The robo-advisor has officially gone mainstream, with financial giants such as Charles Schwab and Vanguard launching their own robo-advisory service. Even ETF giant BlackRock ended up buying FutureAdvisor for ~$150 million back in 2015.
It just doesn’t feel the same because the smaller firms have built their robo-advisory business from the ground up. It’s part of their DNA. Private firms are much more nimble to provide better value-added services than their large rivals.
Summary Of Top Robo-Advisor Picks
1) Personal Capital (hybrid with a great free app)
2) Betterment (hybrid as of 2017 after introducing new human advisory services in Feb)
3) Wealthfront, a pure robo-advisor
What Is A Robo-Advisor?
A robo-advisor (robo-adviser) is an online wealth management service that provides automated, algorithm-based portfolio management advice without the use of human financial planners.
Robo-advisors (or robo-advisers) use the same software as traditional advisors, but usually only offer portfolio management and do not get involved in more personal aspects of wealth management, such as taxes and retirement or estate planning.
Robo-advisors are typically low-cost, have low account minimums, and attract younger investors who are more comfortable doing things online.
The biggest difference is the distribution channel: previously, investors would have to go through a human financial advisor to get the kind of portfolio management services robo-advisors now offer, and those services would be bundled with additional services.
Best Robo-Advisors Overall
Wealthfront and Betterment offer low management fees, reasonable minimums and innovative tools.
- Management Fee: 025%
- Account Minimum$500
- Promotion: $5,000 amount of assets managed with no fee
- Open A Wealthfront Account
- Management fee: 0.15% – 0.35%
- Account Minimum: $0
Wealthfront and Betterment pioneered the robo-advisor industry with their foundings in 2008. They’ve got the lowest cost fees, the most innovative technology, fantastic user interfaces, and the longest robo-advisor track record. Both robo-advisors offer automatic rebalancing, tax-loss harvesting and diversified portfolios.
Betterment uses a three-tier pricing system that reduces fees at higher account balances, charging as little as 0.15% on $100,000 or more. Wealthfront charges a flat 0.25% but manages the first $15,000 invested for free with my special link.
Adding things up, Wealthfront costs less for accounts with balances below $100,000. Once an investor crosses that threshold, Betterment becomes a better value, with one caveat: That fee gap may close on taxable accounts that are eligible for Wealthfront’s direct indexing service.
My pick is Wealthfront, as they are based in Silicon Valley and is the original robo-advisor. It’s always best to go with the original.
Best Hybrid Robo-Advisor (Human + Digital)
- Management Fee: 0.49% – 0.89%
- Account Minimum: $100,000
- Promotion: Free financial tools to allow you to manage your net worth for free
- Open a Personal Capital account to use their FREE financial tools.
Total Equity Funding: $220.3M in 7 Rounds from 11 Investors as of 2019.
Headquarters: Redwood City, California with offices in Denver and San Francisco
Description: Personal Capital is the leading digital wealth management firm.
Founders: Bill Harris, Louie Gasparini, Rob Foregger
Categories: Financial Services, Wealth Management, Finance, FinTech
Personal Capital Management
Personal Capital Funding History
Personal Capital Latest News
I had lunch with the Chief Marketing Officer, Eric Weiss and the Vice-Chairman, Mark Goines in the spring of 2019 to get an update. Here is some key information.
* Performing better than expected. They currently have over 2 million registered users tracking over $600 billion in assets under management.
* Surge in assets under management. Their assets under management for paying clients doubled to $8 billion.
* Key personnel hires. Personal Capital hired Mike Armbsy, ex CFO of Yodlee to be their new CFO. Mike was responsible for helping Yodlee go IPO in 2014. In addition to Mike, Personal Capital welcomed Paul Desmarais of Power Financial Corporation to their Board of Directors. Paul is intimately familiar with Personal Capital as he helped lead Power Financial’s $75 million investment in their Series E financing last year.
Five Free Personal Capital Features
1) Retirement Planner. This tool helps you to know if you’re on track to retire, and even allows you to make adjustments for major life changes, such as job/career/income changes, illness, childbirth or saving for college.
2) 401(k) Fund Allocation. Even though Personal Capital can’t manage your employer sponsored retirement plan, they can analyze the plan and make asset allocation suggestions based on all of the investment options available in the plan.
3) Net Worth Calculator. Track your assets and liabilities so that you can quickly find your net worth at any time. This tool will help you to really know if you’re on track to reach your long-term financial goals.
4) Cash Flow Analyzer. Use this tool to create a budget, where you can track your income and expenses whatever the sources. This will help you see where you’re spending money, so that you can free up income for savings, investing, and debt payoff.
5) Investment Checkup tool. This can provide a risk assessment of your portfolio, including your retirement plan. It will make suggestions to help you improve your asset allocation plan to make it consistent with your goals and personal preferences.
Personal Capital is the most comprehensive hybrid robo-advisor today. I’ve used them to manage my finances since 2012 and have seen my net worth grow to all time highs as a result. I highly recommend you sign up to at least use their fantastic free financial tools.
In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $200,000 a year in passive income. He spends time playing tennis, hanging out with family, consulting for leading fintech companies, and writing online to help others achieve financial freedom sooner, rather than later.