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Best IRA Account Providers 2020

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Individual retirement accounts (IRAs) are investment vehicles designed to help you save for retirement. If you have a company-sponsored retirement plan, like a 401(k), IRAs are an important supplement to further boost retirement savings. If you’re self-employed, IRAs are your main tool for saving up the nest egg you need to retire.

There are a variety of different IRAs available, and which one you choose depends on your unique employment and financial situation. The two main types are Traditional IRAs and Roth IRAs, which differ in the tax treatment of the funds you place in each account. With a Traditional IRA, you pay income taxes on the funds when you make withdrawals, while with a Roth IRA, you pay taxes on your contributions upfront, allowing the money to grow tax-free.

If you’re self-employed or run a small business, you’ll want to look at opening a simplified employee pension (SEP) IRA. SEP IRAs are available to anyone working as a business sole proprietor, earning freelance income or running a business with one or more employees.

Read on as we round up the best IRA account providers for both active and passive investors. For people who want to take an active role in choosing the investments held in their IRAs, we offer a selection of brokerage firms with premium trading resources. For those who would rather fund their IRA and let somebody else handle the investing process, check out our list of best robo-advisor services.

How we chose the best IRA account providers

We regularly review the latest IRA account offerings — we’ve evaluated 39 different offerings in this round — and have selected our top choices. All of the providers on this list may well be worth considering, with those at the top scoring the best in our methodology.

To determine our list of the best brokerage IRA account providers we focused on trading fees, account minimum, the diversity of investment products offered (stocks, bonds, ETFs and mutual funds) and low account fees (yearly fees, transfer fees and inactivity fees)

To determine our list of the best automated IRA account providers, we focused on management fees and account minimums and considered ease of use and customer support. See our methodology article for more details on how we created our rankings.

Best IRA providers for hands-off investors

Many people lack the time and specialized knowledge required to make the best possible investing decisions. This makes choosing a robo-advisor to manage your IRA a good bet. Robo-advisors are automated investing services operated by established brokerages and stand-alone companies. Robo-advisors generally charge annual management fees, usually 0.25-0.50% of your account balance, in addition to other fees to own ETFs and mutual funds. In return, computer algorithms written by financial professionals maximize your earnings to build a nest egg that will carry you through retirement. These are our picks for the best robo-advisors to manage your IRA.

 Annual Management FeeAverage Expense Ratio (moderate risk portfolio)Account Minimum to Start

Wealthfront

0.25%0.09%$500

Charles Schwab Intelligent Portfolios

0.00%0.14%$5,000

Betterment

0.25% (up to $100,000); 0.40% ($100,000.01 or more)0.11%$0

SoFi Automated Investing

0.00%0.08%$1

Wealthfront — Low fees, great tools

Wealthfront Advisers LLCWealthfront’s low annual costs and free financial planning tools are well-suited to IRA investors. Their annual cost is one of the lowest on this list, with a 0.25% management fee and 0.09% average ETF expense ratio. The $500 minimum to open an account is a bit higher than others on this list, but still attainable for many folks looking to build a nest egg. There is little human interaction at Wealthfront, which saves you time and helps the company keep costs low. This can be a drawback for those who would have complicated tax situations or who prefer a bit of personal attention.

Wealthfront Highlights:

  • An annual management fee of 0.25%; average ETF expense ratio of 0.09%
  • Investments are diversified and automatically rebalanced across four to five asset classes using a portfolio of low-cost ETFs tailored to your risk profile
  • IRAs available: Traditional IRAs, Rollover IRAs, Roth IRAs and SEP IRAs. Wealthfront does not offer inherited or beneficiary IRAs

Charles Schwab Intelligent Portfolios — Automated investing from a leading brokerage

The Charles Schwab CorporationCharles Schwab Intelligent Portfolios can be a smart choice for automating your IRA investments, but do not let the 0% management fee mislead you: Instead of charging a fee, Charles Schwab requires that Intelligent Portfolios clients hold 6-30% of deposited funds in cash at a 0.70% APY, which will decrease overall returns in years where the market returns above 0.70%. In addition, Charles Schwab charges a higher expense ratio for owning their ETFs, which averages 0.14% for a moderate portfolio. The minimum deposit requirement of $5,000 to open an account may be a touch high for investors just starting out. Customer service is one of Schwab’s highlights. As a well-established broker, the company has over 350 branch locations where you can get in-person assistance with your IRA investing questions. Plus, 24/7 phone support is available.

Intelligent Portfolios Highlights:

  • No annual management fee, although customers must keep 6% to 30% of portfolios in cash; average expense ratio of 0.14%
  • Investments are diversified across up to 20 different asset classes and auto-rebalanced
  • Starting at Schwab can benefit investors who anticipate opening other account types down the road
  • IRAs available: Traditional IRAs, Rollover IRAs, Roth IRAs, SEP IRAs, inherited IRAs and Custodial IRA

Betterment — Low fees for balances under $100K

Betterment Holdings Inc.Betterment is one of the most prominent names in automated investing. They offer a full suite of robo-advisor features for IRA investors at low cost, with no minimum deposit. Annual management fees for accounts under $100,000 are 0.25% plus an average 0.11% expense ratio. The annual management fee jumps to 0.40% for accounts $100,000 and up. Betterment gives another advantage to accounts with over $100,000 deposited, allowing those clients to actively manage some assets. If active management is your goal, though, you can avoid Betterment’s 0.40% fee by opening a free brokerage account. If you are managing more than $100,000, you may want to consider a different robo-advisor.A feature that sets Betterment apart versus peers is its Tax-Coordinated Portfolio, which attempts to decrease the amount you pay in taxes. It does this by placing assets that will be taxed highly into IRAs, which have big tax breaks, while placing lower-taxed assets in taxable accounts.

