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Updated on Wednesday, January 22, 2020
If you have a brokerage account with Fidelity, TD Ameritrade or Charles Schwab, SigFig helps you automate your investments with these brokers. Think of it as a way to add robo-advisor automation to your existing accounts. In addition, first-time investors can establish a brokerage account with TD Ameritrade through SigFig.
SigFig handles dividend reinvestment, periodic rebalancing and tax loss harvesting. However, you need to decide whether SigFig’s potential fees, minimum deposit requirements and investment options make the service a worthwhile choice for you.
Who should consider SigFig
SigFig‘s requirements immediately narrow the field of people who should consider using the platform. First, there’s the $2000.00 account minimum. While this may be a relatively low amount for some investors, it may be a daunting number to aim for if you’re just getting started. If you have less than that amount to invest, then you should look elsewhere for now.
Next, you have to remember that SigFig only partners with Fidelity, TD Ameritrade and Charles Schwab. If you invest elsewhere, you’d have to transfer your money to one of SigFig‘s partner brokerages first in order to use the platform’s services.
SigFig may be worth considering if you have a brokerage account at one of the platform’s partners, and you’re interested in automated portfolio management for a flat fee. You have the option to allow SigFig to manage some or all of the money in your brokerage account. SigFig invests your money in a mix of low-cost exchange-traded funds (ETFs), and personalizes portfolios so they’re tailored to your age, goals and risk tolerance.
In addition, it’s one of the rare robo-advisors that offers tax-loss harvesting, dividend reinvestment and portfolio rebalancing. Working together, these features can optimize tax efficiency and maintain the right level of diversification, all without requiring you to do any heavy lifting.
SigFig fees and features
|Amount minimum to open account|
|Account fees (annual, transfer, inactivity)|
|Mobile app||iOS, Android|
|Customer support||Phone, Chat, Email|
How SigFig works with existing brokerage accounts
SigFig is designed to manage the funds you already have an account with either Fidelity, Charles Schwab or TD Ameritrade. Here’s what happens when you open a SigFig account:
- You electronically authorize SigFig to access your brokerage account by providing your login credentials.
- SigFig is added as an advisor on your Fidelity, Charles Schwab or TD Ameritrade account. This allows SigFig to manage your account through your existing brokerage.
- You decide whether you want to SigFig to manage all of your portfolio assets or just a portion of them.
- SigFig evaluates your portfolio and reinvests your holdings using a selection of low-cost commission-free ETFs from iShares and Charles Schwab.
- Once your portfolio has been realigned using SigFig‘s algorithm, the platform monitors your investments daily, rebalancing automatically as needed.
When you invest with SigFig, you don’t actually have to move your money anywhere. You’re granting SigFig advisor access to manage your account. If you’re starting completely fresh as an investor, SigFig opens a brokerage account for you which is held at TD Ameritrade.
SigFig product tiers
SigFig offers two ways to manage your investments: the portfolio tracker and the managed account. Here’s how they compare:
At the Portfolio Tracker tier, SigFig offers free investment monitoring. You can use this tier to aggregate your investment accounts at the three brokerages SigFig already partners with, as well as Vanguard and E*TRADE. You can sync accounts from those companies automatically but if your brokerage isn’t on the list, you can add it to the Portfolio Tracker manually.
You pay no fee to use the Portfolio Tracker and there’s no investment minimum you need to meet. But that’s because you get no investment management services at this tier. The Portfolio Tracker is designed for aggregating your accounts so you can view them in one place, which is what allows SigFig to offer this service for free.
The Managed Account tier is where you gain access to more than just investment tracking. At this level, the range of features includes:
- Personalized portfolio management
- Automated rebalancing
- Automated dividend reinvestment
- Tax-loss harvesting
- Investment advice
- Live chat and phone support
The types of accounts you can have SigFig manage include individual and joint taxable brokerage accounts, Traditional IRAs, Roth IRAs, rollover IRS and SEP and SIMPLE IRA plans.
While the Portfolio Tracker tier may be suited to a hands-on investor, the Managed Account is designed for investors who want to leave the hard work of portfolio-building to someone else. At this tier, the minimum investment required is $2000.00.
For investment balances ranging from $2,000 to $10,000, you pay no management fees. Once your balance exceeds $10,000, a 0.25% annual account management fee kicks in. Hitting the $10,000 mark also unlocks unlimited access to a professional investment advisor if you have questions about managing your portfolio.
