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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.

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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

 

Management Fees

0%

Account Minimum

$100 one-time deposit or $20 monthly deposit

Promotion
N/A
Management Fees

0.25%

Account Minimum

$0

Promotion

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

Management Fees

0.30%

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 0.35% 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 0.35% 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 0.20% 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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Investing

Best Online Brokers for May 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.

Written By

 

The easiest way to start investing from home is through an online broker. A broker’s main job is to buy and sell stocks, bonds, exchange-traded funds (ETFs) and other securities that make up your portfolio. When choosing an online broker it’s important to consider your investment experience and style, your trading needs and your financial goals.

Our Background

Our investing experts have been tracking the fees, features and capabilities of dozens of online brokerage accounts since January of 2019. Beyond that, our team of in-house experts consists of both financial analysts and journalists who collectively have more than 20 years of experience across the investment industry, encompassing financial advisory services, asset management, financial journalism and investment banking.

Our Thoughts on the Market

Investing is fraught with risk, as indicated by recent volatility in the markets due to the COVID-19 crisis. History shows that events in the capital markets are beyond your control as an individual investor, and it’s almost certain this will continue to be the case in the future. During these uncertain times, we’d like to remind our readers to keep an eye on the things that they can control, such as broker fees and risk exposure, when picking the right online brokerage account to fit your needs.

Again, there are no guarantees when it comes to investing and the right asset allocation will depend on both your unique financial goals and your individual risk tolerance as an investor. No matter what your goals are, our team of financial experts is ready to help you select the best fit for you from a selection of dozens of the most popular online brokerage accounts on the market today.

Start by checking out our picks for the top brokerage accounts below, which we’ve selected for a variety of investor types. Regardless of whether you’re just starting your investing journey or are a seasoned investing veteran, there’s a brokerage account out there that will suit your needs. Check out our rankings below.

Summary of MagnifyMoney’s Best Online Brokers for May 2020

Read below to learn more about online brokers and access our FAQs

TD Ameritrade: Best Overall Broker

TD Ameritrade
Visit TDSecuredon TD Ameritrade’s secure site
Key Features:

  • Fees per stock trade: $0 equity trades
  • Fees per option trade: $0.65 per contract
  • Minimum Deposit: No minimum

Read the full review

Why we picked it: TD Ameritrade pairs $0 equity trades with a high-quality platform that aims to target investors of all types, regardless of whether you’re a beginner or an investing veteran. There is no minimum deposit requirement, which makes this broker highly accessible, and its ThinkorSwim trading platform provides an industry-leading tool for both researching and executing advanced trading strategies.

Highlights:

  • Exclusive courses and webcasts for investor education.
  • Extensive selection of investments (bonds, foreign exchange [forex], options, futures) with $0 commissions across online stock, ETF and option trades, with option fees of just $0.65 per contract.
  • 24/7 customer service via phone, text and chat and more than 350 brick-and-mortar branches for in-person support.
  • Top-of-the line research and analytical tools through fully integrated desktop, mobile and ThinkorSwim platforms.

What to watch out for: Investors who are interested in futures trading should be wary of the steep $2.25 per contract fee, which is well above the competitor average (Schwab, Interactive Brokers and E-Trade all fall below the $2.00 mark).

Vanguard: Best Broker for Beginners

Vanguard Personal Advisor Services
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Key Features:

  • Fees per stock trade: $0 equity trades
  • Fees per option trade: $0-$1 per contract
  • Minimum Deposit: No minimum

Read the full review

Why we picked it: Vanguard has a simple, intuitive platform that’s well-suited for beginners and passive investors who don’t plan on trading frequently and want to minimize their investment fees. Vanguard’s collection of low-cost index funds, which include its Admiral Shares lineup of funds, are among the most popular and well-known funds on the market.

Highlights:

  • One of the biggest names in the business when it comes to passive investing.
  • Admiral Shares Funds feature some of the lowest expense ratios on the market.
  • 160 no-transaction fee mutual funds from Vanguard and more than 3,000 funds from other companies.