Betterment Highlights:

  • No minimum deposit and low fees for balances under $100k
  • Betterment invests your deposits in ETFs diversified across 12 different asset classes with a strategy personalized to your risk profile
  • The tax-coordinated portfolio feature works to lower your tax bill by placing high-tax items in a tax-advantage IRA account
  • IRAs available: Traditional IRAs, Rollover IRAs, Roth IRAs, SEP IRAs, inherited IRAs and inherited Roth IRAs

SoFi Automated Investing — Low costs, great perks

SoFi Securities LLCSoFi Automated Investing is one of the most competitively-price automated IRA providers, featuring no annual management fee and an ultra-low 0.08% average expense ratio. Valuable perks come with opening a SoFi account, including free access to SoFi financial advisors who can help you create a retirement plan, plus free career counseling and discounts on loans. SoFi also offers an attractive 1.10% APY on deposits in their checking/savings product, though customers must open that account separately.Automated Investing’s main downside is that their portfolios are less customizable than peers’ offerings, with only five different risk levels to choose from, as opposed to at least 10 available from others.

SoFi Automated Investing Highlights:

  • No annual management fee, an average expense ratio of 0.08%, and a $1 minimum deposit
  • IRA and Roth IRA portfolios contain less municipal bonds and more corporate bonds to maximize returns for these tax-advantaged accounts
  • Investments are invested in low-cost ETFs diversified across 16 different asset classes and automatically rebalanced monthly
  • IRAs available: Traditional IRAs, Rollover IRAs, Roth IRAs and SEP IRA

Best IRA providers for active investors

If you are confident in your ability to make financial decisions and are willing to put in the time and effort needed to maintain an investment portfolio, a traditional brokerage IRA can be a good option. With the selected IRA providers below, you have complete control over how investments are allocated within the account. The best part: You pay no management fees.

 Fee per tradeCommission-free ETFsNo transaction fee mutual funds

Charles Schwab

$0.005143,457

Fidelity

$0.005033,636

TD Ameritrade

$0.005713,985

E-Trade

$0.002774,222

Charles Schwab — Free fixed-income consultation

The Charles Schwab CorporationBroker Charles Schwab’s multitude of low-fee investment options and customer service offerings make them a top pick for IRA investors. Schwab offers a number of ways to keep fees low with a low $0.00 per trade commission, $0 minimum to open an account and a large selection of commission-free ETFs and no-transaction fee mutual funds.Especially relevant for investors approaching retirement, Schwab offers free consultations with fixed-income specialists. Customer service is a highlight at Schwab with over 350 branch locations if you need in-person help and 24/7 phone support available. High fees for transfers out of your account or for foreign stock trading are gotchas to look out for.

Charles Schwab Highlights:

  • Free consultation with fixed-income specialist, an advantage for investors close to retiring
  • Low trading commissions at $0.00 per trade
  • There is no minimum deposit to open an IRA with Schwab, so it is easy to get started
  • IRA available: Traditional IRAs, Rollover IRAs, Roth IRAs, inherited IRAs and Custodial IRAs.

Fidelity — Strong mutual fund offerings

Fidelity Brokerage Services LLCFidelity is a top pick among investors saving for retirement, and for good reason. Their vast selection of no-fee mutual funds and ETFs help investors hold onto more of their retirement savings. Fidelity’s lineup of mutual funds with 0% expense ratios are especially noteworthy for fee-conscious investors. Low $0.00 per trade commissions will attract investors who likely actively manage trades in retirement accounts.Fidelity also offers several options for hands-off retirement investors, including its robo-advisor, Fidelity Go, a lineup of well-regarded target date mutual funds, and private client services. For folks looking for in-person help, Fidelity offers over 190 branch locations, and can help by phone 24/7 if you would rather stay home. Low fees and a wide offering of investments make Fidelity a compelling option for beginners.

Fidelity Highlights:

  • 500+ commission-free ETFs, 3,600+ no-transaction fee mutual funds and some proprietary Fidelity funds with 0% expense ratios
  • No fees on early IRA withdrawals or transfers in or out of accounts
  • Great educational resources and useful checklists for retirement
  • IRAs available: Traditional IRAs, Rollover IRAs, Roth IRAs, SEP IRAs, inherited IRAs and custodial IRACustodial IRAs.

