Best Online Investment Sites
Robo advisors, or automated algorithms responsible for allocated, rebalancing and deploying investments, have been readily available in the financial space for years but not until recently have they garnered attention. When it comes to wealth management or financial advising there are nearly an endless number of options to choose from.
Not only are automated investment services simple to use but considerably less expensive then some traditional alternatives like financial investment advisors or the DIY route. Plus, they can often take much of the uncertainty out of the investing process by creating a well-structured portfolio and reinvesting dividends, handling ETFs, harvesting tax losses and much more.
Considerations When Looking for an Automated Investing Site
Selecting a robo-advisor to manage your money can be one of the best decisions you make, however, due diligence is necessary to make sure your funds are safe and well taken care of. Objectively speaking, these are important considerations that should be kept in mind while comparing and contrasting various robo-advisors.
- Fees - Cost obviously plays a role in which robo-advisor you select. The cost of an automated investment service or robo-advisor can range significantly. Generally, there is an annual management fee that is assessed as a percentage of your invested assets. When evaluating robo-advisors take a look at the overall cost including management fees plus the average expense ratio.
- Investments - Not all robo-advisors offer fully automated services. Some limit users to ETFs while others offer comprehensive management options.
- Stocks Managed - Check if the service allows you to invest in individual stocks.
- Taxes - Does the service offer tax loss harvesting features?
- Minimum Investment Required - Some services require a minimum deposit to open the account.
- Features - Some popular features available through robo-advisors are asset classes, re-balancing services, tax-loss harvesting, and more. Determine which features you find to be the most valuable for your portfolio.
While these aren't the only factors to consider, they are a good starting point for narrowing down your options. Also, it's crucial to highlight that many of these services operate differently or take different approaches. That's not to say that one approach is better than the other, per se, but unique features may appeal to different clients.
- Offers individual & joint non-retirements accounts
- Higher investments receive lower rates
- Offers investments in diversified portfolio
- Longstanding history and reputable company
- Offers diversification, automatic rebalancing and low management fees
- No novelty lenses available on the site
This New-York based company, which was established in 2010, manages over two billion in assets and has risen north of $100 million in venture capital to date. Low and behold, Betterment is leading the way in the robo-advisor race. It even assures clients that they can make 4.3% higher returns as compared to an average do-it-yourself investment plan. This investment service utilizes a combination of factors to do so including diversification, rebalancing that's automated and boast low management service fees. With fees having the potential to eat up much of an investor's take home, it's worth paying attention to their low management fees. Clients using Betterment do not pay any transaction or commission fees. Plus, they levy any management expensive on a 3-tier basis depending on the account balance.
As a robo-advisor, Betterment offers a few different account options. First, they have individual and joint non-retirement accounts as well as traditional, SEP, ROTH and rollover IRAs. What they do not manage assets in are 401(k)s, 529 and UGMA accounts. Betterment invests in a range of diversified portfolios including exchange-traded funds (with expense ratios from .09%-0.17%). Note, however, that you cannot invest in individual stocks, bonds, or mutual funds with this service.
Verdict - Superb
With Betterment, the higher your investment the lower your rate will be. Accounts with less than $10,000 incur an annual fee of .35% of the account balance (min. $100 a month in auto deposits or $3 a month). Accounts with $10,000-$100,000, incur an annual fee of .25%. Accounts over $100,000 the annual fee is .15%. Betterment is an excellent option for individuals seeking an automated investment service with tailored portfolio allocation, rebalancing and auto deposit options. With such a low cost of entry ($0) minimum balance and fantastic service features, you really can't go wrong with this company.
- Manage 529s, UTMA's, UGMAs and Coverdell
- Offers tax-loss harvesting
- Free college savings management
- No fee for to link accounts
- Free portfolio analysis/trading recommendations
- Ideal for small portfolio investors
- $10,000 account minimum for premium features
- Accounts have to be held or moved to Fidelity or TD Ameritrade
FutureAdvisor makes managing investments easy. Using a modern portfolio system, this service helps investors minimize risk by offering highly customizable management options.