What to watch out for: Vanguard imposes a $20 annual maintenance fee on customers who don’t opt for electronic statements. The broker also requires a hefty $3,000 minimum investment in its standard mutual funds and $50,000 for actively managed funds, raising the buy-in significantly for investors seeking sector diversification. Vanguard also does not offer futures trading on its platform.

Interactive Brokers: Best Broker for Experienced Traders

Interactive Brokers
Visit InteractiveSecuredon Interactive Brokers’s secure site
Key Features:

  • Fees per stock trade: $0 equity trades
  • Fees per option trade: $0.15-$1 per contract, based on contract volume
  • Minimum Deposit: No minimum

Read the full review

Why we picked it: Interactive Brokers (IBKR) caters to advanced investors by providing complex trading and analytical tools and one of the most diverse selections of investment options on the market. IBKR is one of the few online brokers that offers exposure to a full suite of investment vehicles that many other online brokers won’t offer, including forex; exchange of futures for physical (EFP); hedge funds; foreign stocks and bonds; and futures.

Highlights:

  • Advanced smart-order router seeks optimal price execution making it an excellent choice for day traders.
  • Accumulate/Distribute algorithm features customizable logic to help investors fill large-volume orders while adapting to market conditions.
  • Professional-caliber Risk Navigator reveals exposure across asset classes and around the globe, helping investors monitor and adjust positions as needed.
  • Interactive Brokers’ Traders Academy offers a structured curriculum to advance your knowledge of a variety of financial instruments, complete with tests and recordings offered in multiple languages.

What to watch out for: There is a $20 minimum yearly trade commission required, so it’s not well-suited to someone seeking a passive investing approach. Some resources are also only available to IBKR Pro customers, and its fee structure is one of the more complex ones on the market.

Charles Schwab: Best Broker for ETFs

Schwab Intelligent Portfolios
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Key Features:

  • Fees per stock trade: $0 equity trades
  • Fees per option trade: $0.65 per contract
  • Minimum Deposit: No minimum

Read the full review

Why we picked it: Charles Schwab offers one of the largest selections of more than 2,000 commission-free ETFs that cover more than 110 Mornigstar categories. Not only are they covered across a broad range of asset classes, but Schwab investors have access to Schwab Intelligent Portfolios, a robo-advisor platform that automatically builds and rebalances a diversified portfolio of ETFs based on your investing goals.

Highlights:

  • All ETFs trade commission-free on U.S. exchange.
  • Premium robo-advisor service offers unlimited one-on-one access to a licensed certified financial planner (CFP).
  • More than 300 branch locations for investors seeking in-person support.
  • Intelligent Portfolios robo-advisor service automatically selects and rebalances a diversified portfolio of ETFs based on your investing goals.

What to watch out for: Non-Schwab Mutual Fund OneSource trades are up to $49.95 per purchase. Additionally, the interest rate on its cash sweep account is relatively low, and the account requires the user to manually transfer their cash if they’d rather hold it in a money market.

Ally: Best Broker for Options Trading

Ally Invest Managed Portfolios
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Key Features:

  • Fees per stock trade: $0 equity trades
  • Fees per option trade: $0.50 per contract
  • Minimum Deposit: No minimum

Read the full review

Why we picked it: Ally offers one of the lowest contract fees of just $0.50 per option contract. The broker also features intelligent options trading tools that allow users to forecast theoretical action values and help them identify the best options strategy based on their parameters.

Highlights:

  • Extensive tools designed to analyze market performance, including an ETF screener, a profitability calculator, streaming charts, option chains and more.
  • Cash transfer reimbursements combined with its integrated mobile and web platforms sync up with Ally’s online bank accounts.
  • Managed portfolios, an automated investing option, is available with a minimum deposit of $100.

What to watch out for: Ally charges $9.95 per trade for no-load mutual funds and does not have a collection of no-fee mutual funds that many of its top competitors feature. This makes the broker less than ideal for a passive investing strategy.