TD Ameritrade — Broad selection of no-fee funds

TD AmeritradeTD Ameritrade has a strong IRA offering with almost 4,000 no-fee mutual funds and over 500 commission-free ETFs, paired with strong customer support offerings. Investors comfortable managing their own funds will appreciate TD’s selection of analyst reports, charting tools and watch lists. The high $0.00 per trade commission is TD Ameritrade’s main drawback. If you plan on doing heavy stock or options trading inside your IRA, a broker with lower fees may be a better choice. If you’re willing to pay a premium on trades for full-service customer support and a strong assortment of ETFs and mutual funds, TD Ameritrade is a solid choice.

TD Ameritrade Highlights:

  • Large selection of no-transaction-fee mutual funds
  • Special offers available for qualifying TD Bank customers including free trades and account rebates
  • No fees for early withdrawal, over-contributing, or recharacterizing IRA contributions
  • IRAs available: Traditional IRAs,Rollover IRAs, Roth IRAs and SEP IRAs.

E-Trade — Wide assortment of investments, be careful of fees

E-Trade Securities LLCE-Trade offers one of the broadest assortments of no-transaction-fee mutual funds in the industry with over 4,000 no-transaction-fee mutual funds available, making them an excellent home for your IRA. Their robust research tools make it easy to select your investment portfolio and no minimum deposit to open an account makes it easy to get started. Trading fees are higher than some peers at $0.00 per trade, though they do drop to $0.00 per trade when you place more than 30 trades per quarter.Be aware, however, that E-Trade charges $25 for any early distribution, even those that can be taken penalty-free from IRAs and Roth IRAs, such as first-time home purchases, medical expenses or education expenses. They also charge a $25 fee if you accidentally overfund an IRA or if you need to recharacterize an IRA contribution to a Roth IRA contribution or vice versa.

E-Trade Highlights:

  • Deposits of more than $25,000 in a new E*Trade retirement account qualify for cash bonuses and 500 free trades
  • Expansive selection of no-transaction-fee mutual funds, over 4,200 in total
  • Offers proprietary robo-advisor Core Portfolios for hands-off investors
  • IRAs available: Traditional IRAs, Rollover IRAs, Roth IRAs, SEP IRAs, inherited IRAs and Custodial IRAs.

Individual retirement account FAQs

What is a Traditional IRA?

A Traditional IRA is the most basic variety of IRA. With a Traditional IRA, your contributions are tax-deductible in the year you make them and funds in the account grow tax-deferred. You pay regular income tax on distributions made from the account in retirement.

For 2020, you are allowed to contribute $6,000 per year to a Traditional IRA ($7,000 if you’re 50 or older). These contributions are in addition to one made to a 401(k) employment savings plan, however there are limits to how much you may deduct from your taxes depending on how much you make.

Anyone can open a Traditional IRA if they earn taxable income in the year in which they make a contribution. However, the funds you contribute to a Traditional IRA aren’t allowed to grow indefinitely. Holders are subject to or required minimum distributions, which means you’ll need to start taking distributions from the IRA once you reach the age of 72. In addition, you pay a 10% penalty if you withdraw funds before the age of 59 ½.

What is a Roth IRA?

A Roth IRA is the other main variety of IRA. Contributions to a Roth IRA are not tax-deductible in the year you make them, but your money grows tax-free in the account and you pay no taxes on the income when you withdraw the money in retirement.

The contribution maximums are the same as a Traditional IRA: for 2020, you may add $6,000 per year to a Roth IRA ($7,000 if you’re 50 or older). Like a Traditional IRA, these contributions are allowed on top of ones made to a 401(k) employment savings plan, however there are strict rules capping the annual totals you may put into a Roth IRA depending on how much you make.

One big advantage of a Roth IRA that’s different than a Traditional IRA is that you can withdraw money from a Roth IRA at any time without paying penalty. Note that there are rules dictating how much and when you may make early withdrawals from a Roth IRA. Also, Roth IRAs do not have required minimum distributions.

The rules prevent people earning above a certain amount from opening a Roth IRA. However, there is a tax strategy called a “backdoor IRA” that lets you open a Traditional IRA and then convert it to a Roth IRA.

What is a SEP IRA?

A simplified employee pension (SEP) IRA is designed to let the self-employed and small business owners save for retirement. With a SEP IRA, you get a tax deduction on contributions and funds kept in the account grow tax-deferred. SEP IRA withdrawals in retirement are taxed at regular income tax rates.

Maximum annual contribution limits for SEP IRAs are much higher than other IRAs, because the holders of this type of IRA do not have access to 401(k)s. The maximum contribution for 2020 is $57,000. Eligible SEP IRA owners cannot contribute more than 25% of their annual compensation.

For small business owners that have employees, owners must contribute to their employees SEP IRA accounts at the same rate that they contribute to their own SEP IRA account. Small business employees generally can’t contribute to a SEP IRA set up by their employer — although they can make Traditional IRA contributions in some cases.

What is an IRA rollover?

An IRA rollover is an IRA used to house funds that initially accrued in a different retirement account, such as a 401(k). If you change jobs or otherwise find yourself without access to an employer-sponsored retirement plan, a rollover IRA can help keep your assets invested and growing — while keeping you from paying the taxes and penalties you would face if you cashed out the old account.

