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Investing

Review of Wetherby Asset Management

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.

Wetherby Asset Management is a San Francisco-based registered investment advisor (RIA) with an additional office in New York City. Catering to high net worth clients with at least $10 million to invest, the firm’s 40 financial advisors provide service to 500-plus clients and oversee roughly $4.85 billion in assets under management (AUM).

Along with traditional investment management, Wetherby also advises clients on impact investments across nearly every asset class. The firm also offers a full range of financial planning services.

All information included in this profile is accurate as of March 20th, 2020. For more information, please consult Wetherby Asset Management’s website.

Assets under management: $4,851,933,986
Minimum investment: $10 million (exceptions made on a case-by-case basis)
Fee structure: 0.15% to 1.00% of AUM; hourly fees; fixed fees; negotiated fees; contingent fees
Headquarters: 580 California Street
Eighth Floor
San Francisco, California 94104
www.wetherby.com
(415) 399-9159

Overview of Wetherby Asset Management

Wetherby Asset Management was founded in 1990 by Deb Wetherby, a former broker in Morgan Stanley’s private client division. Prior to that, Wetherby worked in the auditing and consulting department of Price Waterhouse, the accounting firm. In founding her RIA, Wetherby’s goal was to marry the investing know-how of Wall Street with the personalized service and objectivity of accounting.

Today, Wetherby Asset Management is privately held. Wetherby, who is the firm’s CEO and a wealth manager, owns between 10% and 25% of the firm. The remainder is distributed among 23 other shareholders, only four of whom are non-employees.

The firm generally requires its wealth managers to hold an advanced degree or professional license. Its current team includes a number of chartered financial analysts (CFA), certified financial planners (CFP) and certified private wealth advisors (CPWA).

Which types of clients does Wetherby Asset Management serve?

The vast majority of Wetherby’s clients are high net worth individuals, though the firm works with a limited number of individual investors who are not high net worth. For reference, the SEC defines high net worth individuals as those with at least $750,000 under management or a net worth of at least $1.5 million. In addition to individual investors, Wetherby manages money for charitable organizations, corporations, pooled investment vehicles and state and municipal government entities.

With a $10 million minimum, however, Wetherby caters almost exclusively to high net worth and ultra high net worth clients. In some instances, Wetherby will lower its minimum requirements. Still, clients at the top end of the asset level enjoy low fees and a high level of customization.

Services offered by Wetherby Asset Management

Wetherby Asset Management provides investment management services to all of its client types. Clients typically work with Wetherby under one or more of the following arrangements:

  • Discretionary: Wetherby has the discretion and authority to invest and place trades in client accounts according to a client’s established objectives and guidelines.
  • Non-discretionary: Wetherby provides investment guidance but does not have the authority to place trade in client accounts without prior approval.
  • Consulting: Wetherby provides investment advice as needed based upon a mutual agreement, but clients execute trades on their own.

Wetherby’s services also include an impact investing capability, which is the practice of investing in companies, organizations and funds with the intention of generating positive social and environmental change along with financial return.

In addition to investment management, Wetherby also offers its clients a wide range of financial planning services. These services are provided as needed, and clients may or may not incur additional fees for financial planning.

Here is a complete list of services currently offered by Wetherby Asset Management:

  • Investment management
    • Impact investing
  • Financial planning:
    • Financial statement preparation and analysis
    • Income tax planning guidance
    • Risk management/insurance analysis
    • Retirement planning
    • Estate planning
    • Education planning
    • Philanthropic planning
    • Intergenerational wealth transfer
    • Equity ownership and stock option advice

How Wetherby Asset Management invests your money

Wetherby Asset Management invests client money with the dual goals of growth and downside protection. The firm develops an investment policy for each client that takes into account each client’s needs and goals, as well as the current economic and market conditions.

Wetherby’s investment approach is long term, with advisors looking out at least a year, though changing market conditions could cause Wetherby to sell securities more quickly. The firm diversifies its investments across asset classes and among multiple money managers. To execute its investment strategy, Wetherby primarily uses actively managed funds, though it includes passively managed funds in client portfolios to reduce fees and taxes.

Clients have the ability to customize their portfolios with Wetherby. That being said, client assets are generally invested in open-end, no-load mutual funds and other pooled investment vehicles. In some cases, investments are made in individual equities, fixed-income securities, exchange-traded funds or closed-end mutual funds. Some clients may have assets invested in private investment funds or other separate account vehicles or strategies managed by outside advisors.

In addition, Wetherby clients have access to private fund offerings through LRHF II Holding Company, which is owned and managed by Wetherby Asset Management. Wetherby also has an impacting investing capability for clients who want it. With this service, the firm reviews the social and environmental challenges that clients want to address and then finds appropriate investments to meet those goals.

Fees Wetherby Asset Management charges for its services

Wetherby charges clients based on a percentage of assets under management for its discretionary investment management services. There different fee schedules for clients with portfolios under $10 million and portfolios over $10 million, with rates generally declining the more assets a client has invested. However, the firm’s rates are negotiable and may be lowered for charitable organizations or employees’ family members and friends.