Fidelity: Best Broker for Mutual Funds

Fidelity
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Key Features:

  • Fees per stock trade: $0 equity trades
  • Fees per option trade: $0.65 per contract
  • Minimum Deposit: No minimum

Read the full review

Why we picked it: Fidelity offers zero expense ratio index mutual funds directly to its customers. Unlike many of its competitors, there is no minimum to invest in Fidelity funds. Fidelity offers access to more than 10,000 mutual funds from Fidelity and other companies across a variety of sectors, styles and assets, with thousands of no-transaction-fee mutual funds available.

Highlights:

  • More than 3,700 no-transaction-fee mutual funds.
  • More than 500 commission-free ETFs.
  • No minimum investment amount required, making it easy to build a diversified portfolio of mutual funds.
  • Nearly 200 branch locations for investors seeking in-person support.

What to watch out for: Investors seeking to trade in futures contracts will not have that option through this broker.

E-Trade: Best Broker for IRAs

E-Trade
Visit E-TradeSecuredon E-Trade’s secure site
Key Features:

  • Fees per stock trade: $0 equity trades
  • Fees per option trade: $0.50- $0.65 per contract
  • Minimum Deposit: No minimum

Read the full review

Why we picked it: Beyond the typical Roth and Traditional IRA options offered by many competitors, E-Trade also features specialized IRAs. The broker offers an IRA tailored to minors who want to get a headstart on their financial future. There is also the E-TRADE CompleteTM IRA, which is geared toward those who are 59 ½ and older and not only eases the process of taking required minimum distributions once you hit retirement, but also doubles as an excellent bank account, offering free checking, online bill pay and even a debit card. E-Trade also has designated financial consultants that can help manage your portfolios and give retirement advice.

Highlights:

  • More than 9,000 mutual funds available (more than 4,400 of which are no-transaction fee)
  • Cash management features, including a debit card, checking and bill pay, available across its brokerage accounts.
  • E-TRADE Complete™ IRA offers free checking services and its own debit card, making taking required minimum distributions easy.
  • Beneficiary IRA and IRA for minors offer both traditional and Roth contribution options, which makes it easy for younger investors to get started on investing for the future.

What to watch out for: Not all accounts are eligible for cash management features. Investors interested in penny stocks also should be wary of the $6.95 charge associated with these trades.

Why Trust Us?

At MagnifyMoney, it is our mission to inform our readers about the best financial opportunities out there. Our insights have been cited by top financial publications including MarketWatch, CNBC and the Wall Street Journal.

Our dedicated team of financial experts spent dozens of hours grading each brokerage account on its features, including fees, minimum balance requirements, analysis tools and investment vehicles. Our method of evaluation not only compared features and cost, but also took into consideration the type of investor using these brokerage accounts.

Even though they did not make our top picks, we also considered the following brokers in our analysis:

How do brokerage accounts work?

Online brokerage accounts allow retail investors to access the financial markets without the need for a stock broker to act as a middleman. Online brokerage accounts are typically offered through licensed brokerage firms but many banks, money managers and registered investment advisors (RIAs) offer their own accounts.

One of the great benefits of online brokers is that they make investing highly accessible to the average investor, rather than limiting it to the realm of those with lots to invest. Brokerage accounts allow investors to buy and sell assets like stocks, mutual funds, ETFs, options and bonds.

Brokerage accounts can come in many forms but all provide the same basic function: They house your cash and investments and allow you to buy and sell financial assets. Here are some of the most common investment account types:

Retirement accounts:

  • Employer-sponsored retirement accounts: These include 401(k) plans, SIMPLE IRA plans, SEP plans and pension plans (both defined-contribution and defined-benefit) offered through your workplace.
  • Individual Retirement Accounts (IRAs): This includes both traditional IRAs and Roth IRAs offered through most large financial institutions including banks, credit unions and large mutual fund companies.

