AssetBuilder is an investment advisor that uses a long-term investment strategy. They consider themselves to be “an antidote to the ways of Wall Street,” In that way, they use mean variance optimization* to provide lower-cost, transparent investing for just a fraction of the cost of more traditional investment strategies.
They build portfolios that are customized to your family circumstance, your financial goals, your time horizon and your risk tolerance. In doing so, they use a strategy that includes diversification, smart indexing and smart asset allocation.
The overall investment strategy is based on buy-and-hold and seeks to create portfolios less vulnerable to steep declines. The portfolios are driven by the Fama/French school concept of low-cost index funds (Dimensional Fund Advisors (DFA) Funds), naive asset allocation and smart indexing, grading portfolios that provide the highest possible return for any level of risk.
Since your account is held through an independent custodian, AssetBuilder has authorization only to trade your account and deduct their fees. They do not however have control over the withdrawal of funds from your account (beyond payment of fees).
*Mean variance optimization (MVO) is a quantitative tool that will allow you to make asset allocations by considering the trade-off between risk and return.
How Does AssetBuilder Work?
AssetBuilder uses an input questionnaire that asks just four questions…
It provides a portfolio recommendation based on your answers to those questions. For example, I entered a $50,000 initial investment, $1,000 added to the investment per month, a 25-year time horizon and a moderate/aggressive investor type, and it recommended “Portfolio 9 — Growth.” The performance of that portfolio look like this:
AssetBuilder provides a total of eight different portfolios (for some reason they skip Portfolios 1 through 4, and Portfolio 11 or 13), with compositions as follows:
- Portfolio 5 — Capital Preservation: 80% Fixed Income, 8% US Small Stocks, 5% Emerging Markets, 4% Real Estate Investment Trust (REIT), 3% International Stocks
- Portfolio 6 — Capital Preservation: 70% Fixed Income, 12% US Small Stocks, 2% US Large Stocks, 7% Emerging Markets, 6% REIT, 3% International Stocks
- Portfolio 7 — Stable: 60% Fixed Income, 12% US Small Stocks, 6% US Large Stocks, 9% Emerging Markets, 7% REIT, 6% International Stocks
- Portfolio 8 — Balanced: 50% Fixed Income, 14% US Small Stocks, 8% US Large Stocks, 11% Emerging Markets, 8% REIT, 9% International Stocks
- Portfolio 9 — Growth: 40% Fixed Income, 18% US Small Stocks, 8% US Large Stocks, 13% Emerging Markets, 9% REIT, 12% International Stocks
- Portfolio 10 — Growth: 30% Fixed Income, 20% US Small Stocks, 10% US Large Stocks, 16% Emerging Markets, 11% REIT, 13% International Stocks
- Portfolio 12 — Aggressive Growth: 20% Fixed Income, 23% US Small Stocks, 11% US Large Stocks, 19% Emerging Markets, 12% REIT, 15% International Stocks
- Portfolio 14 — Aggressive Growth: 10% Fixed Income, 25% US Small Stocks, 12% US Large Stocks, 23% Emerging Markets, 13% REIT, 17% International Stocks
You can change your asset allocation at any time, but you must contact your investment advisor to do so. Only the initial allocation can be done online.
The major benefit of using AssetBuilder is that you will have professional portfolio management at relatively low fees. This will enable you to invest a very large portfolio without having to provide any direct involvement on your part. You will simply fund the account, and AssetBuilder will manage every aspect of your investments.
