News:

To return to the forum homepage, please click the banner at the top of your browser.

Main Menu

Robo Advisors and the DIY investor

Started by Bonsai, September 22, 2018, 11:22:14 AM

Previous topic - Next topic

Bonsai

For those using robo advisors:  Background:  I am a DIY investor.  Record keeping is now a little time consuming and limited by my skill set.  As a quick count, I have three brokerage accounts for individual stocks, mutual funds and individual stocks in two retirement accounts (regular and Roth), several bank accounts, some I-Bonds, some real estate and some collectables.  I have valid reasons (I think) for not consolidating more.  I have developed Excel spreadsheets over the years to keep track of things.  I have developed some basic metrics for analysis but wish I had a better handle on the whole and want additional metrics (e.g., growth or withdrawal) considering the whole.  My situation may best call for a fiduciary type financial planner but I don't want to pay an AUM fee.  A one time assessment from a financial planner is about $3000 last time I checked a couple of years ago.  An assessment becomes dated real quick and an assessment does not address my quest for more detailed metrics.  With this background, a robo advisor may be a potential solution?  What has your experience been with a robo advisor, e.g., are they cookie cutter (few options to structure for your personal situation), mostly directed at retirement planning, cost v. worth the cost, Personal Finance v. Betterment v. others, ease of use, metrics available, assets that can be incorporated into the platform, fun to use, etc.

nycrite

If I were you, I'd start with a free Personal Capital dashboard. You can glean some useful metrics from that, and it's nice to see all accounts in one place. It would remove the burden of tracking everything offline in spreadsheets. Just be aware that if your assets are large enough, you'll likely be targeted for its advisory services, which are good but may not be of interest.

I researched robos a few months ago, and I liked the technical offerings from Wealthfront more than Betterment. But many of the services, such as individual securities (instead of ETFs) were only available at high AUM.

Have you considered at least opening a Personal Capital free account?

Bonsai

I looked at Personal Capital (PC) a while back (6 months or so).  I signed up but never went beyond that.  I had a PC rep call me a couple of times but did not take the time to chat with him.  I think you have convinced me to try check out a personal chat again.  I do not want to load all of my data on a site just to find out what the site provides and that the site is not for me.  You mentioned three robo's (PC, Betterment and Wealhfront).  Is there any compare/contrast information you can share?     

RageCage

I have been with Betterment and it is OK.  Was not a happy camper when they realized they had to change their biz model to a more personal touch and went and raised my fee from .12% to .25!  The once in while Tax Loss Harvesting this year kept me on the hook but I have been looking at M1finance.  Like the Robinhood that the kids are using they are completely free and you can buy whatever you want and not be restricted to a few core funds.  Still just looking as it has not been a priority for me to switch - I am spending most of my time grinding these last few years before FIRE exit @ 55!

I agree with putting everything in PC dashboard though.  Great tool (free version only -not a fan of a .89% fee).  Betterment tries but it is much more of a retirement target overview versus actually tracking and analyzing your spending/performance/etc.

jsmooth

I was a Wealthfront customer for a couple of years, but I switched to Vanguard for a few reasons:

- It's really difficult to see them take a fee, every month, and imagine that happening for the next 40 or 50 years. The percent seems low but the dollar amount adds up.
- They loved to do frequent transactions for tax loss harvesting. Lots of transactions. I'm not sure it's worth it to do TLH that often.
- They didn't support having an account in the name of a trust.

Anyway, I did a transfer-in-kind to Vanguard and have never looked back. I never have to worry about Vanguard jacking up their AUM fees, since they don't have any.

In my experience being a DIY investor is not a lot of work, and keeps you plugged in to what you're money is doing.

Sam

Quote from: jsmooth on September 27, 2018, 12:20:48 AM
I was a Wealthfront customer for a couple of years, but I switched to Vanguard for a few reasons:

- It's really difficult to see them take a fee, every month, and imagine that happening for the next 40 or 50 years. The percent seems low but the dollar amount adds up.
- They loved to do frequent transactions for tax loss harvesting. Lots of transactions. I'm not sure it's worth it to do TLH that often.
- They didn't support having an account in the name of a trust.

Anyway, I did a transfer-in-kind to Vanguard and have never looked back. I never have to worry about Vanguard jacking up their AUM fees, since they don't have any.

In my experience being a DIY investor is not a lot of work, and keeps you plugged in to what you're money is doing.

