charbo25
commented
8 years ago Thoughts (meant to be ongoing)
Betterment:
- Simple to get into with basic information, lays out a few different 'strategies' in a nice way.
- They do a good job of projecting retirement income. Makes it simple "I'll be making $X/year when I'm retired".
- Portfolios look to be spread into index funds. More complex than a simple three-fund portfolio, and it states that the portfolios are diversified, which is true. It does not, however, explain to the consumer what these funds are or why they are lower risk than individual securities. They sell the diversification of these funds really well, but that is nothing unique to betterment.
- Weakness: Throws you into choosing between taxable brokerage accounts and tradition vs Roth IRAs right away. Doesn't explain what those are. Average user would already be confused and lost.
- Weakness: The most conservative option is a portfolio with 40% bonds, and they push that over using a savings account. "Our rigorous modeling and testing has shown that investing is a reliable alternative to a cash savings account." This is CLEARLY not in the best interest of the consumer, not having liquid emergency savings, and it preys on them using the data that returns would be higher on investments.
- Fees: The fees for betterment are low, and decrease with the size of the portfolio. Lowest fee is 0.35% with a $100 monthly recurring deposit requirement. This is higher than you would get with vanguard, but not unacceptably high.
Wealthfront:
- Similar to Betterment, 0.25% administrative fee.
- They use a method of investing where, rather than investing in index funds, they invest in thousands of individual stocks (thereby 'avoiding the index fund fees', although they charge their own administrative fees for this service. Also, this approach makes is very difficult to get out, because although you are free to switch from Wealthfront to another service, you're left with thousands of investments to manage (or you're forced to liquidate).
Personal Capital:
- The free services appear to be very similar to our interests; analytical tools for planning investments/retirement. Similar to Betterment, though, I don't see any consideration for savings/liquid accounts.
- Personal Capital pushes its financial advising very hard, or else 'the individual investor is prone to mistakes that will add up to losses'. But, their services carry a very high fee: "We have one simple fee based on a percentage of assets managed... First $1 million: 0.89%"
- Looks like they hook you in with their free analytical tools to get you to invest.
Future Advisor:
- Seems very similar to Personal Capital. The retirement advise tools/dashboard are free, but they push their financial advising, which carries a high fee: "The results shown are net of the FutureAdvisor management fee of .5% and do not include transaction costs."
Blooom:
- 401(k) account management service. Doesn't seem to offer any actual investing advice, it's more of a 'let us handle that' sort of model.
- Charges flat fees, depending on the size of the portfolio. What that means is that the fees are proportionally much higher for people at the low end of each bracket. For example, accounts up to $20k are charged a flat monthly feed of $5. So, if you have $20k in your 401(k), you end up paying ~0.3% each year, which is not that high, but higher than investing in vanguard low cost index funds. If, on the other hand, you had $5000 in your 401(k), you are paying 1.2% annually, which is exorbitant.
- The website offers very little information, other than broad statements about how a Blooom portfolio will outperform one you self-administer.
Intelligent Schwab:
- $5,000 minimum account balance to use their advisory services. That's far from free.
- This service claims to have "No advisory fees. No account service fees. No commissions." but they must make money somewhere. In part, it's likely because these services are only available if you have alot of money tied up with them, but they also state that "Schwab affiliates do earn revenue from the underlying assets in Schwab Intelligent Portfolios accounts. This revenue comes from managing Schwab ETFs™ and providing services relating to certain third-party ETFs that can be selected for the portfolio, and from the cash feature on the accounts. Revenue may also be received from the market centers where ETF trade orders are routed for execution." I don't fully understand that, which is probably the point, but my interpretation is that there are no overhead fees on the account, but they will route your money into Schwab ETFs that charge fees, and that's where they get their money. It seems like linguistic sleight of hand.
ConstantinoSchillebeeckx
Meant to be a list of the sites that are kinda doing the same thing (essentially robo-advisors)