The benefit of retirement accounts like 401(k) plans and IRAs is that they allow individuals to invest on a tax-advantaged basis. The tax treatment will differ depending on whether contributions are made to a traditional or Roth account, but in almost all instances, retirement accounts offer individuals some form of tax relief. The trade-off comes in the form of both deposit and withdrawal restrictions.

Expert tip: “The benefits of a tax-advantaged brokerage account cannot be understated. Taxation is one of the biggest determining factors when it comes to your long-run investment returns. The ability to defer or exempt yourself from some of those taxes can pay major dividends over the long run.” – Kenny X. Zhu, CFA, MagnifyMoney Investing Columnist

Personal accounts:

Individual taxable brokerage accounts: Individual brokerage accounts are offered by a number of financial services companies, including banks and licensed brokerage firms. These allow you to trade securities within your own private account.

Joint brokerage accounts: Joint brokerage accounts function in the same way as individual brokerage accounts and are offered through the same financial companies. However, joint brokerage accounts allow for shared ownership by two or more individuals.

Personal brokerage accounts operate similarly to IRAs, but offer no real tax benefit, so your account earnings may be subject to interest or capital gains taxes. However, personal accounts typically feature no deposit or withdrawal restrictions, allowing investors greater freedom when using their personal brokerage account.

What Should I Know About Broker Fees?

When shopping for the best online brokerage account, it’s important to keep costs like commissions and fees to a minimum, as these will eat into your total investment return over the long-run. Here are a few fees you should always be aware of when you’re choosing an online broker:

  • Brokerage fee: Brokerage fees can be charged annually or monthly for the overall maintenance of your account. Many of our top brokerage picks do not charge brokerage fees.
  • Transaction fee: Also referred to as trade commissions, these are fees charged by the broker to complete your trade. Some firms charge a flat fee per trade while others charge per share being traded. It’s important to remember that for each investment you take a position in, you’ll likely be charged twice in terms of commissions: 1. to buy the asset and 2. to sell the asset at a later date. In a bid to increase competition, many of our top brokerage account picks have decided to waive trading commissions altogether.
  • Management Fee: Sometimes called an advisory fee, some brokers may charge you for a percentage of your total assets under management. This is typically charged in exchange for financial advisory or robo-advisor services in your brokerage account.
Expert tip: “When seeking returns, it’s easy to lose sight of minor details like management fees and expense ratios. Much like interest earnings, fees also compound over time and will eat into your total return. “ – Kenny X. Zhu, CFA, MagnifyMoney Investing Columnist
Trading Fees
Amount Minimum to Open Account
Annual Fee
$0.00 per trade
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on TD Ameritrade’s secure site

$0.00 per trade
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on Charles Schwab’s secure site

How do I choose which online broker is right for me?

The best brokerage accounts offer low fees and commissions while providing plenty of investor tools and offering a wide variety of no-fee ETFs and mutual funds.

Brokerage accounts can vary considerably in terms of features and prices, so it’s important to consider your unique investing style and financial goals when choosing an online broker. We’ve outlined the key features to look for when shopping around for a brokerage account:

Fees: It’s important to compare the fees levied by each firm in terms of both management fees and trading commissions. Many firms will charge different fees depending on whether you’re trading equities or options. It’s important to take these into account within the context of your own experience as an investor and the securities that you intend to trade most. Keep in mind that if you’re seeking extra guidance or want specialized trading tools beyond what’s available to the average investor, certain brokerage firms may be willing to provide those in exchange for a higher management fee.

Promotions, free trades and account opening bonuses: Many online brokers will try to entice you to sign up by offering promotions in the form of free trades, cash bonuses or even gifted stocks. If you’re looking to open a new brokerage account and narrow your choices down to a few key brokers, it may be worth comparing their bonus offers to see which provides the most compelling offer.

This can be especially enticing for those who intend to invest large amounts, as these promotions can become more lucrative the more you deposit. Keep in mind that most bonus offers will require some level of minimum deposit or trading activity for you to be eligible. Many will also set time limits in which you may qualify, so make sure you read the full terms of these offerings when picking a brokerage account on the basis of its bonus offer.