What's the fee for Vanguard? And when there are a lot of tax loss harvesting trades, how does it reflect when it comes time to do your taxes?

Thanks
Regards,

Sam

Jon Sharpe

I'll just add my two cents here for Personal Capital. I love their free account consolidation feature, it makes tracking and re-balancing so easy. I'd also recommend taking a second look at whether you really need so many stock, funds, accounts, etc... You may, but in my experience, you can significantly simplify things by consolidating. It reduces overall cognitive load IMO. I'm a DIY investor and have never paid any robo fees, so I can't speak to that. I was contacted by the PC guys several times for a free consultation, but I have never taken them up on it.  Good luck!

numbers

My experience with Personal Capital was as follows:

Signed up more than a year ago. Tracked all but one of my accounts there. The one they could not bring in was with an insurance company, so no big deal - one account left out of my PC data base.
What I especially liked was being able to track all of my transactions daily to make sure nothing unauthorized ever happened.
The calls from PC wanting to manage assets were not problematic, just told them straight out that I was not interested and they stopped.
Then about 5 months ago, my 401k account stopped coming in every day, PC said they would look into it. Shortly thereafter one of my Fidelity accounts stopped coming over, and another of my Fidelity accounts started coming over as a cash position only, even though there were several ETF's in the account, PC said they would look into it.
I contacted them monthly to follow up on all three issues, all I ever heard was we are looking into it. That went on for 5 months after which I cancelled my account. The insurance company was one thing, even the 401k - but not being able to bring in data from Fidelity, to this day I cant understand that.

Going forward multi factor authentication will probably make these services problematic anyway so cancelling the account was not an issue for me.




Sam

I'd love to know what people's investment returns are with robo-advisors like Wealthfront, Betterment, Vanguard etc compared to the S&P 500. I'm assuming most will underperform in this bull market since the portfolio will be constructed with bonds etc.

Please share your risk score too (1-10 on Wealthfront for example).
Regards,

Sam

jsmooth

Quote from: Sam on September 27, 2018, 07:01:12 AM
Quote from: jsmooth on September 27, 2018, 12:20:48 AM
I was a Wealthfront customer for a couple of years, but I switched to Vanguard for a few reasons:

- It's really difficult to see them take a fee, every month, and imagine that happening for the next 40 or 50 years. The percent seems low but the dollar amount adds up.
- They loved to do frequent transactions for tax loss harvesting. Lots of transactions. I'm not sure it's worth it to do TLH that often.
- They didn't support having an account in the name of a trust.

Anyway, I did a transfer-in-kind to Vanguard and have never looked back. I never have to worry about Vanguard jacking up their AUM fees, since they don't have any.

In my experience being a DIY investor is not a lot of work, and keeps you plugged in to what you're money is doing.

What's the fee for Vanguard? And when there are a lot of tax loss harvesting trades, how does it reflect when it comes time to do your taxes?

Thanks

No extra fees for Vanguard besides the low expense ratios, probably averaging less than 0.10%. I don't use their financial advisor service or anything.

WF generated far more than the yearly $3k TLH max with all of those trades, so the losses carried forward. I suppose that is an advantage but I think I can do the TLH myself going forward.

BuckNut

Quote from: Sam on October 01, 2018, 08:05:00 AM
I'd love to know what people's investment returns are with robo-advisors like Wealthfront, Betterment, Vanguard etc compared to the S&P 500. I'm assuming most will underperform in this bull market since the portfolio will be constructed with bonds etc.

Please share your risk score too (1-10 on Wealthfront for example).

I'm only had my Wealthfront account for a year, so I don't yet have a full grasp on how a lot of their services affect tax time. Due to a sign-up bonus, I get my first $15k managed for free and since I have less than that in the account at the moment, I pay $0 in management fees.

My all-time time-weighted return is 6.24% (2.36% for 2018).

My risk score is 8.5 which puts my allocation as follows:
    - US Stocks: 35%
    - Foreign Stocks: 24%
    - Emerging Markets: 18%
    - Dividend Stocks: 9%
    - Natural Resources: 5%
    - Municipal Bonds: 9%

I have very minimal knowledge of the finance world (hence why I'm here, trying to learn  :)), so Wealthfront was an easy way to get my money back into the market without needing to spend a ton of time doing research. I'm also working to pay off student loans, which is my top financial priority at the moment, so this is my way to grow some investments until the time comes that I can put a greater percentage of my money towards them.

hyperobjeckt

Quote from: Sam on October 01, 2018, 08:05:00 AM
I'd love to know what people's investment returns are with robo-advisors like Wealthfront, Betterment, Vanguard etc compared to the S&P 500. I'm assuming most will underperform in this bull market since the portfolio will be constructed with bonds etc.