AssetBuilder uses up to 14 funds in the construction of all investment portfolios, including:
- DFA Dimensional 1YR Fxd Inc (DFIHX)
- DFA Intermediate Govt Fixed Income (DFIGX)
- DFA 2 Yr Global Fixed Incm Port (DFGFX)
- DFA 5 Yr Global Fixed-Income I (DFGBX)
- DFA US L/C Value Portfolio (DFLVX)
- DFA US Large Cap Growth (DUSLX)
- DFA US Small Cap Value (DFSVX)
- DFA US Small Cap Growth (DSCGX)
- DFA US Micro Cap (DFSCX)
- DFA Real Estate (DFREX)
- DFA Intl Small Cap Value PT (DISVX)
- DFA Intl Small Cap Growth (DISMX)
- DFA Emerging Markets Value (DFEVX)
- DFA Emerging Markets Small Cap (DEMSX)
AssetBuilder uses mutual funds, rather than exchange traded funds as most other robo-advisors do. This is due to the fact that they use exclusively DFA funds, which are mutual funds. Those funds emphasize value, rather than growth, which is one of the foundations of AssetBuilder’s overall investment strategy.
It’s important to understand that AssetBuilder is not a do-it-yourself account. That means that you will be bound by the investment selection chosen for you and will not be able to add other funds or individual securities such as stocks.
However, in my experience with AssetBuilder, I found its customer service to be somewhat lacking. I sent AssetBuilder an email on a Monday evening; as of Wednesday there was no response. I then called customer service and spoke with a woman who knew very little. She referred me to an account executive who knew a lot more but seemed somewhat hesitant in answering my questions, all of which were general. Perhaps this was a unique experience, but it’s something to be aware of if you plan to use the service.
|Account Fees||0.20% – 0.45% Annually|
|Accounts Available||Traditional IRA, Roth IRA, Trusts, Corporate, Custodial, Individual and Joint|
|Customer Service||Phone — M-F 8A-4P ET; Email — 24/7|
Clearing Agency — All accounts are held through Charles Schwab. In order to use the AssetBuilder service, you must do so through the Schwab Alliance — which is a joint arrangement between AssetBuilder and Charles Schwab. You will not be able to open an AssetBuilder account directly through Charles Schwab, since AssetBuilder accounts are considered to be institutional accounts. Once your account is opened, you will then be allowed to make deposits into your account directly at a Charles Schwab office.
Account Protection — Since your funds are actually held by Charles Schwab, they are insured through the Securities Investor Protection Corporation (SIPC). That protects your investments for up to $500,000 in cash and securities, including up to $250,000 for cash.
Assets Under Management — $671 Million.
AssetBuilder charges an annual fee based on the size of the assets under management. The schedule is as follows:
|Amount of Assets||Annual Fee|
|$50,000.00 – $249,999.99||0.45%|
|$250,000.00 – $ 599,999.99||0.43%|
|$600,000.00 – $999,999.99||0.40%|
|$1,000,000.00 – $3,999,999.99||0.30%|
|$4,000,000.00 – $19,999,999.99||0.25%|
|$20,000,000.00 and above||0.20%|
AssetBuilder charges only the annual fee as indicated above. There are no setup fees to begin your account. However, Charles Schwab does charge trading fees on mutual funds that range between a minimum of $20, to a maximum of $49.95.
The operating expense ratios for the 14 funds that AssetBuilder uses in the construction of all portfolios ranged between 0.12% and 0.73%. As a rule, the lower expense ratio is associated with fixed income funds, while a higher ratio applies primarily to equity funds.
- All-In-One Management — AssetBuilder handles portfolio allocation, investment selection and rebalancing.
- Lower Fees Than Traditional Advisors — AssetBuilder’s annual fee ranges from 0.20% to a high of 0.45%.
- Detailed Knowledge Center — AssetBuilder has a webpage dedicated to providing related investment information.
- Fees Higher Than Most Other Robo-Advisors — The annual fees are lower than what you would pay a traditional investment advisor, but they are considerably higher than what you would pay a robo-advisor.
- High Initial Deposit — The $50,000 account minimum will eliminate many small and new investors from participating.
- No Mobile App — There is no mobile app and no immediate plans to add this feature.
- Customer Service Lacking — AssetBuilder was slow to answer my email, and a phone call yielded few answers to my questions.
AssetBuilder provides low-cost investment management for high-net-worth individuals. Small investors would benefit by looking at other robo-advisors such as Betterment or Wealthfront. Carefully consider if the returns they post on their various portfolios are consistent with your long-term investment objectives.