FutureAdvisor Review 2023 – More Than Just for Retirement
FutureAdvisor is an online investment advisor that automatically manages your investments. It helps you do this in an advantageous way by using modern portfolio theory (or MPT) to build and maintain a portfolio to maximize your return based on certain levels of risk indicated by your investor profile.
Commissions & Fees - 6
Customer Service - 8
Ease of Use - 8.5
Tools & Resources - 8
Investment Options - 7.5
Asset Allocation - 8
FutureAdvisor competes with similar online investment advisory services such as Empower, Wealthfront, and Betterment.
How does it stack up against them? It depends on what services you're looking for.
What Is FutureAdvisor?
The company launched operations in March 2012. It's led by a team of finance professionals, data scientists and software engineers backed by the same venture capital team that backed PayPal and Google.
The service offers direct management of taxable investment accounts — both individual and joint. It also offers direct management of IRAs, including traditional, Roth, rollover and SEP IRAs.
With direct management, you grant the service the authority to trade in your accounts on your behalf. Since the last update, FutureAdvisor has revamped some of their services and now has new features and offerings to help you reach retirement, personal and other life goals.
How Does It Work?
FutureAdvisor works with Fidelity and TD Ameritrade accounts. These firms charge their usual transaction fees for trades within the account, in addition to any fees you may pay to FutureAdvisor.
Once you sign up for a FutureAdvisor account, you can get started by linking your investing accounts or manually reporting your holdings. The service will analyze everything via the dashboard and then provide you with analysis and recommendations tailored to your portfolio and specific goals.
Your recommended retirement plan will be broken down into nine simple steps. The software will then determine how well you're doing and where there's room for improvement. The recommendations will show you exactly why FutureAdvisor recommends these changes, and the updates will be made in real time.
Management includes the following services — depending upon the plan selected:
- Index fund investing that favors low-fee index funds, primarily with Vanguard or iShares.
- Personalized diversification through a specific portfolio based on your age, risk tolerance and investment horizon.
- Low fees, by making portfolio fees transparent to help you pick lower fee options.
- Rebalancing recommendations –- typically two to four times per year -– based on significant changes in your portfolio.
- Emphasis on value and small-cap funds for greater long-term returns, includes U.S. and internationally centered funds.
- Tax harvesting, by monitoring your holdings and looking for positions with at least $1,000 in harvestable losses at current market prices.
FutureAdvisor Features
| Minimum Investment | $10,000 |
| Fees | 0.50%/year |
| Accounts |
|
| 401(k) Assistance | |
| Tax Loss Harvesting | |
| Portfolio Rebalancing | |
| Automatic Deposits | Daily, Weekly, Biweekly, Monthly, Bimonthly and Quarterly |
| Advice | Automated |
| Smart Beta | |
| Socially Responsible | |
| Fractional Shares | |
| Customer Service | Phone: M-F 8:30A-5P PT; Email |
- Retirement Planning — A service that analyzes your funds, makes recommendations and offers tailored advice to better your portfolio and holdings.
- Investment Management — This service costs 0.50% annually and affects only the assets that you select for them to directly manage.
- Comparison of Advisors — One benefit to using FutureAdvisor's Investment Management service is that you'll get access to a chart that shows the difference of returns and fees when using FutureAdvisor versus a traditional financial advisor.
- College Savings — Advice to help you create an optimized plan for your finances and children’s future education plans. FutureAdvisor can open and manage your 529 accounts, as well as handle disbursements to the school.
- Investing Library — FutureAdvisor has an entire library of articles and educational content to help you find the answers you're looking for.
FutureAdvisor Pricing
FutureAdvisor charges a flat annual management fee of 0.5% of assets directly managed. This means that those investments and accounts that FirstAdvisor doesn't directly trade in — such as your 401(k) — are managed for free.
| Highlights |  |  |  |
|---|---|---|---|
| Rating | 9.5/10 | 9/10 | 7/10 |
| Minimum to Open Account | $100,000 | $10 | $10,000 |
| 401(k) Assistance | |||
| Two-Factor Auth. | |||
| Advice Options | Automated, Human Assisted | Automated, Human Assisted | Automated |
| Socially Responsible Investing | |||
Portfolio
FutureAdvisor’s portfolios are comprised of varying positions in low-cost index-based ETFs. It's a balance of stocks and bonds, depending on your age and risk temperament. See their allocation chart to determine where you might fit.
