Ben Todd | Jun 3, 2017 | 2
Best Robo Advisors: Top Picks for 2017
A Robo Advisor is a program that gives you financial advice and/or manages your investments for you based on a series of algorithms. They are able to allocate, deploy and rebalance your investments.
This article is neither promoting the companies/programs on it, nor is it promoting the use of Robo Advisors. This article was created due to popular demand for an independent list of the best Robo Advisors of 2017. The list is in no particular order.
A Brief Analysis Of Robo Advisors
A Robo Advisor is a catch-all term that includes all types of investment software and investment managers, which makes analyzing the pros and cons a little difficult. Some Robo Advisors are fully automated and some include human assistance or input.
In many cases, Robo Advisors are considered because it means the investor doesn’t have to do as much work. Let the computer program do the work while the investor sits back and watches the money roll in. This is not a new concept, since brokers have been offering this service for years.
Are computer programs more successful and/or more reliable than human brokers are? Logically, it doesn’t seem possible for a program to be able to guess the correct investments to make at the correct time (yes, they are guessing, we all are), and if a computer program does consistently outperform humans, then we are in a lot of trouble.
There are no Robo Advisors and/or computer programs that can guarantee a profit with your investments. Nevertheless, many people are happy to allow Robo Advisors to manage their accounts. If most of these people are making a profit from having their accounts managed by Robo Advisors, then doesn’t that indicate that the world’s markets are in big trouble because anything that can be predicted can also be exploited?
Another point is the fact that Robo Advisors are becoming more and more popular as the world recovers from the global economic slump. It stands to reason that a computer program would do well (on average) if it uses consistent decision-making protocols/functions. In other words, won’t thousands of people start losing money as consistently as they are making it today when there is another slump?
By their very nature, Robo Advisors offer a cookie-cutter approach, which is going to benefit some people and not others. The companies that offer the Robo Advisors should also be taken into consideration because they are the ones that control which choices the programs have with regards to where your money goes. For example, if the Robo Advisor has to select from a pool of 20 investments, and all 20 investments are top performing, then the Robo Advisor will do better than a program that has to choose between 20 failing investments.
Best Robo Advisors To Choose
Here’s our picks for some of the best robo advisors to consider for 2017. We are not necessarily giving a rank list, but our selection of the more popular, standout Robo Advisers that have a good reputation among investors. You will, of course, have to do your own due diligence.
The SigFig Company offers a Robo Advisor, and they currently manage assets that total $60 million. Their fees are 0.25% annually if your account maintains a balance of over $10,000. If you have less than that in your account, they will manage your money for free. At the very beginning, SigFig was an account aggregation tool that you could use for free. It allowed (and allows) users to see all of their financial accounts in just one view. If you allow SigFig to manage your investments, they will put your money into EFTs. Your lineup may differ from your neighbors because SigFig works with different companies such as TD Ameritrade, Schwab and Fidelity. SigFig will also allow you to choose how hands-on you are with your investments. It will take over a portion of your asset management and allows you to choose how much of your assets you manage on your own. They have mobile app, and they have a rebalancing function that acts “when-needed” (to put it in their words).
TradeKing Advisors is an online investment advisory service. Answer several questions about your risk tolerance, and the company will manage your assets for you. You may choose between Momentum portfolios and Core portfolios. If you wish to build a portfolio with TradeKing advisors, you will need $500 to put into your Core Portfolio, and a further $5,000 to put into your Momentum Portfolio. Fees range from between 0.25% annually to 0.50% annually. You will have to maintain an investment account balance of more than $5000 or else you will be charged an extra $1 per month. The Robo Advisor manages your re-investments and rebalancing, though unlike many Robo Advisors, it does not offer tax-loss harvesting.
This company manages assets that add up to over $1.7 billion. If you have more than $10,000 in your account, then your fee is 0.25% annually. Their headquarters are in Palo Alto, and even though they only launched the company in 2011, they were one of the original Robo Advisory companies that concentrated almost exclusively on selling Robo Advisory services. It was funded by venture capitalists that have so far paid $130 million. Some big names have joined Wealthfront, such as Marissa Mayer (Yahoo CEO), Tim Ferris (self-help author) and Kevin Rose (Google Ventures general partner). EFTs make up most of the user investments. Wealthfront offers rebalancing and tax-loss harvesting. They do not give advice about 401(k)s or outside accounts. They also have a mobile app you may use.
The Asset Builder Company manages less than $600 million in assets, which is still a very large and healthy number. You need a $50,000 account balance in order to be eligible for their services. The fees range from between 0.20% and 0.50% annually. Asset Builder offers an online portfolio platform. It uses DFAs (Dimensional Fund Advisors) from Texas to help manage the accounts. If you sign up, you may choose from eight model portfolios for rebalancing your investments. You will have to pay commissions on trades, and the commission fees range from between $20 and $49.95, though the fee depends on your account balance. For example, if you decide to buy twelve mutual funds in order to launch your portfolio with a bang, then you are going to pay up to $600 in trading fees. There are also operating expenses that range from between 0.24% and 0.45%.