With this service, you can manage individual and joint non-retirement accounts (traditional, rollover, Roth, and Sep IRAs as well as 529s, UTMA's, UGMAs and Coverdell). What's really great about FutureAdvisor is that it can manage 401(k)s but they have to be linked with Fidelity and enabled with BrokerageLink. That being said, all accounts have to be held or moved to Fidelity or TD Ameritrade which may be a dealbreaker for some clients.
In terms of fees, there's a .50% annual management fee on any assets managed but no minimum to link accounts.
Verdict - Great
FutureAdvisor is really built to cater to clients who want to manage college savings accounts or implement a plan for small portfolios. A big turnoff was the $10,000 account minimum which is high considering other services have a $0 min. Nonetheless, there are still great tools and features available at no cost including the monitoring and rebalancing of investments. FutureAdvisor appeals to clients who are accumulating assets and at pre-retirement age, so they do not accept premium clients who are over the age of 68.
Motif Investing Review
- Intuitive thematic investing
- No account minimum
- Pre-made motifs to choose from
- Buy or sell Motif's for $9.95
- Diversified stock options
- More hands-on, less automation
- Rebalancing only for pre-made motifs
- Annual third party fees(ETFs, Index funds, mutual funds, broker/dealers)
Have you heard of Motif Investing? Based on their website they offer an "innovative wealth management platform to help Advisors connect with investors across generations."
This service is known for boasting thematic portfolios for investors of all ages including Millennials. Usually these portfolios will include up to thirty securities, ETFs, or a combination which is traded for $9.95 each portfolio (per initial trade). It accommodates traditional IRAs, Roth, rollover IRAs, individual and joint accounts.
With Motif Investing, you basically can create your own fund centered around a specific concept or idea which consists of 30 stocks or ETFs and/or other shares in that motif for a flat fee of $9.95. If you don't think you have the capacity or time to hand-pick you can choose from pre-made motifs as well. In all they have close to 150 motifs. The platform is very simple and straightforward so it's not a challenge to navigate. Just sign into your account and explore the industries or sectors that interest you, and then make your pick.
Verdict - Very Good
There are a number of cons with Motif. First of all there are less automated options compared to other providers on our list. For instance, rebalancing is an advanced option but only for the pre-made motifs. Furthermore, third party annual fees do apply for certain securities but it's best to contact Motif for those individual figures.
This service is ideal for investors who have a laser focus since they can hand pick where and when to invest. With that being said, it offers instant diversification and is a great tool for secondary investing.
Personal Capital Review
- Globally diversified investment portfolio
- Longstanding history in the industry
- Link all account to personal dashboard
- Free analyzer tools and checkups
- Retirement planner tool available
- $100,000 account minimum
- .49-.89% advisor service fee
- High fees compared to other services
Bill Harris, the founder of Personal Capital, was formerly the CEO of Intuit and PayPal. To date, the service has upwards of 800,000 clients and assets surpassing $150 billion.
Personal Capital facilitates a range of account types and features automatic rebalancing, tax optimization, and tax-loss harvesting. They have one fee based on a percentage of your assets managed and bill on a monthly basis. In that sum, trade costs and custody are included, plus you're not responsible for trade commissions like with some other services.
What's really great about Personal capital is that you benefit from a globally diversified portfolio, get access to free analyzer tools and checkups as well a retirement planner and can link all of your accounts to a personal dashboard. The biggest drawback is that there's a $100,000 account minimum.
Verdict - Good
All-in-all, Personal Capital has solid offerings in the investment management sector. One great feature we didn't mention is access to a human advisor who is in charge of communicating with you regarded aspects of your account. This in itself is a very valuable asset. Your portfolio will be designed with your unique goals in mind.
Scottrade Advisor Services Review
- Functionality to analyze and monitor portfolios
- Multi-block trading available
- Customizable account alerts in real-time
- Built in modeling and rebalancing
- Time saving technologies
- Fewer automated features
- Less comprehensive options
- Third party integrated technologies
Scottrade's new custodial platform supplies fully customizable options to appeal to investor's unique needs.
The company's trading and account management platform offers multi-block trading capabilities and real-time allocation as well as integrated technologies including Redtail Technology CRM, and MoneyGuidePro, among others.
Some of the platform features include:
- Homepage navigation
- Bulk download of client statements
- Trade all within one account page
- Seamless integration with the programs noted above
It's necessary to point out that the portfolio modeling and rebalancing tool is powered by Advisor Software Inc. which is a third party vendor not affiliated with Scottrade Advisor Services.