Fee Schedule for Portfolios Under $10 Million
Assets Under ManagementAnnual Rate
First $3 million1.00%
Amounts over $3 million and up to $9 million0.75%
Amounts over $9 million and up to $10 million0.00%
Fee Schedule for Portfolios Over $10 Million
Assets Under ManagementAnnual Rate
First $10 million0.75%
Amounts over $10 million and up to $40 million0.55%
Amounts over $40 million and up to $80 million0.25%
Amounts over $80 million0.15%

In addition to the fees charged by Wetherby, clients may be responsible for some trading fees, such as when investing in private placements. Clients will also incur expenses for investing in mutual funds and other pooled accounts. Further, clients who use the services of LRHF will be charged an additional fee.

Whetherby’s fee may also include a negotiated fee in which clients contribute a portion of their negotiated fee into Wethreby’s Donor Advised Fund.

In some circumstances, Wetherby may negotiate with another investment advisor on behalf of a client for a reduced fee. For this service, Wetherby fees may include a contingent fee, which is charged based on a percentage of the client’s savings.

For the firm’s non-discretionary asset management and consulting services, clients may be charged either a fixed or hourly fee, with the rate varying based on the complexity of the client’s situation.

Wetherby Asset Management’s highlights

  • Low fees (for big investors): Those with more than $80 million to invest can enjoy rock bottom fees of 0.15%. A sampling of investment advisory fees in 2019 by AdvisoryHQ shows that the average rate for assets over $30 million is 0.59% a year, which is significantly higher than Wetherby’s rate.
  • High level of customization: With just under 550 clients, Wetherby has 40 investment advisors on staff. The firm allows clients, including those who request impact investing, to place certain restrictions on the types of investments in their portfolios. Additionally, Wetherby will provide consultation and oversight to assets not held at the firm for no additional charge, unless asked to provide reporting or additional research on the assets.
  • Awards and accolades: Wetherby has frequently earned top rankings over the years. The firm’s founder, Deb Wetherby, landed the No. 5 slot on Forbes’ list of the Top 50 Best-In-State Wealth Advisors in 2020; No. 122 on Forbes’ list of America’s Top Wealth Advisors in 2019; and No. 19 on the magazine’s list of America’s Top Women Advisors in 2019. Other awards the firm has won include two entries on the list of the 2018 Top Wealth Advisor Moms by Working Mother magazine and appearances on B Lab’s lists of the Best for the World for Changemakers, Workers, Customers and Governance in 2019.

Wetherby Asset Management’s downsides

  • High account minimum: Wetherby’s high investment minimum requirement of $10 million makes its services out of reach for many investors. However, the firm will waive this minimum on a case-by-case basis, and it does currently serve just under 50 individuals who do not meet the SEC’s definition of high net worth individuals.
  • Small geographic footprint: With just two offices, Wetherby has a limited geographic reach. If you aren’t located in San Francisco or New York, it will be challenging to meet with your advisor in person, though the firm is registered in a number of other states if you’re open to working remotely with your advisor.
  • Potential conflict of interest: Debra Wetherby and two other owners of the firm also own minority ownership interests in a savings and loan holding company called National Advisors Trust Company (NATC). The firm intends to refer clients to NATC for trust and custodial services, contending that NATC provides these services for less than competitors. While the firm states in its Form ADV that it “will only recommend NATC to its clients when it is in the best interest of its clients,” this outside interest does present a potential conflict of interest as advisors may have an incentive to give the company additional work, thus referring its clients.

Wetherby Asset Management disciplinary disclosures

Wetherby has no disciplinary disclosures listed in its Form ADV. SEC-registered firms are required to provide prompt disclosures of any legal or disciplinary actions in their Form ADV to help current and prospective clients evaluate the firm. The type of legal and disciplinary events that must be disclosed include criminal and civil actions; administrative proceedings before a federal regulatory agency; and proceedings before a self-regulatory organization.

Wetherby Asset Management onboarding process

Prospective clients can contact Wetherby by filling out a form on its website, emailing the firm at [email protected] or calling (415) 399-9159.

Once clients choose to work with the firm, they will attend an official kickoff meeting during which advisors will get to understand the client’s goals and risk tolerance to create a suitable portfolio. The firm continually monitors clients’ investments and will make adjustments as necessary as a client’s goals and objectives change over time.

Clients have five business days after signing on with Wetherby to rescind the contract (though they will be required to settle transactions that Wetherby began on their behalf).

Is Wetherby Asset Management right for you?

For high net worth investors, Wetherby Asset Management offers a customizable investment management experience. Additionally, the firm’s requirement that wealth managers hold professional licenses and its clean disciplinary record can provide assurances to investors that they’ll be taken care of. What’s more, Wetherby’s emphasis on impact investing gives investors an option to participate in an increasingly popular investment style. However, the firm’s high account minimums leave out all but the very wealthy who are based near the firm’s offices in San Francisco and New York City from getting advice there.

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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Investing

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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Investing

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.

LEARN MORE

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.

Learn More

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.

Learn More

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.

Learn More

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.

Learn More

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).

Learn More

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).

Learn More

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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