The easiest way to perform an IRA rollover is to have your existing account custodian transfer the funds directly to the new account or write a check made out to the new trustee in your benefit. You also can do an “indirect rollover,” where you cash out the account and reinvest the funds manually, but there are some important caveats to keep in mind before taking this approach.

As required by the IRS, your retirement account manager must withhold 20% when writing you a distribution check, even if you intend to reinvest it later. Although you have a 60-day window in which you can redeposit the funds without incurring a penalty, you must redeposit the entire amount, which means you’ll need to make up the difference out of your own pocket.

How do I open an IRA account?

You can open an IRA at your bank, at a wealth management firm, at a brokerage or through online robo-advisors. The specific steps required to open an IRA will depend on your chosen account custodian. You’ll be asked verifiable identification information, such as your Social Security number, and you may also be required to meet a certain minimum initial deposit.

Once your account is open and funded, you can begin to research and invest in specific stocks, bonds and other securities and investments. The investments you choose will dictate how the account will generate income from capital gains over time, so it’s important to select and properly allocate your assets as soon as you open your account.

What are the advantages/disadvantages to managing my IRA myself?

Some folks want to handle their investments by themselves. In order to manage your own IRA, you should feel confident in your ability to invest and make decisions with meaningful sums of money — it is your retirement savings after all. With a brokerage IRA, you will have full control over where and how your money is invested, and by doing it yourself you will not pay any management fees.

The downside is that you will have to spend time and energy researching investment decisions and rebalancing your portfolio. You also do not get the advantage of having a professional money manager in your corner. Luckily, a number of brokers will offer free consultations to get you going, and by investing in mutual funds and ETFs, you can leverage the expertise of some of the best money managers in the world.

What are the advantages/disadvantages to automating my IRA?

Many people would prefer to have a professional manage their investments, either because of lack of time or investing expertise. Choosing an IRA managed by a robo-advisor lets a computer algorithm written by investing professionals is a great strategy a hands-off investor.

This comes at a price. Most robo-advisors charge an annual management fee of around 0.25-0.50% of your account balance. Additionally, you lose some of the customization that comes with managing your own investments. Most robo-advisors will assign you one of their predetermined portfolios based on a questionnaire. As a result, you could end up with a portfolio that isn’t as optimal as a custom one or that contains companies that you would rather not own.

One last thing to consider is that many of these robo-advisors are relatively new. If you are young, chances are that the industry and robo-advisors’ offerings will likely change by the time you are retiring.

What investments should my IRA broker offer?

Ensure that the broker you choose has a strong selection of commission-free ETFs and mutual funds along with screening and portfolio-building tools to help you choose the right investments. Most brokers offer a “select list” of mutual funds, which often feature funds created and managed by the same broker. As with all investing decisions, be skeptical and make sure to compare funds from a number of different companies to try and get the best return while paying the lowest fees.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Review of Vanguard Personal Advisor Services

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Vanguard Personal Advisor Services is the investment advisory service offered through Vanguard Advisers, a wholly owned subsidiary of Vanguard, Inc., one of the world’s largest investment management firms. Vanguard Personal Advisor Services focuses on serving individual investors, including high net worth individuals. Clients work with human advisors, but also have access to Vanguard’s digital advice platform.

All information included in this profile is accurate as of April 2, 2020. For more information, please consult Vanguard Personal Advisor Services website.

Assets under management: $83.7 billion
Minimum investment: $50,000
Fee structure: A percentage of AUM; one-time financial planning fee for some workplace retirement plan participants
Headquarters: 100 Vanguard Boulevard
Malvern, PA 19355
vanguard.com
800-416-8420

Overview of Vanguard Personal Advisor Services

Vanguard Personal Advisor Services is the investment advisory arm of Vanguard Advisers, a wholly owned subsidiary of Vanguard. The advisory part of the business launched in 2015, decades after Vanguard was founded in 1975 by the late John “Jack” Bogle.

Bogle introduced the first-ever index fund to retail investors and encouraged them to buy and hold a diverse basket of low-cost investments. Though Bogle passed away last year, the firm aims to continue his legacy.

Vanguard Personal Advisor Services is focused on providing ongoing advisory account services for individual investors as well as point-in-time financial planning for retirement plan participants. Vanguard Personal Advisor Services oversees $83.7 billion of Vanguard Advisers’ total $221 billion in assets under management (AUM).

Which types of clients does Vanguard Personal Advisor Services serve?

Vanguard Personal Advisor Services primarily serves individuals, including high net worth investors and those who get services through their workplace retirement plans. For reference, the SEC defines high net worth individuals as those with at least $750,000 under management or a net worth above $1.5 million.

The individual investors either come for financial planning via their workplace 401(k) plans, or they are retail investors with an IRA or other account with Vanguard. In the latter case, there’s a minimum investment requirement of $50,000. The firm does not provide financial planning services to clients who do not have accounts with Vanguard.

Services offered by Vanguard Personal Advisor Services

Vanguard Personal Advisor Services offers financial planning and point-in-time advice to participants in Vanguard workplace retirement plans. Those participants are not eligible for managed account services for assets in those plans.