This company has around 1700 users, and their assets come to around $200 million. These are the paid users, and they pay fees of up to 0.50% annually. You also need to maintain a $10,000 account balance in order to use the service. The company has free services too. If you sign up for a free account, then the Future Advisor program will not manage your money, but it will send you rebalancing reminders and allocation recommendations. It does this for free, and it also analyzes your portfolio for free too. The idea is that with the help of the Future Advisor, people will make better investments and will therefore be able to afford to allow Future Advisor to take over the role of managing their investments. If you pay for their services, they will manage your investments, they will give you access to a financial advisor, they will conduct rebalancing and will automate your tax-loss harvesting.
If you opt for Rebalance IRA, you will have to open your account with $75,000 and maintain a minimum balance of $75,000 in order to qualify for their services. They manage assets that total $180 million, and their fees are 0.50% annually. This company offers a Robo Advisor that targets your IRA. All of the investments are rebalanced around twice per year and they are mostly held in EFT investments. Rebalance IRA states on their website that they will consider your retirement account “from a holistic viewpoint” in a way that allows them to make recommendations for improvements (make of that what you will).
Opt for Liftoff, and you will pay fees of 0.40% annually. The company manages assets that total $150 million at the moment, but the company is one of the youngest on this article. It was actually launched in October 2016. A New York firm offers this Robo Advisor. The firm is called Ritholtz Wealth Management, and they have collaborated with Josh Brown, who is a minor celebrity in the blogosphere. The Robo Advisor (automated investment platform) came from a company known as Upside Advisor. The Robo Advisor will put your investment into eight mixed ETFs, most of which are Vanguard, ETFs.
Schwab Intelligent Advisor
The Schwab Company is relatively old compared to the others on this list, but it is only recently that they have entered the robo-advisor field. There are no account service commissions or fees; the model is free, which means there are no advisory fees either. The robo-advisor function (online investment advisory service) helps you build, monitor and rebalance your portfolio. It is a goal-based system rather than a grow-at-the-most-healthy-rate system. You will need to deposit $5000 and maintain a $5000 account balance to qualify for their Intelligent Portfolios account. Every Intelligent Portfolio from Schwab has a percent invested in cash because Schwab believes cash is important for a diversified portfolio, plus it improves liquidity, stability and diversification. A free Robo Advisor sounds suspicious, but Schwab make so much money from their Schwab-branded money market funds and ETFs that it is in their interest to offer people free advisory services.
Vanguard Personal Advisor Services
They currently have 4.2 billion dollars of assets under their management. They are a big player in the Robo Advisory industry. They ask that your account has at least $100,000 and your fees are around 0.30% annually. When Vanguard Personal Advisor Services rolled out its beta version of the money management software, it had had around $700 to play with. After a while and after a few good results, the company started finding more customers. In 2013, it managed $700 million in assets, and it now manages over $4.2 billion. There is a fair amount of human input with Vanguard Personal Advisor Services. The staff “partner up” with the online tool. The built in tool does much of the rebalancing with the human element on hand to stop things going wrong. Part of becoming a customer of this Robo Advisor is that you will be using Vanguard mutual funds and ETFs, but that is more of a perk than a negative.
The Betterment Company manages around $2.5 billion in assets. If you wish to become a customer, they are going to charge you between 0.15 and 0.35% annually. The company was established in New York in 2010. The company started with $105 million and in six years has seen its managed asset amount rise to $2.5 billion, and they currently have more than 100,000 customers/accounts. You are able to invest as much as you like, but if your account balance is less than $10,000, then you are charged an extra fee of $3 per month. However, you may avoid the extra fee if you have $10 auto-deposited from your bank into your Betterment account every month. There are plenty of portfolios on offer, which include Vanguard and iShares ETFs. There is tax-loss harvesting and automated rebalancing. There is also a mobile app you may use.
This company manages $1 billion worth of assets. You may use their software for free, but if you use their service, then fees may vary. For example, if your account balance is between $1 million and $100,000, then your fees will be 0.89% annually. The company has headquarters in Redwood City. Their free service gives you free investment advice based on whatever the program’s algorithm says. If you wish, you may link the service to your holdings with other firms and you may use the tool to see how your overall investment allocation should look. If you are looking for portfolio management, then you have to sign up for a paid account and allow them to manage your money. Personal Capital also has different services you may pay for. You have to have a minimum balance of $100,000 in order for Personal Capital to manage your investments for you, and there starting fee is 0.89% annually.