fee on amounts below $10,000. For accounts over $10,000, it charges a monthly management fee of 0.25%. That works out to $18.75 per month for a $100,000 account.

Services like Wealthfront also require far lower account balances to get started. Whereas a traditional financial advisory firm might work with anyone with assets lower than $50,000, Wealthfront only requires that you invest $500 to start. The Wealthfront service includes a diverse portfolio of exchange traded funds (ETFs), tax harvesting, periodic rebalancing, and dividend reinvesting.

In this post, we will review Wealthfront’s services. Read on to find out:

  • How Wealthfront works
  • How much Wealthfront costs
  • The fees and gotchas
  • Pros and cons
  • How it stacks up against competitors

How Wealthfront Works

Wealthfront supports investors with both non-retirement accounts and retirement accounts. For retirement, you can open 401(k) rollover, traditional IRA, Roth IRA, and SEP IRA accounts. Wealthfront also allows you to open joint and individual accounts that you can use to invest money for other long-term financial goals besides retirement. You can also use Wealthfront for trusts.

The Wealthfront investment team invests client funds in low-cost ETFs and focuses its strategy on maximizing long-term return. To get started, Wealthfront measures your risk tolerance by asking you a few questions about your income and liquid assets. After completing the assessment, Wealthfront recommends an ETF portfolio. You can make adjustments to your portfolio by changing your risk tolerance.

ETFs at Wealthfront track indexes for 11 diversified asset classes. The Wealthfront asset classes include:

  • U.S. Stocks
  • Foreign Stocks
  • Emerging Markets
  • Real Estate
  • Natural Resources
  • U.S. Government Bonds
  • Treasury Inflation-Protected Securities
  • Municipal Bonds
  • Dividend Stocks
  • Corporate Bonds
  • Emerging Market Bonds

wealthfront1

Key Wealthfront Features

Wealthfront offers a free Portfolio Review service for anyone, including non-Wealthfront clients, interested in getting an assessment of their current portfolio. Wealthfront also has a robust help center you can check out for in-depth information on the investment team’s strategy before signing up.

All Wealthfront accounts include the initial recommendation, diversified ETFs, tax harvesting, and periodic rebalancing. If you have an account size over $100,000, there’s a premium Direct Indexing feature that’s supposed to offer even greater tax efficiency.

Here’s an overview of each feature in detail:

How Much Wealthfront Costs

In addition to the 0.25% monthly fee Wealthfront charges, investors will pay any fees associated with the underlying ETFs in their portfolio. The additional cost of your ETFs will vary. The average expense ratio for ETFs offered on Wealthfront’s platform is 0.12%.

The first $10,000 you invest with Wealthfront is always free. Beyond $10,000, Wealthfront charges a monthly advisory fee that equals 0.25% of the net market value of your assets.

For a simplified example, if your portfolio has a net market value of $15,000, you would pay no management fee for $10,000 and 0.25% for the amount greater than $10,000. In this case, $5,000.

Wealthfront does not currently have a tiered pricing system that charges you a lower advisory fee the more you invest. The management fee is 0.25% across the board.

Portfolio Review

Wealthfront portfolioIf you’re thinking about moving your portfolio to Wealthfront, the free Portfolio Review feature is the first place to start. Wealthfront connects to your current brokerage account to analyze your fees, taxes, portfolio diversification, and cash drag. Cash drag is the amount of excess cash you have on hand that you should be investing. Based on the results, Portfolio Review will make recommendations on ways your investment strategy could be improved.

Rebalancing

When you become a Wealthfront client, your investment allocation may stray away from the target recommended allocation over a period of time. Wealthfront keeps tabs on your allocations and will periodically rebalance them to be sure they are aligned with your financial goals.

Daily Tax-Loss Harvesting

Tax-loss harvesting is the process of selling off losses to offset taxes on your investment gains and income. Wealthfront’s investing algorithm can monitor your accounts daily for tax-harvesting opportunities. According to Wealthfront, Daily Tax-Loss Harvesting can improve performance by as much as 1% because of the tax savings.