Clients who have an IRA or other retail account worth at least $50,000 with Vanguard can use Vanguard Personal Advisor Services to get a customized financial plan and enroll in the firm’s “ongoing advised services.” That gives an advisor the authority to make trades on the client’s behalf in accordance with their agreed-upon plan. It also allows participants to call advisors about advice on financial issues that arise as they hit life’s milestones, such as buying a new house or having grandchildren.

Here is a full list of services offered by Vanguard Personal Advisor Services:

  • Investment advisory services/portfolio management
    • Asset allocation strategies
  • Financial planning
    • Retirement planning
    • Estate planning
    • Charitable giving
    • Succession planning
    • Tax planning and management

How Vanguard Personal Advisor Services invests your money

All participants in Vanguard Personal Advisor Services get a financial plan, including the creation of a portfolio with a diverse asset allocation that reflects your personal financial situation, goals and risk tolerance. To do that, the advisors rely on an algorithm, which recommends an investing track and glide path, or asset allocation strategy, that meets your needs. The investment tracks range from very conservative to very aggressive, and the glide paths adjust over time, depending on your goals.

Each portfolio includes a variety of Vanguard index funds with holdings in a specific asset class, such as international stocks or short-term bonds, but it does not recommend investments in individual stocks or bonds. In addition to diversification, the portfolios take taxes into account, aiming to keep the investments as tax-efficient as possible. In general, Vanguard encourages a long-term, buy-and-hold approach rather than switching strategies based on market performance.

Fees Vanguard Personal Advisor Services charges for its services

Employees who use Vanguard Financial Planning Services through their workplace retirement plan pay $1,000 for the service if they have less than $50,000 in assets with Vanguard, and $250 if they have $50,000 to $500,000 with Vanguard. The firm may waive that fee for clients who are over the age of 55 or who have more than $500,000 invested with Vanguard.

For clients of Vanguard Personal Advisor who don’t have a workplace retirement plan and are enrolled in the ongoing advised services, the firm charges a percentage of assets under management. Rates run from 0.30% for accounts of less than $5 million to 0.05% for accounts over $25 million.

Assets under managementAnnual rate
Under $5 million0.30%
$5 million to under $10 million0.20%
$10 million to under $25 million0.10%
$25 million and over0.05%

In addition to the above fees, you may also pay fund fees, annuity fees, account fees or retirement plan fees.

Vanguard Personal Advisor Services’s highlights

  • A dedication to low fees. Vanguard literally invented index investing, and the firm remains dedicated to keeping its fees low. Its fee schedule is substantially lower than the industry average total fee rate of 1.17%, according to RIA in a Box.
  • Excellent reputation. Vanguard Personal Advisor Services was named the “Brand of the Year” in 2019 for digital investing by Harris Poll EquiTrends. The title was awarded based on consumer devotion and respect.
  • Fee-only model. Advisors don’t receive commissions for selling products or making recommendations, so they do not have a financial incentive to do so, which can pose a potential conflict of interest.

Vanguard Personal Advisor Services’s downsides

  • High minimum balance for young investors. You need to have $50,000 invested with Vanguard (outside of your workplace retirement plan) to access its investment management services if your employer is not enrolled in the program. That could be a high bar for young investors or for those who haven’t been saving for long.
  • Less potential upside: Since Vanguard’s investment philosophy is built on a buy-and-hold strategy comprised of low-cost funds, you can expect your investments to perform in line with the markets, but advisors aren’t actively trading to try to “beat the market.”
  • Large digital component: While you’ll work with a human advisor to create your initial plan, future check-ins may take place via the platform’s digital interface. Clients with $500,000 or less in assets do not have an assigned financial advisor, though they can call to schedule an appointment at any time.

Vanguard Personal Advisor Services disciplinary disclosures

Vanguard Personal Advisor Services does not have any disciplinary disclosures. All registered investment advisors are required to disclose any legal, regulatory or criminal events in their Form ADV, documents they file with the SEC.

Vanguard Personal Advisor Services onboarding process

To learn more about working with Vanguard, you can call (800) 414-8740 or create an account online to set up an appointment to talk with an advisor. In your initial conversation, you’ll discuss your financial situation and goals, and share information about all your financial accounts. Your advisor(s) will spend a few weeks creating a plan, and then you can decide whether you want to implement that plan and allow them to manage the account on your behalf.

If your portfolio is worth less than $50,000, you’ll work with a team of advisors, while those with a portfolio worth more than $500,000 have a specific, dedicated financial advisor. Advisors will check on your portfolio on a quarterly basis, making adjustments as needed to your asset allocation. You can check in online or call your advisor or team at any time.

Is Vanguard Personal Advisor Services right for you?

The firm may be a good choice if you’re an investor with at least $50,000 looking for a low-cost, low-maintenance way to manage your money (or your employer has chosen Vanguard as its retirement plan provider). Vanguard Personal Advisors offers extremely low fees and boasts a clean disciplinary record.