Verdict - Good
What's good about Scottrade's custodial platform is that it can alleviate many of the administrative burdens which in turn boosts productivity. Within the rebalancing functions you can create custom securities models or asset allocation models to save time. Overall, the professional custodial platform is a powerful tool to expedite many cumbersome investment tasks. Since it has a number of automated features, you also reduce the likelihood of manual errors.
These five services are valuable for managing investor's financial assets and establishing automated monitoring tools. Robo-advisors a good low-cost alternative to the traditional investment options previously mentioned. Remember to take into consideration the account minimums, transaction fees or expenses, features, limitations and user reviews.
In the coming years, we'll likely see the rise of more robo-advisors or automated services as its growth expands. Until then, these five providers are some of the best in the industry.
As with any financial service it's crucial to evaluate your needs with the features and options offered. Be aware that any of the aforementioned fees and features may change from the time of writing this review. Contact the specific provider for the most up-to-date service information and offerings. Again, Betterment ranked the highest on our list of robo-advisors but that's not to say that another provider (not listed) is not adequate or suitable for your financial situation.
Robo Advisors FAQs
What is a robo-advisor and who is it appropriate for?
Robo-advisors are essentially online investment management services which offer automated, algorithmic portfolio suggestions. These don't necessarily replace traditional financial planners who have the training and education to guide investors; however they do tend to offer lower fees and comparable service for certain portfolio options.
What's special about robo-advisors compared to other investment options?
What's unique about these services is they offer advice with minimal human intermediary action. Instead, they utilize portfolio management software which functions off investment algorithms. Note that they cannot completely replace a financial planner for wealth management because they can't aid in personal aspects such as estate planning or unique tax management.
What is a "financial advisor"?
In legal terms, a financial advisor is an individual offering advice related to securities. Generally, robo-advisors focus their services on portfolio management like allocating investments among classes and not so much emphasis on retirement planning, cash flow management, etc.
Who are robo-advisors intended for?
Generally, robo-advisors attract a younger crowd since they often have low account minimums and such features like rebalancing, tax-loss harvesting, etc. That's not to say, however, that individuals in their later years can't make use of their services.
Are robo-advisors commonly used?
As of late last year, these automatic advisors manage approximately $19 billion, which indicates their level of popularity among consumers. Not all robo-advisors utilize the same technology or features, so it's important to research what tools are relevant to your individual needs.
What are the disadvantages of robo-advisors?
While robo-advisors can be very valuable investment tools, they do have their share of disadvantages. How robo-advisors function is they determine the allocation of your portfolio depending on your goals and risk tolerance. The biggest drawback is you don't have a human personal financial planner who can assure you that you've properly specified your investments. What's more, these services are largely based on algorithms which means you're outcome is largely dependent on the algorithms used and may include factors such as age, risk tolerance, assets, etc.
How can robo-advisors charge such low fees?
Robo-advisors are able to offer their services at such low fees because they don't require the help of a traditional wealth management firm which has to employ and pay the overhead of a brick-and-mortar business. By contrast, robo-advisors usually come in at a third of the price (fees) of these traditional management companies.
Do robo-advisors completely replace financial advisors?
While robo-advisors can automate many of the functions performed by a traditional financial planner, they don't necessarily replace them in their entirety. Since these are algorithm based services they can't take into account the personal aspects of a client and make a well informed decision on a case-by-case basis. The "human" element is a very valuable aspect in the financial planning industry and while it has its costs, it does remain valuable.
How do most financial advisors charge their fees?
There are a myriad of ways financial advisors can charge their fees. Some may be through a common fee structure, in which the better your portfolio performs the higher they get paid. Some provide their services on an hourly basis and get paid by that rate. Some advisors include commissions in their fee rate while others may not. It's best to discuss the fee compensation with the specific company prior to entering a contract.
Am I guaranteed to make money by using a robo-advisor?
As with any financial portfolio or investing venture, there is no "guarantee" that you will make the amount of money you want. There is a moderate degree of risk involved with any investing opportunity including robo-advisors. While they do use advanced algorithms throughout their investing platforms, you have to be willing to take the associated risks.