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All Contents © 2017The Kiplinger Washington Editors
By Nellie S. Huang, Senior Associate Editor
| June 10, 2014
Getting good investment advice doesn't require millions in the bank anymore. These days, an army of online advisers will offer low-cost solutions to the age-old question: How do I invest my money? Many will even do the trades for you, rebalance your portfolio periodically and suggest ways to minimize your taxes, too.
Some firms are more like financial planners; others pick investments for you. With help from Grant Easterbrook, an analyst for the research firm Corporate Insight, we focused on seven firms that offer specific investment advice online.
The diversified portfolios they recommend—typically after you answer questions about your risk tolerance and time horizon—hold only low-cost exchange-traded or mutual funds. Although many of these firms don’t have a long-term record, they list a lot of information on their Web sites. On most, you can view the recommended portfolios and see which funds they hold, along with recent performance.
Annual fee on a $50,000 balance: $225 (0.45%)
How it works: AssetBuilder invests your money in a mix of U.S. and foreign stocks, real estate stocks and bonds. The firm’s eight model portfolios each hold 11 to 14 funds managed by Dimensional Fund Advisors (available only through DFA-approved advisers).
Pros: AssetBuilder suggests other portfolios you can invest in on your own. Plus, you can talk to an adviser on the phone, if necessary. Fees, as a percentage of assets, drop as portfolio balances rise. AssetBuilder also offers 401(k) plan advice upon request.
Cons: The initial-balance requirement is high.
Annual fee on a $50,000 balance: $125 (0.25%)
How it works: Low-cost ETFs (with annual fees between 0.12% and 0.16%) fill the portfolios that Betterment has created to suit every goal and time horizon. Underlying funds include Vanguard Total Stock Market ETF (VTI) and the small-company-oriented iShares Russell 2000 Value (IWN). Your money is held in an account at Betterment Securities, the firm’s brokerage division.
Pros: Advisory fees fall for balances above $100,000.
Cons: Betterment does not accept securities, so you may have to sell current holdings to provide the cash to open an account. If you want to hold on to a specific security, hold it in another brokerage account. No 401(k) plan advice.
Annual fee on a $50,000 balance: $149.95 (if paid in advance) or $191.40 (if paid monthly)
How it works: Link your investment accounts through Financial Guard and the firm assesses your portfolio for diversification and fund selection (grading it A through F). Then it tells you what to buy, sell or hold, providing specific fund or ETF selections for each asset class.
Pros: Financial Guard will offer fund-selection advice for 401(k) and 529 plans.
Cons: The firm doesn’t execute the suggested moves for you (but this service is in the works).
Minimum: $10,000 for the premium service
Annual fee on a $50,000 balance: $250 (0.5%)
How it works: You fill out a profile and the Web site spits out an “action plan” that tells you how to achieve a suggested target allocation—basically, it tells you to sell individual stocks and mutual funds and replace them with the ETFs it recommends. (That service is free.) If you pay for premium service and you have an account at Fidelity or TD Ameritrade, the firm will execute the trades for you, focusing on the ETFs each firm lets its customers trade without commissions.
Pros: You can execute the trades on your own and save the monthly advisory fee. The service also lets you exclude from the analysis any securities you prefer to hold.
Cons: No advice on 401(k) funds unless you pay for premium service.
Annual fee on a $50,000 balance: $216 ($17.99 per month)
How it works: Patch into your investment accounts, or enter holdings manually, on Jemstep’s Web site. The firm’s software analyzes your holdings, including evaluating your mutual funds and ETFs. After considering the fund evaluations and any tax implications from selling specific securities, Jemstep tells you what to buy and sell to bring your portfolio in line with an asset-allocation plan tailored for you.
Pros: The service is free for clients with less than $25,000. You can exclude holdings from the analysis if you’re bent on keeping them. It rates thousands of funds on at least 50 different factors, which means it can advise you on your 401(k) holdings, too.
Cons: You execute Jemstep’s prescribed investment moves on your own.
Annual fee on a $50,000 balance: $120 ($10 per month)
How it works: This Mint-like account aggregator started in 2011. It lets you view all your investments in one place and appraises funds you own, including those in your 401(k) plan. Plus, answer ten questions and you’ll get a portfolio that’s suited to your goals and risk tolerance. The firm has 20 portfolios, which hold ETFs that invest in U.S. and foreign stocks, bonds, and real estate. Until late 2013, the firm only made trade recommendations. Now it will execute those trades for you, using Fidelity, Schwab and TD Ameritrade as account custodians.
Pros: No commissions.
Cons: The firm’s advisory services are relatively new.
Annual fee on a $50,000 balance: $100 (0.25% on assets over $10,000)
How it works: Answer ten simple questions, and the Web site kicks out two portfolios for you: one for your taxable account and another for a tax-deferred retirement account. Using ETFs, the portfolios hold a mix of assets that can include municipal bonds, foreign and emerging-markets stocks, U.S. stocks, and even a basket of commodities.
Pros: No commissions on trades. No fee on the first $10,000.
Cons: The service doesn’t provide advice on investments you currently own, whether they are individual stocks or funds in your 401(k) plan.
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