You 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:
Emerging Market Equities
U.S. Fixed Income
International Fixed Income
Emerging Market Fixed Income
Master Limited Partnerships
Short U.S. Equities
Short Emerging Market Equities
Short Fixed Income
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.