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Updated on Friday, October 1, 2021
If you’re looking for a low-cost, easy way to invest, SoFi, an online finance company, offers an automated investing tool. With SoFi Automated Investing, you pick your investment goal and the program creates your portfolio and manages it for you. There’s no annual management fee, and you can sign up with just $1. However, the platform doesn’t offer more sophisticated investment strategies like tax-loss harvesting or accounts such as 529 plans, so people looking for more specialized choices may be left wanting. Below we’ll dive into the details to help you determine whether SoFi might be a good fit for you.
|Access to human advisors||Yes|
- What is SoFi Automated Investing and how does it work?
- SoFi Automated Investing investment approach
- SoFi Automated Investing fees
- SoFi Automated Investing features and tools
- SoFi Automated Investing user experience
- SoFi Automated Investing safety and security
- Is SoFi Automated Investing worth it?
What is SoFi Automated Investing and how does it work?
SoFi Automated Investing is a type of robo-advisor, a financial platform that manages your investment portfolio with little to no human interaction. When you sign up for a SoFi Automated Investing account, SoFi gives five portfolio options based on your time horizon and risk tolerance: conservative, moderately conservative, moderate, moderately aggressive and aggressive.
Based on the investment goal you pick, the SoFi Automated Investing platform will set up a portfolio of ETFs designed for the goal. The platform will automatically review and rebalance your investments as needed to keep you on track (this is done at least quarterly). And although it’s a robo-advisor, you can still get live support from SoFi, including from financial advisors. You can reach out for questions by email, phone or live chat. Let’s look at the program details for our SoFi Automated Investing review.
- Takes only $1 to open: This makes the SoFi tool accessible to everyone. You can get started with any investment budget.
- No management fees: SoFi does not charge a fee for managing your account. You need to pay for the cost of the ETFs, but not for portfolio management.
- Convenient, done-for-you investing: When you sign up, all you need to do is pick a style of investing (conservative, moderate, etc.), SoFi’s platform will then generate your portfolio and track it over time, rebalancing when needed at least once a quarter.
- Access to live financial advisors: If you need help or have a question, you can reach live financial advisors working with SoFi, at no charge.
- No tax-loss harvesting: Tax-loss harvesting is an investment strategy that aims to strategically sell investments that have lost money and then replace them with something similar to reduce the taxes on your gains. Some robo-advisors include this strategy, but SoFi Automated Investing does not.
- Missing some account options: While SoFi offers the standard individual/joint and retirement investment accounts, it does not include 529 plans or custodial accounts for their Automated Investing program.
- Limited investment options: The SoFi Automated Investing program does not include some of SoFi’s ETF options, such as SoFi Gig Economy. It also doesn’t offer investment strategies, such as socially conscious investing or maximizing income. Your only option is picking a plan based on your risk tolerance.
- Potential conflict of interest with SoFi ETFs: The SoFi brochure notes there is a potential conflict of interest because it can recommend SoFi ETFs for their portfolios and could be biased towards suggesting these. To minimize the conflict, it waives fees for SoFi ETFs in this platform.
SoFi Automated Investing investment approach
So how does SoFi Automated Investing work for managing your portfolio? This section looks at the investment specifics, starting with which features it includes.
|Investment options||Stock and bond ETFs|
|Tax loss harvesting|
|Socially Responsible Investing|
To set up your SoFi Automated Investing account, the app will ask you your age, your time horizon (when you expect to need the money) and whether you’d prefer to minimize risk or maximize gains. Based on these answers, the robo-advisor will give you one of five portfolio recommendations:
- Conservative (all bond ETFs)
- Moderately Conservative (mostly bond ETFs with some stock ETFs)
- Moderate (an even mix of bond and stock ETFs)
- Moderately Aggressive (more stock ETFs with some bond ETFs)
- Aggressive (all stock ETFs)
The robo-advisor creates portfolios with a mix of SoFi ETFs, as well as ETFs from other companies including Vanguard, iShares and VanEck HY. It will also show the expected SoFi Automated Investing returns for each portfolio.
You are free to pick another investment style besides the recommendation. For example, if SoFi suggests a moderate portfolio, you can still sign up for an aggressive one. However, you can’t request for it to change specific ETFs in a recommended portfolio. Once you pick an investment strategy, though, you aren’t stuck with it; you are able to change it at any time.
SoFi offers fractional investing for their ETFs. If you don’t have enough to buy a full share of an ETF, it would allow you to buy a fractional piece based on how much you invest. For example, if a stock ETF costs $100 per share and you have $50 left to invest, your account would still buy you half a share of the ETF, rather than just leaving you with the $50 uninvested.
The SoFi Automated Investing platform does not offer much support in terms of tax efficiency. While it does let you set up your account as an IRA, which can reduce taxes on your investment gains, the robo-advisor itself does not include tools or features to actively reduce your taxes, such as tax-loss harvesting. The platform also does not use Smart Beta, which is a more advanced form of indexing that seeks to maximize returns.
SoFi Automated Investing fees
- Annual management fee: None
- Investment expense ratios: Depends on the ETFs in the portfolio
SoFi does not charge an annual management fee for its Automated Investing program. Instead, SoFi Automated Investing fees are based on the expense ratios of running the ETFs for your portfolio. What you’ll pay for SoFi Automated Investing fees depends on the breakdown of your portfolio.