For investors who have less than $50,000, or who are looking for a more active approach to asset management, another firm might be a better fit. As is always the case when choosing a financial product or service, it’s important to shop around, ask questions of financial advisors and make the choice that’s best for your unique situation.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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The 7 Best Robo-advisors of 2020

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

If you’re new to the world of investing in stocks and bonds, knowing where to begin can be an intimidating prospect. Robo-advisors could be the best choice to start your investing journey. They make putting money in the market simple and intuitive utilizing smartphone apps and sophisticated computer algorithms.

Robo-advisors invest your money in diversified portfolios of stocks and bonds that are customized to your needs. Since computers do the work, they are able to charge much lower fees than traditional wealth advisors.

They begin the process with a questionnaire to assess your financial goals and your risk tolerance. Based on your answers, robo-advisors purchase low-cost exchange-traded funds (ETFs) for you and adjust the portfolio — or rebalance, as they say on Wall Street — on a regular basis, with no further intervention required from you.

To match your risk tolerance, robo-advisors offer more aggressive portfolios containing a greater percentage of stock ETFs, or more conservative ones containing a greater percentage of bond ETFs. The robo-advisor will also consider your age in developing your portfolio.

How we chose the best robo-advisors

We regularly review the latest robo-advisor offerings — we’ve evaluated 19 different ones in this round — and have selected our top choices. All of the robo-advisors on this list may well be worth considering, with those at the top scoring the best in our methodology.

To determine our list of the best robo-advisors, we focused on management fees and account minimums, and also considered ease of use and customer support.

The top 7 robo-advisors of 2020

Robo-advisorAnnual Management FeeAverage Expense Ratio (moderate risk portfolio)Account Minimum to Start
Wealthfront0.25%0.09%$500
Charles Schwab Intelligent Portfolios0.00%0.14%$5,000
Betterment0.25% (up to $100,000), 0.40% (over $100,000)0.11%$0
SoFi Automated Investing0.00%0.08%$1
SigFig0.00% (up to $10,000), 0.25% (over $10,000)0.15%$2,000
WiseBanyan0.00%0.12%$1
Acorns$12/yr0.03%-0.15%$5
Fees

N/A

Account Minimum

$100 one-time deposit or $20 monthly deposit

Promotion
N/A
Fees

N/A

Account Minimum

$0

Promotion

Three months free for new customers who are referred by an existing Betterment account holder

Fees

N/A

Account Minimum

$100

Promotion

N/A

Wealthfront — Low fees, high APR for cash account

Wealthfront
Wealthfront’s stand-out features are its low annual cost and free financial planning tools. The 0.25% management fee and 0.09% average ETF expense ratio adds up to one of the lowest annual costs on this list. In addition, Wealthfront includes a cash management account with an attractive 0.26% APY.

Wealthfront continues to steal share in wealth management as customers fed up with high fees leave traditional brokerages and wealth advisors. Human interaction is intentionally minimal at Wealthfront: This could be a benefit to those who want to be left alone, or a drawback for those who would prefer personal attention or who have complicated tax situations.

Wealthfront’s key attributes:

  • Fees: Management fee of 0.25%, plus 0.09% avg ETF expense ratio
  • Minimum starting deposit: $500
  • Investing strategy: Wealthfront invests your money in one of 20 different automated portfolios. Each portfolio is a different mix of 11 low-cost ETFs, which are rated with risk scores from 0.5 (least risk) to 10.0 (most risk).
  • Average annual return over the past five years: 5.40% per year, based on Wealthfront’s mid-level 5.0 risk score.
  • Other notable features: Tax-loss harvesting (see below for a full explanation of tax-loss harvesting) comes standard, also includes an FDIC-insured cash management account yielding 0.26% APY.

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Charles Schwab Intelligent Portfolios — Brand-name brokerage

Charles Schwab
Intelligent Portfolios can be a smart choice, but do not be misled by the 0% management fees — investing with this robo-advisor still comes at a cost. Intelligent Portfolios requires users to hold 6% to 30% of deposited funds in cash at a 0.70% APY, which will eat into overall returns in years where the market returns above 0.7%. This is on top of an average 0.14% expense ratio for a moderate portfolio. The $5,000 minimum deposit to open an account may also be too high a bar for investors just starting out.

That said, Intelligent Portfolios has an exceptionally detailed description of their ETF selection methodology, and a major brokerage like Schwab can be a good launchpad for folks who anticipate getting deeper into investing. Intelligent Portfolios users get access to Charles Schwab’s 300 U.S. branch locations where you can talk to advisors and handle administrative tasks in person.

Key attributes of Intelligent Portfolios:

  • Fees: Zero management fee, but customers must hold 6% to 30% of their portfolio in cash at 0.7% APR, plus 0.14% avg ETF expense ratio.
  • Minimum starting deposit: $5,000
  • Investing strategy: Schwab invests your money in a custom portfolio with two main components: ETFs representing up to 20 different asset classes, including stocks and bonds; and cash, in the form of a FDIC-insured cash sweep program earning 0.7% APY. Cash must be between 6% and 30% of the portfolio.
  • Average annual return from 3/31/2015 to 12/31/2018: 3.1% per year for medium-risk portfolio
  • Other notable features: Tax loss harvesting available for accounts over $50K, includes access to in-person assistance at over 300 U.S. branch locations.

