Review of: Ellevest
Reviewed by: Kara Perez
Last modified: February 19, 2018
Ellevest is a robo advisor investing platform that targets women specifically. It can offer custom plans that are tailored to the needs of women. A good argument can be made for the necessity for taking women's particular situations into accounts. After all, they tend to live longer yet earn less. However, is a completely separate robo advisor really needed? We'll let you be the judge after reading our review.
Ellevest is a robo investing platform for women founded in 2016 by Sallie Krawcheck, a former Wall Street executive who felt that the investing world doessn’t work for women’s interests. Women don’t invest as often or as much as men do. That’s the investment gap and what Ellevest was built to address.
Why is there the need for a ladies-only investing platform? Women have specific money needs. They don’t exist in the same money world as men.
In the past, women have been barred from money. As late as 1974, women found it hard to open credit card accounts on their own in the U.S. Women still earn less in the same jobs as men, and those wages vary with a woman’s race.
Ellevest accounts for the fact that women live longer than men. The company knows their wages often take a hit when they become mothers and what the time off from work means for their investments.
Keep in mind that this isn’t the first service to focus on a women’s investment needs. A few years ago, LearnVest also targeted women but eventually changed its focus to be more gender neutral.
|Fees||0.25%/year; Premium - 0.50%/year|
|Tax Loss Harvesting|
|Automatic Deposits||— Monthly, Bimonthly and Quarterly|
|Socially Responsible Investing|
|Customer Service||Phone; Email|
|Promotions||Get up to $750 Cash Back|
Ellevest is an SEC-registered fiduciary, so it’s legally obligated to work in your best interests. If you transfer your IRA to Ellevest, the service won’t charge you any fees, and you won’t be taxed on your transfer.
How Does Ellevest Work?
Ellevest looks at both the wage and the investing gaps. As its website states, “86% of investment advisors are men, with an average age of 50+.” These advisors, it says, don’t know the struggles working women face. More importantly, Ellevest says that typical advisors don’t consider women’s specific financial situations (namely, earning less and living longer) when investing their money.
Ellevest says it will. It also provides forecasts that reflect a 70% likelihood of reaching the goals that you establish on the platform. The service uses a Monte Carlo simulation (a fancy way of saying it tests all possible outcomes) to gauge how well your investments would do in different economic situations.
When signing up, clients give their income, money goals, family responsibilities, and other info. Ellevest then builds an investment portfolio for them. Unlike many other robo advisors on the market, the service factors human capital factors such as gender, salary and education level into custom recommendations tailored for each client.
Clients can change their goals themselves, and Ellevest will adjust their portfolios to match and with the clients’ individual goal timelines and risk tolerance in mind.
Ellevest knows just how personal money is. That’s a huge win for me. Money is personal. The obstacles and triumphs we face in life affect our money. It’s silly to act as if these barriers for women don’t exist. It’s ground-breaking to take Ellevest’s approach.
Ellevest recently made some changes to the company’s pricing tier. Originally, all accounts were charged 0.50% in fees. That was a bit on the high side of the robo-advisor spectrum.
However, the company has now created a Premium service for larger accounts. For a minimum balance of $50,000, you can now receive personal services such as one-on-one access to a Certified Financial Planner and access to Ellevest’s Executive Coaches, who provide “guidance on salary negotiations and career events.”