Investment products: Many large brokerage firms offer their own line of no-fee ETFs and mutual funds, each with its own set of investment strategies, market exposures and specialities. This is important if you’re trying to obtain the greatest level of diversification at the lowest cost.

Also keep in mind that if you’re trying to get access to specific product lines offered through certain brands like Vanguard’s Admiral Funds, Blackrock’s iShares or State Street’s SPDR ETFs, you may not have access or will have to pay a higher fee to gain access to these investments, depending on which online broker you choose.

Additionally, not every online broker allows you to trade every type of investment. For example, some online brokerage accounts may limit or restrict trading in certain specialized assets, like futures contracts, forex or structured products. If you’re a sophisticated investor who’s interested in gaining access to a wider variety of investments beyond just stocks and bonds, it’s worth checking what types of investments are permitted before committing to an online broker.

Resources: Many brokerage accounts offer services beyond filling buy-and-sell orders, and some offer different tiers of service for those willing to pay more or commit a larger amount in cash. You also may want your brokerage to be your one-stop shop for banking or planning services.

Some other features that online brokers may offer in addition to trading include:

Account minimums: Online brokers may differ in the size of the minimum account opening deposit required. If you’re just starting off or don’t have a lot to invest, you may consider shopping for online brokerage accounts with low or zero minimum deposits. Conversely, those willing to deposit large amounts may be able to obtain greater tiers of service through brokers that require high account minimums.

Much like certain checking or savings accounts, some brokers also may require a minimum account balance to avoid service charges. In some cases, brokers will also require minimum monthly deposits to avoid this charge. It’s worth looking into specific brokerage account policies if you intend to invest lower amounts to avoid paying unnecessary surcharges.

Trading software and research tools: If you trade frequently or deal in complex investments, you’ll want to take note of each brokerage account’s investing platform, any specialized software they may offer and how much access they provide in the form of proprietary or third-party research reports and information published by industry experts.

Some brokerage firms may allow you to “tour” their online trading platforms and run a simulated trade so you can get a feel for the experience. If you plan on using your phone to trade on the go, it’s also worth taking a look at the broker’s mobile app to make sure it suits your needs.

Expert tip: “There’s no single brokerage account that’s unequivocally better than all others. The best brokerage account will vary by individual and depends on your personal investment philosophy, the type of exposure you want and how hands-on you intend to be with your investments, among other factors.” – Kenny X. Zhu, CFA, MagnifyMoney Investing Columnist

FAQs: What should I know about brokerage accounts?

Once you have a brokerage account, you’ll need to deposit money into your account. Online brokers make it easy to transfer funds from your bank account electronically, but many brokers also give you the option of mailing in a check or wiring money. Some well-known brokers like TD Ameritrade, Charles Schwab and Fidelity even have branches where you can deposit your checks in person.When you’re ready to trade, you’ll have a few different options in terms of the orders you can place:

  • Market order: Market orders typically offer the fastest execution for investors who want to buy or sell immediately. This order type directs the broker to buy or sell a security at the current market price. It may not always offer the best price though.
  • Limit order: A limit order directs the broker to buy or sell a security at a specified price or better. Limit orders give you the most control over the price at which your transaction is executed but take longer to execute depending on where the security is trading. If no counterparties are willing to trade at the price specified, the limit order will sit unfulfilled until the specified price becomes available or the order expires.
  • Stop-order: A stop order directs the broker to buy or sell a security once the market price meets the specified “stop” price, or better. Stop orders are similar to limit orders in that they allow investors greater control over where the trade is executed, but unlike a limit order, which allows counterparties to view the price at which you’re willing to transact, a stop order is not viewable by counterparties and automatically converts into a market order once the specified stop price has been reached. Investors typically use stop-loss orders to guard against potential losses.