Please share your risk score too (1-10 on Wealthfront for example).
My wealthfront acct performance YTD: -0.7% (time-weighted)
S&P 500 performance YTD: +6.5%
My risk score: 9.0

hmm.......

Side note: I have a generally negative opinion of Wealthfront due to their decision to opt existing users into their paid Risk Parity feature by default. Currently keeping a low balance in that account since it's being managed for free but will probably close it out within the next year.

Jamie

I use Personal Capital's free tools and have been quite happy with them. I also had my free consult with one of their advisors and got some useful tips and feedback out of it. I'm a fan of free tools and keep my portfolios pretty sinple so I feel comfortable maintaining them myself.

sfpf

#13
I have been investing with Wealthfront for the past three years and it has helped me stay disciplined and automatically investing a portion of my paycheck every two weeks. Performance has been relatively in line with the S&P 500, but that's because I have a 10 out of 10 risk tolerance. Lower levels of risk means more bonds, so you're comparing a stock and bond portfolio to a pure equity index, which is not really fair.

So many of my friends haven't  bothered to regularly invest over past 3 to 5 years. As a result, they've missed out on a lot of opportunities sitting on cash.

Wealthfront helps people get started. And they help people stay in the game for the long run.

Snow

I've been using Personal Capital's free tools for several years and have found them quite useful. Trying to track the markets on my own and place trades has been time consuming for me and I haven't been that good at it since my work and home life got more hectic. I opened an account with Wealthfront a few months ago with some cash I had been sitting on to try and take some weight off my own shoulders and have been happy so far. If things continue well through year end I plan to put my ye bonus into it and any other cash I save up. I don't plan on liquidating my other existing accounts but won't trade in them much more to save myself time and stress.

IzzyEsq

I have my Roth IRA with Wealthfront.  I've been with them since late 2015, risk score of 7.5, and my TWR right now is 24.57.  So I am not unhappy.
All the best,
Brenda

Sam

#16
Quote from: IzzyEsq on October 13, 2018, 07:34:25 AM
I have my Roth IRA with Wealthfront.  I've been with them since late 2015, risk score of 7.5, and my TWR right now is 24.57.  So I am not unhappy.

Can you clarify what TWR means and 24.57? Time Weighted Return? Thx
Regards,

Sam

Plimsoll

TWR = Time Weighted Return.  Wealthfront tracks both TWR and Money Weighted Return.

I opened up a Wealthfront account in May 2017 with risk factor 9.0.  My TWR since inception is 10%, and my MWR is 6.4%.  My MWR is significantly lower, since I am investing every month, and the returns last year when my account balance was lower were better than this year.  I'm happy with Wealthfront, but it is a very small account.  When I made my last car payment in April 2017, I just diverted the same monthly payment into Wealthfront as an incentive to keep me from buying a new car.


Sam

Quote from: Plimsoll on October 13, 2018, 02:31:42 PM
TWR = Time Weighted Return.  Wealthfront tracks both TWR and Money Weighted Return.

I opened up a Wealthfront account in May 2017 with risk factor 9.0.  My TWR since inception is 10%, and my MWR is 6.4%.  My MWR is significantly lower, since I am investing every month, and the returns last year when my account balance was lower were better than this year.  I'm happy with Wealthfront, but it is a very small account.  When I made my last car payment in April 2017, I just diverted the same monthly payment into Wealthfront as an incentive to keep me from buying a new car.

Good stuff. I figured you meant Time Weighted Return, but wanted to make sure.

What prevents you from adding more to the account? How does your WF account compare to your own DIY account?
Regards,

Sam

IzzyEsq

#19
Quote from: Sam on October 13, 2018, 01:08:44 PM
Quote from: IzzyEsq on October 13, 2018, 07:34:25 AM
I have my Roth IRA with Wealthfront.  I've been with them since late 2015, risk score of 7.5, and my TWR right now is 24.57.  So I am not unhappy.

Can you clarify what TWR means and 24.57? Time Weighted Return? Thx

TWR= time weighted return, as Plimsoll already noted :)  I contribute $200 every two weeks, going for the max I can contribute annually to a Roth at this stage of the game.  MWR for me right now is 20.31.
All the best,
Brenda