Robo–advisors are a class of financial adviser that provides portfolio management online with minimal human intervention.
Wealthfront invests your money for you with a minimal amount of work. They will monitor your portfolio every day looking for opportunities to rebalance or harvest tax losses. They charge 0.25% of your assets as a management fees; much lower than the usual 1.00% many advisors charge. There are also no commissions.
Betterment does one better, like Wealthfront, they charge 0.25% for your investments, but if your account exceeds $100,000, they only charge 0.15% on the excess amount.
There are many others; these are just the two most prominent. Our friend Rick Ferri is the latest advisor to offer automated money management targeted at younger investors. Rick Ferri is one of the most well-known index investors in the world. His goal to for his robo advisory service is simple: to reach younger investors. Ferri says the younger demographic doesn’t necessarily want to pay for advice, nor can it afford account minimums at most advisories. His service begins this summer.
There’s also Josh Brown, chief executive officer of wealth management firm Ritholtz Wealth, who launched a robo advisory named Liftoff last fall. And, Ric Edelman, of Edelman Financials, who launched Edelman Online. And even Schwab and Vanguard are getting into the act as well.
Our friends at investorjunkie.com put together a handy chart with reviews of several robo-advisor services.
Robo Advisors List
|Company||Fees||Minimum Deposit||More Info|
|Betterment||0.15% – 0.35%/annually||None – less than $10k must deposit $100/mo or pay $3/mo||Review|
|LearnVest||$89 – $399/setup and $19/month||None||Review|
|MarketRiders||$14.95/month + trading fees||None||Review|
|Personal Capital||0.49% – 0.89%/annually depending the amount invested||$100,000||Review|
|Rebalance IRA||0.50%/annually, $250 setup fee, and trading fees, min $500/year||None||Review|
|TradeKing Advisors||0.25%/annually – Core
0.50%/annually – Momentum
|$5,000 – Core
$25,000 – Momentum
|Vanguard Personal Advisor Services||0.30%/annually||$100,000|
|Wealthfront||Free for first $15k, 0.25%/annually for anything higher||$5,000||Review|
I believe that everyone can and should manage their own money. It just takes a few index funds and the occasional rebalancing, but if you don’t want to manage your own money, you might want to consider a robo-advisor. They are relatively inexpensive options available for you.