The next step is calculating how many shares you can buy or sell. This will be based on the current share price minus any trading fees. It’s important to realize that trades aren’t automatic and the actual share price might change from the time you place your order to the time your trade is completed. Your final order can be impacted by factors such as:

  • Size of order
  • Availability of shares
  • Time you place the order

Generally, if your order isn’t huge and is for stocks traded on a major exchange (meaning stocks are readily available for purchase), there shouldn’t be a delay. If you place an order outside of normal trading hours, your order won’t be executed until markets open. Market volatility can cause after-market movements that impact the price of a share at opening, which is called a gap. Trading after hours could mean that you’re bound to a price you weren’t expecting.

You can trade more than just stocks with most online brokers. Given your financial goals, diversifying your investments can be a way to balance your portfolio and protect against losses. Here’s a list of securities types that most brokerage accounts allow you to trade:

Some brokerage firms offer more niche investment opportunities including forex and EFPs.

How much you’ll need to start investing will vary depending on which broker you choose and the type of brokerage account you’re opening. There are plenty of online brokerage accounts with no account minimums, lowering the barriers to entry to start investing for the future. Many 401(k) accounts can be set to automatically allocate your paycheck to mutual funds that your workplace plan allows for, eliminating the problem of minimum purchase amounts.

In theory, all you need to start trading is enough funds to cover the cost of a single stock and the trading commission, but you’ll want to take into account the current market price of the security you want and how big of a position you want to take. Keep in mind that trading fees incurred will eat into your total return.

Most online brokers offer exposure to international markets through mutual funds and ETFs that specialize in international investments. You also may be able to identify specific stocks that give you direct exposure to foreign companies in both over-the-counter (OTC) and American Depository Receipts (ADR) investments.

Keep in mind that international investments may command higher trading fees and additional risks and tax concerns that differ from trading domestic securities.

Any investments you undertake are subject to both gains and losses in market value. In other words, there are no guarantees that you won’t incur losses on either principal or interest when it comes to investing in any asset. It’s important to consider your own risk tolerance relative to your portfolio and overall investing strategy.

If you’re worried about the solvency of your broker or the funds in your brokerage account, know that all brokerage firms registered with the Securities and Exchange Commission (SEC) are also members of the Securities Investors Protection Corporation (SIPC), a non-governmental organization that insures brokerage accounts in a manner similar to the Federal Deposit Insurance Corporation (FDIC). In the event of broker insolvency or misappropriation, the SIPC insures your account for up to $500,000 per person (including a $250,000 limit for cash only).

It’s important to note that the SIPC will not cover any losses in market value on your investments, any investments in mutual funds directly held by the brokerage company or brokerage accounts held with non-SIPC member institutions.

Many online brokers offer additional resources and tools for researching, investing and financial planning, in addition to custodial and trading services. Often, brokerage firms will offer greater access or premium services for individuals willing to deposit more money or pay additional management fees.If you’re interested in premium features like personalized financial planning, in-depth investment education and technical and fundamental investment analysis tools, it’s a good idea to inquire with the firms you’re considering when shopping for the best brokerage account to see whether they offer these resources.

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Investing

Review of Beacon Pointe Advisors

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.

Written By

Reviewed By

Beacon Pointe Advisors, LLC is an independently owned, fee-only financial advisor firm offering financial planning and wealth management services to both individuals and high net worth individuals, with a focus on women and clients going through life milestones. The firm employs 113 investment advisors across 20 offices, most of which are located in California, including its headquarters in Newport Beach. It currently oversees about $9.9 billion in assets under management (AUM).

All information included in this profile is accurate as of May 20, 2020. For more information, please consult Beacon Pointe Advisors’ website.

Assets under management: $9,949,699,273
Minimum investment: $1 million
Fee structure: Percentage of AUM for portfolio management; fixed fees; hourly fees
Headquarters:24 Corporate Plaza Drive
Suite 150
Newport Beach, CA 92660
www.beaconpointe.com
(949) 718-1600

Overview of Beacon Pointe Advisors

Beacon Pointe Advisors is an independent firm primarily owned by its CEO and founder, Shannon Eusey. In March 2020, Beacon Pointe merged with sister firm Beacon Pointe Wealth Advisors to form a single registered investment firm, Beacon Pointe Advisors. As part of the transaction, private equity firm Abry Partners took a minority stake in the merged firm. Other employees hold a minority interest in the firm.