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Betterment — Low fees for balances under $100K

Betterment
Betterment offers a full suite of robo-advisor features at low cost with no minimum deposit. The annual management fee for accounts under $100,000 is 0.25%, plus an average 0.11% expense ratio. Unfortunately, accounts over $100,000 will see the annual management fee jump to 0.40%. One advantage Betterment gives to accounts above the $100,000 threshold is that they can actively manage some assets. If active management is your goal, though, you can avoid Betterment’s 0.40% fee by opening a free brokerage account — so if you are managing more than $100,000, you may want to consider a different robo-advisor.

Betterment’s key attributes:

  • Fees: If total balance is less than $100,000, the annual management fee is 0.25% of assets; for balances over $100,000, management fee rises to 0.40% of assets. The average ETF expense ratio is 0.11% (for a 70% stock and 30% bond portfolio).
  • Minimum starting deposit: $0
  • Investing strategy: Betterment invests your money in an automated portfolio comprised of stock and bond ETFs in 12 different asset classes.
  • Average annual return over five years: 6.2% per year on a 50% equity portfolio (July 2013 to July 2018).
  • Other notable features: Tax-loss harvesting comes standard; active management features for clients with $100,000+ balance; several premium portfolios available.

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SoFi Automated Investing — Low costs, great perks

SoFi
SoFi Automated Investing’s 0.00% management fee and ultra-low 0.08% average expense ratio makes it one of the most competitively-priced robo-advisors in the market. Valuable perks come with opening a SoFi account, including free access to SoFi financial advisors, free career counseling and discounts on loans.

Automated Investing’s main downside is that their portfolios are less customizable than its peers’, with only five different risk levels to choose from, as opposed to at least 10 available from others. SoFi does not offer tax loss harvesting yet, though this may change in the near future.

SoFi Automated Investing’s key attributes:

  • Fees: Zero management fee, plus 0.08% avg expense ratio.
  • Minimum starting deposit: $1
  • Investing strategy: All SoFi Automated Investing portfolios are actively managed. This means that real humans at SoFi decide the makeup of the five model portfolios, which they believe will add value beyond what passive investing offers. SoFi invests your money in one of five portfolios of low-cost ETFs, covering 16 different asset classes. Each of the five portfolios has two versions: one is for taxable accounts and the other for tax-deferred or tax-free accounts, like IRAs and Roth IRAs. SoFi only rebalances portfolios monthly, versus some peers which check for this opportunity daily.
  • Average annual return over five years: 6.78% per year on the moderate risk portfolio (60% stocks / 40% bonds).
  • Other notable features: Commission-free stock trades in separate Active Investing accounts. SoFi’s combined checking/savings product, SoFi Money, offers 1.10% APY on deposits. Customers must open this account separately.

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SigFig — Free access to advisors

SigFig
Free access to financial advisors by phone and 0.00% management fees on the first $10,000 deposited are SigFig’s biggest strong points. On deposits over $10,000, management fees rise to 0.25%. Expense ratios are on the high side compared to the competition, at an average of 0.15%.

One of SigFig’s peculiarities is that they do not hold your assets. If you open a new account, SigFig will open an account at TD Ameritrade for you and then manage it. Current TD Ameritrade, Fidelity and Charles Schwab customers can also use SigFig’s robo-advisor services.

The $2,000 minimum deposit may put SigFig out of reach for some, but SigFig is worth a look for investors looking to keep robo-advisor costs low.

SigFig’s key attributes:

  • Fees: Zero annual management fee for the first $10,000; management fee rises to 0.25% of assets on balances over $10,000. Average ETF expense ratio of 0.15%, depending on allocation.
  • Minimum starting deposit: $2,000
  • Investing strategy: SigFig invests your money in an automated portfolio based on how you indicate you want to invest. Each portfolio is made of ETFs from Vanguard, iShares and Schwab, comprising stocks and bonds in nine different asset classes. The specific ETFs SigFig invests in will vary based on whether your account is held at TD Ameritrade, Fidelity, or Schwab.
  • Average annual return over five years: 5.45% per year for moderate portfolio (as of 4/24/2019)
    Other notable features: SigFig has a free portfolio tracker that allows investors to track their entire portfolio’s performance across multiple brokers.

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WiseBanyan — No-frills choice for beginners

WiseBanyan
A 0.00% management fee for core robo-advisor functionality makes WiseBanyan a good choice for beginning investors who can get by with a no-frills offering. Make sure to notice that they still charge a 0.12% average ETF expense ratio, so it is not completely free.

WiseBanyan charges premiums for features that come standard with other robo-advisors, including tax loss harvesting (0.24% of assets up to $20/month max), expanded investment options ($3/month) and auto-deposit ($2/month). If you care about these other features, do the math based on your own portfolio size to compare WiseBanyan to its peers.