Compared with traditional advisors, who often charge annual fees of 1% or more, 0.25% may seem like a bargain to pay for account management. And that amount is similar to what competitor robo-advisors charge. Betterment, for example, also charges a 0.25% fee.
SigFig tools and resources
SigFig offers some tools to help manage your portfolio more efficiently. Some of these perks include tax-loss harvesting, automatic dividend reinvestment, and investment advice.
Tax-loss harvesting simply means selling investments at a loss to offset capital gains from other investments. This can help to manage your tax liability. SigFig does this for you, buying and selling investments as needed to harvest losses. SigFig‘s algorithm is designed to help you avoid the wash-sale rule, which can cancel out tax benefits. The wash-sale rule, established by the IRS, prohibits you from selling a losing stock and repurchasing a substantially similar one within a 60-day window.
There is no set time schedule for how often tax-loss harvesting occurs; SigFig reviews your account and harvests losses when necessary. SigFig uses a range of primary and secondary ETF options from Fidelity, Schwab and TD Ameritrade to harvest losses while helping you to maintain your desired asset allocation.
Automatic dividend reinvestment
Reinvesting dividends can be a simple way to grow a portfolio. The idea is that instead of pocketing your dividends as income, you use them to purchase additional shares of the security you’ve invested in.
SigFig makes this easy by reinvesting dividends for you automatically. Remember, this feature as well as tax-loss harvesting, are only available if you have a Managed Account with SigFig. You don’t get these benefits with the Portfolio Tracker tier.
Booking a chat with a professional investment advisor could cost you but SigFig provides this service for free. You can schedule an appointment to get investment advice that’s tailored to your needs and goals. Advisors are available to help you flesh out a plan for reaching your financial goals, help you avoid hidden fees and put together a larger financial plan.
Strengths of SigFig
- A trifecta of automated features: Tax-loss harvesting, dividend reinvestment and rebalancing are seldom offered together by a single robo-advisor, making this a major advantage of SigFig. These benefits can help keep your portfolio operating as efficiently as possible.
- Low fees for beginners: Being able to invest in a managed account with no management fee as you start out with a lower balance is a great way to get your feet wet as a new investor. Essentially, you can test-drive SigFig‘s management tools and features until your account balance passes the $10,000 threshold. That’s an opportunity to see how well it fits your investment style and needs.
- Free portfolio tracking: If you’re not ready to go all in with SigFig or you have an account at brokerage the platform doesn’t partner with, you can still take advantage of the Portfolio Tracker. This could be useful if you’re looking for a way to aggregate information from multiple investment accounts in one place without actually having to move your money.
Drawbacks of SigFig
- Account duplication: The main kicker is that you must have an account with Fidelity, Charles Schwab, or TD Ameritrade to take advantage of SigFig. While this robo will open a TD Ameritrade account if you don’t have brokerage account yet, some people may not want to maintain two separate accounts when they could have just one with a competing robo-advisor.
- Limited investment choices: ETFs have their strong points, in that they’re often a cost- and tax-efficient way to diversify a portfolio. When you invest with SigFig, you’re limited to investing in the platform’s selection of ETFs. That could be a downside if you’re interested in exploring securities beyond ETFs, such as options or futures.
- Limited retirement account options: If you have a 401(k) or 529 plan alongside an IRA or taxable account, you won’t be able to manage those through SigFig. Competitors offer broader account type options.
Is SigFig safe?
SigFig is a member of the SIPC, which means invested funds are safe from loss if SigFig faces financial hardship. Up to $500,000 in your managed brokerage account is protected so you have lots of peace of mind.
SigFig also takes privacy and security seriously, which is important because you must give SigFig your credentials to log into your brokerage account with TD Ameritrade, Fidelity, or Schwab. SigFig uses 256-bit SSL encryption — the data is encrypted from the moment you log in until you log out. SigFig also promises never to sell your information.
But SigFig is investing your assets in ETFs, which aren’t guaranteed to go up. Whenever you invest, there’s a risk of loss so you need to be aware that you could end up with less money than you start with.
Is SigFig right for you?
If you already have a brokerage account with Fidelity, Charles Schwab or TD Ameritrade, and you want a simple way to have some of your funds managed by a robo-advisor, SigFig can provide it — as long as you have at least $2000.00 to start investing. You’ll need to observe the $10,000 cap to avoid paying a management fee for SigFig‘s services. On the other hand, you’re looking for a stand-alone robo-advisor that doesn’t have such a high minimum balance requirement, Wealthfront or Betterment may be better options for you.