Following are some of the stocks and bonds FutureAdvisor uses:
Stocks
| Sector | ETF | Ticker |
|---|---|---|
| U.S. | Vanguard US Total Stock Market | VTI |
| U.S. | iShares S&P 500 Index ETF | IVV |
| Foreign | iShares MSCI EAFE Value Index | EFV |
| Foreign | Schwab Fundamental International Large Company Index | FNDF |
| Real Estate | Vanguard REIT Index Fund | VNQ |
| Real Estate | SPDR Dow Jones International RelEst ETF | RWX |
Bonds
| Sector | ETF | Ticker |
|---|---|---|
| U.S. | iShares Core U.S. Aggregate Bond | AGG |
| U.S. | Schwab US Aggregate Bond | SCHZ |
| Foreign Government | iShares International Treasury Bond | IGOV |
| Foreign | Vanguard Total International Bond | BNDX |
| Short-term U.S. Inflation-Protected Treasury Bonds | iShares 0-5 Year TIPS | STIP |
| Short-term U.S. Inflation-Protected Treasury Bonds | PIMCO 1-5 Year U.S. TIPS Index | STPZ |
FutureAdvisor Screenshots
BlackRock Purchase
The buyout of FutureAdvisor by BlackRock Solutions proved that this robo advisor is here to stay. Currently, FutureAdvisor manages over $950 million in assets and will continue to serve both existing and new individual investors from its home base in San Francisco.
So why is BlackRock interested in FutureAdvisor? They plan to sell the company's automated advisory services to other banks, securities firms and insurance companies that are customers of BlackRock.
This new company sells a system that allows financial institutions to place trades and assess how those trades will affect their portfolios’ risk profiles, among other features. This makes the buyout with FutureAdvisor a good match for both companies.
FutureAdvisor Pros & Cons
[table “proscons” not found /]Summary
If you're looking for a service to maintain your brokerage account, FutureAdvisor might be a great choice for you. It's great for set-it-and-forget-it investors.
However, note that the fees can quickly add up, when you compound your annual FutureAdvisor fee with the fees that the brokerage service you use for each trade will charge.
Have you used FutureAdvisor? If so, do you recommend it?
FA no longer provides free advice service; you must transfer funds to them in order to get any planning. I presume this is as a result of the acquisition by BlackRock.
Which is unfortunate; I will no longer use them,
Real fees for FutureAdvisor can be lower than .5%.
Here’s how it works:
Although FutureAdvisor DOES charge .5% fee per year (billed quarterly at .125%) for managing my “rollover” IRA as well as ROTHs for me and my wife, they offer FREE management of my 3 kids’ Coverdell ESAs as well as my Self Directed 401k. So, when I add it all up, the REAL fees come out to only .36% for 2017 (approx .09% per quarter). And, that % is going to keep going down as the size of my 401k continues to grow and grow.
I’ve been with FutureAdvisor since August of 2014 and they are the ONLY robo out there that will take a holistic look at my wife and my ENTIRE retirement portfolio, as well as my cash in the bank, AND my non-retirement investments. They look at EVERYTHING. You won’t find another robo that does this.
7 July 2016
I have been using Future Advisor for about a month, a decision I was happy to make at it’s origination. I’d been trying to decide on whether or not to have my account professionally managed or not for quite some time. Now, I’m regretting such a decision and not sure I want to continue… at least not with them.
I know folks make the comment that it takes time to see the performance, but I’m at a point where I think I’ve seen enough. To give a bit of background on my reasoning is I have not received clear and concise answers to questions. I’m told that I have and advisor, I see his picture, and I’ve tried to get in touch with him. Thing is that you are provided a place to submit a question and you get an email response in return. Then you begin your email communications back and forth. Each email I’ve sent is returned with the name of someone different each time. None of them being ‘My Advisor.’
