Robo advisors are on the rise, and various companies aim to provide you with investment advice that’s not only easy to understand but isn’t too expensive.
By using Modern Portfolio Theory (MPT), robo advisors are able to put together a portfolio for you based on asset allocation related to your risk tolerance, and usually, your age.
One of the popular companies doing this is Financial Guard.
What is Financial Guard?
Financial Guard is a robo advisor that offers advice through constructing a portfolio. You pay a flat fee, and you receive advice on which of your holdings to buy and sell. Financial Guard bases its recommendations on your risk profile, as well as the fees you’re paying.
You will also receive recommendations based on your performance and possible future performance. You’ll receive a grade for your current portfolio (based on classic school ratings of A, B, C, D, F), and then get a little help tweaking your portfolio so you increase your portfolio grade to an A.
Financial Guard offers straightforward advice, and their business model is based on subscriptions, not commissions. The company also has a team of investment professionals who are supposed to help choose the funds you use.
Every quarter, you can receive an alert to rebalance if needed. You can keep tabs on your performance over time, fairly easily with comparisons and easy-to-read visuals.
How Does Financial Guard Work?
It’s also not like Betterment, which charges a fee based on a percentage of your assets.
Instead, here’s how Financial Guard fees stack up:
|Financial Guard Fees||Monthly Fee||Yearly Fee|
|based on subscriptions, not commissions||$15.95||$149.95|
If you stick with their service for a year, this is a much better deal, since paying monthly costs $191.40 in total.
The main benefit to Financial Guard is that you’re able to get advice about putting your portfolio together. You’re charged the same fee regardless of how much you have invested since the company isn’t actually managing your assets for you. You can also use Financial Guard to check up on your fees, and see where you could be paying less.
How Financial Guard Works
To get started, you simply click the “sign up for free” button. Then enter your email address and a verification notice will be sent to you. Once you receive that, just set up a password, and then fill in your profile. It’s quick and easy to do so.
Next, enter your age and whether or not you want your spouse considered. Then decide whether or not you want to go with a riskier portfolio or choose a less aggressive portfolio. I chose a portfolio that was just a little less aggressive than the recommended portfolio. However, when I ran the numbers later with the recommended portfolio, the results weren’t different enough for me to really care all that much.
Once you get to that point, though — and before you’re asked to enter any holdings and their value — you’ll be asked to enter your credit card information. Even if you’re trying it out for free, you’ll be required to fill in this information.
This was a little disconcerting for me since I am not used to needing to enter this information before getting a basic analysis. But I entered the information (and canceled my account as soon as I finished trying out the features), and moved forward.
Basically, the features are straightforward. It’s easy to use, and the visuals are simple to read. You can quickly and easily view your performance, fees, asset allocation, and other information. It’s nice to finally have a robo advisor that offers straightforward pricing. It’s also a nice touch that you can quickly discover investments that might have lower fees.
However, I was a little confused at the recommendations I was given, since they don’t seem to pan out. I also didn’t like that I had to enter financial info to try it out. Although I guess it makes sense from the standpoint that they’re giving you advice immediately.
Truth be told, I like Betterment a little more, especially since they will automatically rebalance my portfolio so I don’t have to do it manually. And, if I want help identifying investments with lower fees, I can use Personal Capital, which includes a fee analysis in its free version.
Financial Guard Features
|Account Fees||$15.95/month or $149.95/year|
|Accounts Available||Traditional IRA, Roth IRA, Rollover IRA, SEP IRA, Trusts, Individual and Joint|
|Customer Service||Email — 24/7|
My Portfolio with Financial Guard
Link your investment accounts so Financial Guard can automatically pull your information on holdings, or just enter your holdings manually. After all of the information is compiled, you’ll receive recommendations for selling and buying.
Here’s what my recommendations were based on my personal information and risk tolerance:
Basically, Financial Guard told me my portfolio was a C, and that to get an A, I needed to sell everything I owned and buy different ETFs. But here’s where it gets a little weird for me; when looking at the projected outcome of switching my portfolio around, it doesn’t appear that I’d be gaining any sort of an advantage by following their advice:
As you can see above, the returns are better with my current portfolio, rather than the recommended portfolio. So, I get a B- for performance and a C for diversification, but the A version of all of this might mean better diversification, but I’m at a complete loss to understand how the A performance is better, when the potential returns are lower than what I would get with my current setup.
Now, look at the fee comparison in my current investment portfolio versus the recommended one:
With the recommended portfolio, I end up paying higher fees. I’m not sure why I would want to switch up my portfolio to see a worse potential return and pay higher fees to boot. I don’t know if this is some sort of glitch, or if I’m reading this wrong, but it just doesn’t seem to add up.
Everything that Financial Guard recommends seems to be a step back, and it seems I’m better off not paying the fee charged by Financial Guard to build the portfolio they suggest.
- Easy and User-Friendly — Setting up a Financial Guard is simple, and the service is user-friendly.
- Comprehensive Grading System — Financial Guard's grading system can help you determine where you are at and how you can improve.
- Confusing Recommendations — The Financial Guard system isn't always quite clear with their recommendations. I am not also sure about some of their algorithms.
Overall, Financial Guard is a nice idea. You get some practical input in what to do with your investment portfolio, but I’m skeptical of whatever algorithm is being used, since my results were a little wonky.
Additionally, I wasn’t impressed by the fact that the “start free” still required my personal financial information. However, my assessment might be a little too hard on Financial Guard.
Here’s what Kevin Pohmer, the President of Financial Guard had to say in an email when I mentioned my concerns:
Over a five-year market run up (as we have experienced) an efficient portfolio will not look as good from a performance perspective as it is built for long-term outcomes and reduction in volatility which we explain through engaging content and that diversification grade (unfortunately you won’t see our responses). Not that I am hoping for a market downturn, but our portfolios will look much better during an equity correction as the uncorrelation of some of our defensive asset classes will preserve returns. I can’t comment on the fees as I didn’t see your portfolios, but depending on whether you chose passive or active in the profile will have a significant impact.
(For the record, I chose “passive.” I always, when I have the option, choose “passive.”)
Update: Clearly, I really don’t understand how Financial Guard works properly or didn’t do something “right” when choosing my portfolio. I chose a step down from the most aggressive, as is my wont with most robo advisors. As a result, I am including further comment from Kevin Pohmer, who has looked at the review and noticed that there are issues with my comparison:
Based on the screenprints that you have included in your analysis, it is interesting that you chose to go away from the “recommended” portfolio that Financial Guard’s algorithms and analysis provided to you-by choosing to go into a more conservative portfolio than the recommended portfolio you actually reduced the performance numbers (this is surprising because the portfolio your aggregated was 95% equity with limited diversification, but you then went down a notch on our recommendations to reduce the equity allocation that Financial Guard recommended). In addition, you didn’t actually compare an apples to apples portfolio when you did your fee analysis – if you had taken your existing holdings and allocated them in similar percentages as a “properly” diversified asset allocation you would have been paying more in the fee comparison chart but instead you placed no money in your higher expense ratio asset classes (natural resources/commodities etc) and more money in your lowest expense ratio in order to get that result.
When considering fees, any of the services in the marketplace (human or robo) that charges basis point fees on a $99k portfolio, would be at minimum $100 dollars more expensive than Financial Guard on an annual basis. We pride ourselves on transparency and nobody in the industry has as straightforward a pricing model as a fixed, dollar-based price regardless of how many accounts or how large a portfolio you may have.
Have you tried Financial Guard yet? What was your experience with this new online investment advisor?