Saturday, June 16, 2018
Business

Robo-advisers offer lower costs

Inexpensive advice

These companies offer help picking and rebalancing index and exchange-traded funds or similar investments, and none charge more than about 0.5 percent of your assets each year for the privilege.

Company/ productCostsMinimum balance requirementComments
AssetBuilder0.20 to 0.45 percent of assets, depending on balance, plus trading costs$50,000Uses investments from a company called Dimensional Fund Advisors, which creates funds that are similar to index funds but don't mimic standard indexes precisely. Includes help from a human during account opening.
Betterment0.15 to 0.35 percent of assetsNone, but people with less than $10,000 must deposit $100 each month or pay a $3 monthly feeOne feature helps people determine a safe amount of money to withdraw for retirement each month. Betterment also offers tax-loss harvesting in taxable accounts and support for trust accounts.
Charles Schwab (Schwab Intelligent Portfolios)Free (Schwab does make money when it uses its own funds in the portfolios)$5,000Schwab says it does not disqualify any funds that don't pay it fees to be considered; it does make money this way in other parts of its business.
Fidelity GoNo announcement yet, since it is still in betaNone yetAn employee beta as of late 2015, set for invite-only beta in early 2016. Some portfolios may include a few actively managed Fidelity mutual funds.
Financial Guard$15.95 per month or $149.95 annually, plus trading costsNoneFinancial Guard gauges risk, examines all of a customer's investment accounts and suggests funds to buy and sell. Customers can request index or exchange-traded funds, which Financial Guard recommends.
Folio Investing

(Unlimited Plan)

$29 per month or $290 annuallyNoneFolio Investing has a number of "Ready to Go" portfolios of exchange-traded funds that customers can buy in a single transaction.
FutureAdvisor0.5 percent of assetsNoneFutureAdvisor will advise on, watch and rebalance multiple individual retirement accounts and taxable brokerage accounts. Since being acquired by BlackRock in August 2015, the service will largely be available through financial advisers.
Hedgeable0.3 percent to 0.75 percent of assetsNoneThe automated service shifts portfolio holdings from risky to safe assets based on market conditions. The goal is to limit losses during market downturn, though it could limit potential gains.
Invessence$250 per year for balances under $100,000, 0.25 percent of assets for balances over $100,000$5,000Only in Connecticut, Illinois, Michigan, New Jersey, New York, North Carolina, Pennsylvania, Texas and Virginia so far. Invessence does the trading and rebalancing.
Jemstep Portfolio ManagerFree for first $25,000; $17.99 to $69.99 per month after that, depending on balance, plus trading costsNoneJemstep also evaluates the holdings in your 401(k) or other workplace retirement account, which other services may not do. Since being acquired by Invesco in January, however, the service will largely be available through financial advisers.
MarketRiders$14.95 per month or $149.95 annually, plus trading costsNoneMarketRiders tells you which funds to buy and when to rebalance but doesn't do it for you. The company's owners started Rebalance IRA for people who want more help.
Motif Investing (Horizon Portfolios)None$250There is a conservative, moderate and aggressive portfolio of exchange-traded funds that Motif has built. Motif does the rebalancing and is itself a brokerage firm.
Rebalance IRA0.5 percent of assets, plus $250 startup fee and trading costsNone, but there's a $500 minimum annual feeAs the name suggests, Rebalance IRA specializes in retirement accounts; its service includes human contact with a dedicated adviser.
SigFig

(Managed Account)

$10 per month$2,000SigFig manages money in your existing account if it's at Charles Schwab, Fidelity or TD Ameritrade. There are no trading costs, and the company trades for you.
Target-Date Mutual Funds

(Various companies)

Vanguard's are inexpensive and made up of index funds with average costs of 0.17 percentGenerally very small, if anySometimes, companies stuff target-date funds with their own actively managed mutual funds, which can raise costs. Funds from competing companies with the same target date may have very different ratios of stocks to bonds and other assets.
Vanguard

(Personal Advisor Services)

0.3 percent of assets$50,000Vanguard is alone among this group in including full-service financial planning in the price.
WealthfrontFree for the first $10,000; 0.25 percent after that$500Wealthfront does tax-loss harvesting for all taxable accounts and helps Twitter and Facebook shareholders sell their stock and diversify in an efficient fashion.
WiseBanyanNoneNoneWiseBanyan makes money by charging for various additional financial planning services.

Costs are annual unless otherwise noted. There also are underlying fees for the funds that every one of these services uses, though they tend to be low since they go into index or similar funds. Trading fees, commissions and related charges are included unless otherwise noted; some companies are able to absorb them. Companies that have a range of fees usually charge less as you give them more money to manage.

Sources: The New York Times and Corporate Insight

So-called robo-advisers provide investment advice for a lot less than the typical human adviser. These robots assemble investment portfolios after customers answer a series of questions online and have been widely praised for their easy, low-cost approach to investing.

The automated services, which include startups like Betterment and Wealthfront, along with offshoots from established players like Schwab, have quickly amassed $53 billion under management in just a handful of years, according to estimates by Aite Group.

The flow of funds into robo-adviser accounts is expected to accelerate because of new federal regulations, which require all financial professionals to put their customers' interests first when providing advice on their tax-advantaged retirement accounts.

The rules are expected to push more customers into lower-cost investments.

Robo-advisers were already required to follow the highest standards of consumer protection — on every dollar they manage, not just retirement money — because most of them are registered investment advisers. That means they are required to act as fiduciaries, the legal term meaning they must put customers ahead of all else.

Some regulators have raised concerns about whether robo-advisers are thorough enough when gathering information. A robo-adviser does not ask about money held outside of its service, for example, which can provide a distorted picture of a customer's financial standing. Others argue they try to wiggle out of too much responsibility in their customer agreements.

New York Times

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