Ellevest Premium charges a fee of 0.50%. Fees on regular Ellevest accounts are now only 0.25%. (In addition, for a minimum balance of $1 million and a sliding scale of fees, Ellevest will provide private wealth management.)
|Fees||0.25%/year; Premium - 0.50%/year||Digital – 0.25%/year; Premium – 0.40%/year||First $10k managed free; 0.25%/year for $10k+|
|Promotions||Get up to $750 Cash Back||Up To 1 Year Free||$15k Managed for Free|
|Review||—||Read the Review||Read the Review|
Ellevest can invest in 21 different funds, focusing on ETFs as the primary investment vehicles.
|US||Vanguard US Total Stock Market||VTI|
|Large Cap||Vanguard US Large-Cap Value||VTV|
|Mid Cap||Vanguard US Mid-Cap||VO|
|Mid Cap||Vanguard US Mid-Cap Value||VOE|
|Small Cap||Vanguard US Small-Cap||VB|
|Small Cap||Vanguard US Small-Cap Value||VBR|
|Foreign||Vanguard FTSE Developed Market||VEA|
|Emerging Market||Vanguard FTSE Emerging Markets||VWO|
|US Bond||Vanguard Total Bond Market ETF||BND|
|US Short Term Bond||Vanguard Short-Term Bond ETF||BSV|
|High Yield Bond||Barclays High Yield Bond ETF||JNK|
|US TIPS||Schwab U.S. TIPS||SCHP|
|Muni||Vanguard Tax-Exempt Bond ETF||VTEB|
|Muni Short-Term||Barclays Short-Term Muni Bond ETF||SHM|
|US High Yield Municipal Bond||VanEck Vectors High-Yield Municipal Bond||HYD|
|Emerging Market||iShares JPMorgan USD Emerg Markets Bond||EMB|
|Emerging Market Local Currency||VanEck Vectors Emerging Market Local Currency Bond||EMLC|
|Cash||FDIC Insured Investments||N/A|
|Real Estate||Vanguard REIT||VNQ|
|International Real Estate||Vanguard International REIT||VNQI|
Compared with men, women have different issues when it comes to income and longevity, and from this Ellevest believes you should invest differently. The competing robo advisors focus mostly on the asset allocation of your investments. Ellevest’s goal-based investing helps plan for either a short-term goal (like buying a house) or long-term goal (e.g., retirement).
Ellevest recommends an asset allocation that is right for a woman’s needs and based on research from Morningstar Investment Management. The service’s objective is ensuring that you reach your goal, rather than performing better than an arbitrary benchmark. Ellevest’s portfolios are built around the investment theory of Liability Driven Investing (LDI), which is different from other automated investment services in this space. LDI estimates the cash flows needed to fund future liabilities.
Pros and Cons
- Targets Women — Ellevest focuses investment advice on the needs of women and takes into account issues such as female longevity and the wage gap.
- Goal-Focused — Those who need help with their investment future will find it with Ellevest. The service makes unique investor profiles for each client, based on their income, gender, and personal goals.
- Invests in Real Estate — Included in the portfolio is real estate, which historically diversifies investment returns with long-term goals and is a hedge against inflation.
- Gender-Specific Advice — Men can use the service, but Ellevest's strength lies in helping women fight the wage and investing gaps.
- No Tax-Loss Harvesting — Unlike other robo advisors, Ellevest does not offer any advantages for taxable accounts.
- Complex Portfolio Makeup — For smaller (i.e., sub-$100K) portfolios, Ellevest's number of fund choices is excessive. In short, investing in that many funds won't move the needle much with investor returns, nor will it dramatically affect volatility. One could argue a smaller amount of funds could give a very similar performance.
By calling out this male-dominated industry, Ellevest has established itself at the forefront of female-focused investment advisors and platforms. With a focus on the wage gap between males and females, Ellevest promises women that their concerns will be heard and met.
Ellevest also lacks some features that other robo advisors offer, such as tax-loss harvesting (TLH). According to Ellevest, it doesn’t offer a TLH functionality because with this feature you’re merely deferring taxes, not eliminating them. It’s true that TLH isn’t a magic bullet, and in quite a few situations (e.g., in an IRA) TLH offers no benefit.
Overall, Ellevest’s choice of ETFs is solid, although I question the need for as many as 21 funds to create a decently asset-allocated portfolio.
However, if your primary concern is an investment firm with a woman-central focus, then Ellevest might be a company to consider.