In a moderate portfolio, we saw funds charging as low as 0.05% and up to 0.25%. Your total fee would be the weighted average of all the ETFs in the portfolio. For example, if you invest $100,000 and the weighted investment expense ratio is 0.10%, you would pay $100 per year in fees.
SoFi also charges miscellaneous fees for certain administration issues, such as insufficient funds for a transaction, paper statements or transferring your account balance to another brokerage.
SoFi Automated Investing features and tools
SoFi Money® (cash management account)
To go with your SoFi Automated Investing, you can also transfer funds to SoFi Money, a cash management account. This account does not charge account fees and lets you withdraw money from 55,000 ATMS for free. The account also earns interest so long as you direct deposit at least $500 per month into the account.
If you’d like financial advice, you can schedule calls with financial planners at SoFi. They can discuss your strategy for Automated Investing, as well as other topics including budgeting, saving and lending. There’s no fee for using this service.
SoFi Edmit Plus (college planning support)
After joining SoFi, you also gain access to Edmit Plus, a tool for college planning. With this tool, you can estimate the cost of college at different schools, find financial aid and scholarships and estimate your future earnings based on your area of study.
SoFi Automated Investing user experience
We found SoFi Automated Investing user experience to be very pleasant. It took only a few minutes to set up an account and start the Automated Investing process. By answering just three multiple-choice questions, we received a portfolio recommendation and were ready to invest. We also liked that, through one app, you could also easily access other parts of SoFi, such as their active investing service, SoFi Money and loans.
For investment customer service support, you can contact SoFi by phone, email or live chat. Customer service is available Monday through Thursday, 5:00 a.m. to 5:00 p.m. PST and Friday 5:00 a.m. to 4:00 p.m. PST (there are no weekend hours). You can also book a 30-minute call to speak with a financial advisor. We found plenty of options to book a call for the very next day.
SoFi Automated Investing safety and security
- SIPC insurance
- Two-touch verification
- Fiduciary standard for advisors
SoFi Automated Investing comes with several safety features. First, it is a member of the Securities Investor Protection Corporation (SIPC). The SIPC insures your account for up to $500,000, with $250,000 for cash. This covers you in case SoFi itself goes bankrupt, though it doesn’t cover your investment losses.
On the technology side, the SoFi app gives you the option to set up two-factor verification for logging in, either by text, voice call or email, to keep your account secure.
Finally, their advisors agree to follow a fiduciary standard. This means if you speak with one of their representatives, they don’t earn commission for selling you SoFi products, so they can give unbiased advice to meet your financial needs.
Is SoFi Automated Investing worth it?
The SoFi Automated Investing platform is a good deal for beginner investors. There’s no management fee and you can get started for just $1. On top of it all, you get support from live financial advisors. However, the program is a little restricted compared to other robo-advisors. The investment strategies are basic, there is no tax-loss harvesting and it is missing account types like 529 college plans.
Investors with larger portfolios and more specialized needs may be better off with a competitor. But if you’re looking for a simple, low-cost automatic investing approach, SoFi Automated could be worth it.
Alternatives to SoFi Automated Investing
|Account minimum||Annual fee||Accounts offered|
|SoFi Automated Investing||$1||None|
|Ally Invest Managed Portfolios||$100||None|
|Wealthfront||$500||0.25% annual advisory fee on assets under management|
SoFi Automated Investing vs. Ally Invest Managed Portfolios
Ally Invest Managed Portfolios is another solid robo-advisor for beginner investors. Like SoFi, it does not charge an annual management fee, and you can open one of their accounts for $100. With Ally, you get access to more sophisticated investment strategies. Besides building portfolios on your risk tolerance, it can also finetune your strategy for other goals, such as generating income, minimizing taxes and being a socially responsible investor.
When you invest with Ally, however, you’re required to keep at least 30% of your money in cash. In addition, there are no live advisors available for the Ally automated investing program. If you want more options for investment strategies and don’t mind keeping a large share of your portfolio in cash, Ally could be a contender. But if you want all — or at least more — of your money in the market, SoFi could be better, especially if you’d prefer dealing with a live financial advisor as well.
SoFi Automated Investing vs. Wealthfront
Wealthfront is a more sophisticated robo-advisor than SoFi. In the attempt to generate higher returns, their software uses strategies such as Smart Beta and Risk Parity, an advanced method of distributing capital among multiple asset classes. It also uses automatic tax-loss harvesting to help reduce taxes on your portfolio. Finally, Wealthfront offers a wider range of account types, including trusts and 529 college plans.
These extra features come at a cost, though. You need to deposit at least $500 to open a Wealthfront account and it charges an annual fee of 0.25%. The more advanced portfolio benefits are also only available for larger accounts — for example, you’ll need at least $500,000 to receive Smart Beta services. Finally, Wealthfront doesn’t allow you to speak with live advisors.
Wealthfront is better if you have a large portfolio and want a more sophisticated automated trading strategy, whereas SoFi is better for reducing costs, and it comes with live support.
All information included in this profile is accurate as of 10/16/2020. For more information, please consult SoFi Automated Investing’s website.
The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.