WiseBanyan’s key attributes:

  • Fees: Zero management fee, plus average ETF expense ratio of 0.12%. Premium features carry additional fees and higher expense ratios.
  • Minimum starting deposit: $1
  • How WiseBanyan invests your money: For basic Core Portfolio users, portfolios comprise ETFs across nine asset classes, with an average expense ratio of 0.03% to 0.69%. If you upgrade to the Portfolio Plus Package, you gain access to 31 total asset classes with exposure to ETFs tracking oil and gas, precious metals and other industries, with an average expense ratio of 0.03% to 0.75%.
  • Average annual return over five years: Not provided
  • Other notable features: Premium offerings, including tax loss harvesting (0.24% /month up to $20/month max), Fast Money auto-deposit ($2/month) and Portfolio Plus ($3/month).

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Acorns — Unique savings functionality

Acorns
By rounding up the spare change from your transactions and placing it into an investment account, Acorns provides a clever way to get started with investing. The main drawback is that, until you have more than $4,800 deposited in an Acorns Core account, the $1/month fee will actually be proportionally higher than the 0.25% management fees that most competitors charge.

Acorns does not offer tax loss harvesting, joint accounts, or access to financial advisors currently. Still, if you’re looking for an easy way to start investing, give Acorns a shot.

Key attributes of Acorns:

  • Fees: $1/month for Acorns Core, plus ETF expense ratios ranging from 0.03% to 0.15%
  • Minimum starting deposit: $5
  • How Acorns invests your money: Acorns invests your money in one of five automated portfolios— notably, this is a more limited number of portfolios than some other competitors. Each portfolio comprises ETFs across seven asset classes.
  • Average annual return over past five years: Not provided
  • Other notable features: Offers two add-on accounts for expanded functionality with Acorns Later retirement product ($2/month) and Acorns Spend checking account ($3/month).

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What is a robo-advisor?

A robo-advisor is a service that uses computer algorithms to invest customers’ money in portfolios customized to their needs. Since robo-advisors create these portfolios using automated algorithms, they can charge a fraction of what human advisors do and still offer advanced benefits like auto-rebalancing and tax-loss harvesting to boost overall returns. Most robo-advisors start with a questionnaire to assess your financial goals, risk tolerance and assets. Based on the answers, the robo-advisor allocates your investments accordingly.

How do I choose the right robo-advisor?

When considering which robo-advisor to choose, you should focus on management fees, minimum balances, ease of use and customer support. The lower the fees, the more money stays in your account. The top robo-advisors typically charge a flat management fee of 0.00% to 0.50% of your deposited balance. In addition, you pay an expense ratio to cover the fees charged by the companies offering the ETFs that comprise your investment portfolio. Note that some robo-advisors claim to offer zero management fees, but still charge an expense ratio.

Make sure you are comfortable leaving your deposits with a robo-advisor for the medium to long term — think five to eight years. There are a number of robo-advisors with $0 account minimums and most are under $5,000 today.

How do I open a robo-advisor account?

Most robo-advisors can have you up and running with an account in a few minutes. Typically you create a username, fill out a questionnaire to assess your financial goals and risk tolerance and connect your profile to a bank account. There may be some additional steps required for verification depending on the robo-advisor.

What other features should I consider?

Robo-advisors offer a host of additional features, including tax loss harvesting, cash management options, checking accounts and rewards programs. Cash management can provide a meaningful compliment for users who keep some of their portfolio in cash. Some robo-advisors offer an APY of more than 2.00% on cash management accounts. Tax loss harvesting can make a difference for users looking to lower tax exposure.

What is tax loss harvesting?

Tax loss harvesting is a tax strategy that some robo-advisors offer to help clients reduce their tax bill. Generally, this involves selling an asset that has lost value for a loss, using that loss to offset capital gains taxes or income taxes, then purchasing a similar but not “substantially identical” asset to maintain exposure to the asset class. The details behind each robo-advisor’s strategy can get complicated and should be looked at in detail to make sure you understand what you are getting into.

Capital losses from tax loss harvesting can be used to offset capital gains and can potentially offset up to $3,000 (or $1,500 if married and filing separately) of ordinary income.

What if my robo-advisor goes out of business?

While not a pleasant thought, it is possible that a robo-advisor could go out of business. Most robo-advisors insure clients’ assets through the Securities Investor Protection Corporation (SIPC). This is different from the bank account coverage provided by the FDIC; generally, SIPC coverage includes up to $500,000 in protection per separate account type, with up to $250,000 of cash assets protected.

Keep in mind that the SIPC will take necessary steps to return securities and account holdings to impacted clients, but will not protect against any rise or fall in value of those holdings. This means that if you make a bad investment in a stock, the SIPC ensures you still own that bad stock, but do not replace losses from a poor investment. Some brokers also insure assets beyond the $500,000 in SIPC coverage through “excess of SIPC” insurance.

See the full list of SIPC members at their site, along with a detailed explanation of how SIPC coverage works.

The bottom line

Robo-advisors can be an excellent option for users who are starting their investing journeys, rolling over a 401(k) or who want to minimize the time needed to manage their investments. By creating a customized portfolio based on your financial goals and automatically rebalancing your account, a robo-advisor can help to maximize your return while taking on the right amount of risk.

Because robo-advisors run off of automated algorithms, you should be comfortable with little or no human touch for your investments. The upshot to low human interaction is that fees are generally much lower than with a registered investment advisor, which may be worth the tradeoff as part of an overall financial plan.

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