Direct Indexing

Direct Indexing is the next level of tax harvesting available for Wealthfront clients with larger portfolios. Wealthfront purchases up to 1,000 individual stocks on your behalf. The movement of individual stocks gives Wealthfront more flexibility to harvest investment losses. According to Wealthfront, Daily Tax-Loss Harvesting and Direct Indexing combined can add as much as 2.03% to your investment performance annually.

The Fine Print

Wealthfront is overall transparent in how it charges fees, so there aren’t any “gotchas” to worry about. There is no charge for withdrawals or an exit fee for closing your Wealthfront account. Besides the first $10,000 you invest being free, you can qualify for a waiver on an additional $5,000 when you refer a family member or a friend. After their account is funded, both you and your friend or family member will get the fee waiver on an additional $5,000.

Pros and Cons

Pro: No advisory fee for small accounts. If you’re new to investing, starting small has its benefits. Wealthfront charges no advisory fee on amounts below $10,000. And if you can land a referral, you’ll get another $5,000 managed for free.

Con: There’s a minimum balance. Wealthfront requires a minimum account balance of $500 which is much lower than traditional investment firms. However, other roboadvisers like Betterment will manage your portfolio if you have even less money to invest. Betterment has no minimum balance requirement and doesn’t even charge a management fee if you have $0 in the account. We’ll cover what Betterment has to offer investors in the next section.

Pro: Direct Indexing for larger accounts. You can take advantage of Direct Indexing for increased tax efficiency if you have an account size over $100,000.

Con: The management fee for larger investments. As mentioned, if you have a larger amount to invest, Wealthfront doesn’t give you a break on cost. We’ll discuss a robo-adviser in the next section that has tiered pricing to show you the difference. Wealthfront states the reason for not offering a lower advisory fee for amounts over $100,000 is the value you get from Direct Indexing.

Pro: Portfolio Review and an easy setup process. Wealthfront offers an intuitive way to find out if your current portfolio is performing effectively through Portfolio Review. If you discover Wealthfront is a better option, a representative can assist you in transferring funds.

How Wealthfront Stands Up to the Competition

Betterment is a robo-adviser that offers trades, transactions, automatic rebalancing, and tax harvesting in each of its portfolio management plans. There’s no minimum balance required to start a Betterment account. However, the amount you invest will impact how much you pay for the service.

Betterment has the following management fee structure:

  • $0 – $10,000 account balance: Flat $3 per month fee if you don’t set up auto-deposit
  • $0 – $10,000 account balance: 0.35% annual fee if you have an auto-deposit of at least $100 per month
  • $10,000 – $100,000 account balance: 0.25% annual fee, no auto-deposit required
  • $100,000+ account balance: 0.15% annual fee, no auto-deposit required

As you can see, for someone investing over $100,000 with Betterment, the fee is just 0.15%. That is a better deal compared to Wealthfront’s 0.25% fee. Betterment also utilizes a portfolio of ETFs. The expense ratio for ETFs ranges from 0.09% to 0.17%, similar to Wealthfront.

WiseBanyan is a robo-adviser with no advisory fee, which makes it unique. However, there are nickel-and-diming administrative fees to consider. WiseBanyan offers tax harvesting, but it’s not free. It costs 0.25% of taxable assets up to a $20 cap per month. You can find a list of the other administrative fees here.

WiseBanyan uses ETFs and doesn’t have a minimum investment requirement. The average ETF expense ratio is 0.12%, and the range is 0.08% to 0.13%.

Who Will Benefit the Most from Wealthfront

Wealthfront may be worthwhile for those new to investing or for passive investors who aren’t seeking much customization in their portfolio. You do have the power to adjust your risk tolerance, but you can’t make direct changes.

If you have over $100,000 to invest, you may want to weigh the pros of the Direct Indexing feature against the advisory fee savings you may be able to obtain using another robo-adviser that has a tiered pricing system.

 

Taylor Gordon
Taylor Gordon |

Taylor Gordon is a writer at MagnifyMoney. You can email Taylor at taylor@magnifymoney.com

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