Eusey founded Beacon Pointe in 2002 based on a business school project, and it has since grown to 20 offices nationwide. Beacon Pointe Advisors has a total of 167 employees who collectively hold more than 100 designations and degrees, such as the highly respected certified financial planner (CFP) and chartered financial analyst (CFA) designations and JD and master’s degrees. Beacon Pointe Advisors currently has $9.9 billion in assets under management, with plans to keep growing.

What types of clients does Beacon Pointe Advisors serve?

Beacon Pointe Advisors serves mostly individuals and high net worth individuals. (For reference, the SEC defines a high net worth individual as someone with at least $750,000 in assets under management or a net worth of over $1.5 million.) While the minimum account balance required for clients is technically $1 million, the firm may waive or reduce that minimum at its discretion, as evidenced by the fact that it serves more individuals than high net worth individuals.

Beacon Pointe Advisors has a particular focus on women investors. In 2011, it founded the Women’s Advisory Institute, aimed at helping female clients. Additionally, half of the firm’s leadership team are women. The firm also specializes in helping multi-generational families; entrepreneurs and business owners; and clients going through financial life changes, such as divorce or the death of a spouse.

In addition to individual investors, Beacon Pointe Advisors works with some charitable organizations, businesses, insurance companies, pension and profit-sharing plans and pooled investment vehicles.

Services offered by Beacon Pointe Advisors

Beacon Pointe Advisors offers both consulting services and a managed account program. Financial planning services fall under the consulting part of the business. Clients interested in financial planning have the option of getting a holistic plan that looks at their entire financial picture and results in the creation of a written financial plan with specific recommendations. Clients can also request limited-scope financial planning focused on a specific goal, such as saving for retirement or paying for a college education.

Other consulting services offered by Beacon Pointe Advisors include assistance with creating an investment policy or asset allocation strategy; recommendations of managers, mutual funds, or custodians; and the monitoring of managers and portfolios on a non-discretionary basis.

Clients in the managed account program have access to the above services as well as investment management on a discretionary basis. That means that the firm invests the money on their behalf and has the authorization to make changes to keep the client’s portfolio in line with their investment policy.

Here is a complete list of services currently offered by Beacon Pointe Advisors:

  • Investment advisory services/portfolio management
  • Financial planning
    • Wealth and retirement planning
    • Estate and tax strategy
    • Insurance review
    • Risk assessment
    • Charitable giving
    • Education planning
    • Tax planning and management
    • Life transitions
    • Generational wealth transfers and legacies
  • Selection of other advisors
  • Retirement plan consulting
  • Workshops and seminars
  • Newsletters and publications

How Beacon Pointe Advisors invests your money

Beacon Pointe Advisors works with each client to learn about their financial situation to create an individual investment policy based on their goals and risk tolerance and the firm’s models. Typically, the firm will include a mix of stocks (domestic and international), bonds, real estate, private equity, hedge funds and real assets.

When possible, the firm recommends investments with active managers who have undergone a rigorous screening process that includes quantitative and qualitative analysis, portfolio analysis and product evaluation. The firm prefers independent managers who invest alongside their clients.

Fees Beacon Pointe Advisors charges for its services

Asset management: Clients in the managed account program pay negotiated asset-based fees, typically ranging from 0.50% to 1.15% of assets under supervision. The maximum rate the firm will charge is 1.65% of assets under management. These fees are in addition to any manager or transaction fees that clients may owe custodians.

Consulting services: For consulting services provided on a one-time or project basis, Beacon Pointe Advisors charges either a fixed, project-based fee, with a typical minimum of $25,000, or an hourly fee that typically runs from $350 to $500 an hour. If the consulting services are provided on an ongoing basis, the firm will charge an asset-based fee. The annual retainer fee for discretionary portfolios generally ranges from 0.20% to 0.50%, while the rate ranges from 0.08% to 0.50% for non-discretionary portfolios. Clients with a portfolio worth more than $500 million typically pay a negotiated fixed fee.

