The decision to use a digital finance advisor in place of, or in conjunction with, a traditional advisor is a personal decision. Many factors will determine if investing online is the right decision for you-it constitutes serious consideration. But today let's assume you've already been through the decision-making process and you've determined "robo advisors" are for you. It's time to start shopping!
Countless options for financial planning services can leave your head spinning-and looking only at fees isn't enough to help you find the right fit. Here are seven of the top "robo advisors," plus a rundown on the philosophy, fees and other unique offerings of each to help you make the best decision for your financial life.
Betterment was designed to answer the question, "What should I do with my money?" CEO Jon Stein wanted to build an investment tool which could be called "efficient, accessible, and delightful." Betterment features a no minimum investment and no minimum balance policy. Fees range from 0.15% to 0.30% of assets. And if you have a balance of under $10,000, you will be charged a $3 monthly fee if you don't deposit at least $100 into your account each month.
Robinhood is aptly named in honor of its zero dollar trade platform. Founders Vladimir Tenev and Baiju Bhatt were building trading platforms on Wall Street when they noticed the discrepancy between trading fees and the minimal effort actually required to complete the trade. Thus, Robinhood was born. As well as offering free trades, the app doesn't require an account balance minimum. However, what's important to understand about Robinhood is that it's a DIY model-which means there's little to no support for investing beginners.
Loyal3 is a fee- and commission-free investing tool. Founded on the principal that the capital markets needed to be democratized, this tool is geared specifically toward beginner investors. You can invest as little as $10 in whole or fractional shares of stock in your favorite brands, and as little as $100 in an IPO (initial public offering). Since the tool is extremely simplistic, it works best for newbie investors who want to invest in companies they've heard of.
You're probably familiar with brokerage giant Charles Schwab, but what you may not know is that Charles Schwab is getting in on the "Charles Schwarb robo advisor" game. To get started with Charles Schwab Intelligent Portfolios, you'll need a $5,000 initial investment and the time to fill out a questionnaire. How you answer the questions will determine your asset allocation. A downside of this service is the large cash allocation. Anywhere from 6%-30% of your investments will be earning zero percent simply because they are in cash.
Wealthfront is an automated investment service offering fee free service up to $10,000 and only charges 0.25% on your assets per year after that. Wealthfront-which relies on Modern Portfolio Theory to provide the optimal mix of asset classes-also offers five levels of tax minimization to help you be as tax-efficient as possible. The minimum balance for a Wealthfront account is $5,000.
FutureAdvisor was created by financial professionals and software engineers to make investing simple for the end user. There is no minimum balance required, but there is 0.5% fee to manage your investment. A unique feature of FutureAdvisor is that it gives advice on your 401(k), a service which isn't provided by most digital advisors.
WiseBanyan claims to be the world's first free financial advisor. Yep, completely free. Though of course you will pay for certain premium features such as tax-loss harvesting. WiseBanyan is another easy to use platform, but with their waiting list/invitation model it may take some time for you to be granted an account. By primarily using exchange traded funds (ETFs) WiseBanyan can keeps costs low for the end user.
Peter Dunn, aka Pete the Planner, is an award-winning financial mind who has authored five books, hosts the popular Pete the Planner radio show and travels around the country offering financial education. For more from Peter, visit www.petetheplanner.com.
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