Beacon Pointe Advisors’s highlights

  • Minimal conflicts of interest: Beacon Pointe Advisors is fee-only and employee-owned, which minimizes the firm’s potential conflicts of interest. Since the firm only earns money through the fees its clients pay, it doesn’t have financial incentives to recommend certain products or make referrals.
  • Customized advice: The firm works with each client to create an individualized investment policy from which it makes asset allocation recommendations. This means that each portfolio reflects its owner’s specific financial situation and risk profile.
  • Industry recognition: Together, Beacon Pointe and Beacon Pointe Wealth Advisors have won more than 60 awards in the last 15 years. Recent accolades include appearances on Barron’s list of the top RIA firms in 2019 and Financial Times’ 2019 list of the top retirement advisors. Beacon Pointe Advisors’ CEO and founder, Shannon Eusey, appeared on Worth Magazine’s 2020 list of 50 Women Changing the World.
  • No disciplinary disclosures: The firm has a clean disciplinary record (see more below).

Beacon Pointe Advisors’s downsides

  • High account minimum: Beacon Pointe Advisors requires a $1 million minimum account balance to open an account. This may exclude many potential clients, although the firm may waive the minimum. In fact, its current client base includes more individuals than high net worth individuals.
  • Expensive strategy: The firm’s preference for active management means that clients may pay higher fees within their portfolio, on top of the fees that they pay to Beacon Pointe Advisors. For comparison, the average total fee in the advisory industry is 1.17%, according to a 2019 study by RIA in the Box. In comparison, clients at Beacon Pointe typically pay up to 1.15% of assets under management (with an absolute maximum of 1.65%), plus any underlying transaction and manager costs.
  • Limited geographic footprint: Beacon Pointe Advisors has 20 offices, almost half of which are located in California. While its footprint is growing, clients who want face-to-face service but aren’t located near a Beacon Pointe Advisors office might find it challenging to establish a relationship without convenient access to an office branch.

Beacon Pointe Advisors disciplinary disclosures

Beacon Pointe Advisors does not have any disciplinary disclosures on its record. Registered investment advisors (RIAs) who face disciplinary action, including criminal charges, regulatory infractions or civil actions, must report those incidents on the Form ADV that they file with the Securities and Exchange Commission (SEC).

Beacon Pointe Advisors onboarding process

Interested clients can get in touch with the firm by calling the nearest office. The firm provides each office’s contact information on its website.

Once in contact, advisors work with the client to create either a limited-scope or holistic financial plan and an investment policy based on that plan. The firm then recommends custodians to implement the plan, and clients can either implement the strategy on their own or allow Beacon Pointe Advisors to manage their portfolio on their behalf.

Advisors review client accounts quarterly and aim to meet with clients once a year to discuss portfolio performance and any necessary changes to their portfolio. Clients in the managed account program receive monthly reports from their custodian showing their portfolio and quarterly written reports from their Beacon Pointe Advisors. The firm reviews financial plans as needed, on request form the client.

Is Beacon Pointe Advisors right for you?

Beacon Pointe Advisors may be a good choice for you if you’re located near one of the firm’s 20 offices (or don’t care about face-to-face service), have at least $1 million to invest and are interested in active management for your portfolio. Women investors, in particular, may be well served by the firm, which has a corporate leadership team that’s 50% women. The Beacon Pointe Women’s Advisory Institute also claims to specialize in many of the financial issues and monumental life events facing women investors.

However, Beacon Pointe Advisors also has a relatively high minimum balance, $1 million. Another firm may be a better choice if you don’t have the funds, though it’s worth noting that the firm may waive this minimum at its discretion. Additionally, the firm’s preference for active management may mean that you end up paying higher fees than you would if you went with a firm that prefers passive management.

As is the case when choosing any financial product, it’s important to do your research and ask questions of your advisor to make sure you find the best fit for you.

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.