To go into more detail about occurrences with my account I have a 401k with Fidelity, and that account has the option for a BrokerageLink account under the same umbrella. My company was making many changes with the 401k and going to sell our shares anyway to move them into new mutual funds that they’ve decided we could newly purchase. I decided to take that opportunity to sell all the shares and move them into the BrokerageLink account so that I could make my own decisions in the future. Those funds went into Fidelity Cash Reserves under the BrokerageLink account. At that point I decided to give Future Advisor a shot.
I also had a small portion of funds in a Roth IRA with bi-monthly contributions. Most of the funds in this account too were in Fidelity Cash Reserves as I’d started “hitting it hard” to try and rebuild it.
The process took a couple weeks. In that time there was no financial movement in my accounts except for my constant increase in contributions. The few days that Financial Advisor began initiating purchases my investments fell many thousands of dollars. I sent an email requesting an answer to this and the response I received was that it was the activity of the accounts held previous to FA taking over the handling of my accounts. Those investments fell and that FA did not take full control until a certain day. Granted, if you’ll remember I had the funds in Fidelity Cash Reserves… which do not fall. I have not received response from my returned email to them and this little fact as of yet.
In the time following I’ve had contributions from work, personal, and dividends that have continued going into the accounts. Such funds drop drastically the day funds are purchased. I’m trying to get answers from them as to why they are on this trend of ‘Buy High’ and hold as they drop. I thought the intent was to buy low and eventually sell high.
I also contacted them about their notifications of Tax-loss savings drive on my 401k umbrella BrokerageLink account and Roth IRA. I asked if they knew what it types of accounts they were handling and they responded that they did. I requested why they felt the need to worry Tax-loss on such accounts and have yet to get a response.
To make matters worse as my funds were on their downward fall I was receiving emails congratulating me on attaining certain levels of investment achievement. These achievements were far lower than where the funds had started. Adding salt to the wound.
I suggest you be cautious in your decisions to invite FA as your investment handler.
FutureAdvisor took over my significant Fidelity IRA assets last July. I started with a small set of mutual funds that performed reasonably well over time, but they rebalanced into their strange mix. Over 6 months time my assets have now dropped over 10%. I know it’s not a real loss until I sell, but that doesn’t sound right and I’m regretting my decision so far. I’ve asked them to explain what is going on. If things don’t improve in the next 6 months, I will regretfully leave and pick my own funds again.
I started with FA in June of 14. I was retiring and this looked like a program that would work for me. Having made back my losses of 08/09, I was interested in a safer approach. I’m now over 18 months in and my FA account is down more than 5%! I wasn’t expecting double digit returns, but frankly, this is unacceptable. Now I’m back looking to see where to go.
My portfolio was beating their recommended portfolio in all 3 time spans that they show. Then they stopped showing side by side comparisons. Now they just show their recommendations, which are
always ETFs. Even when I was beating them on all three time spans, they were still showing my performance as a C+.
Here is my portfolio:
42% FSITX
25% FUSVX
23% DODFX
6% FDRXX
1% each ATVI, HII, SYKE
Based on Future Advisor ‘s recommendation, despite entertaining reservations, I put quite a bit of money into emerging markets just when they were at their peak, and so far they have fallen by nearly 30%. As a result, my overall retirement portfolio is down about 15% from the peak. I quit their service.a few months back.
I was comapring FA’s allocation recommendation vs Personal Capital.
FA recommends for me 28% domestic stock, 26% foreign stock, 17% emerging markets, 13% REITs, 9% bonds.
PC recommends 52% domestic stock, 22% foreign stock, 16% bonds, 11% alternative.
So the big difference is in PC’s 52% US stock vs FA’s 28% us stock allocation.
Any thoughts on this discrepancy?
I’m an aggressive investor, with 16 years till retirement.
I was looking at FA after realizing my management of my 401K is pretty weak, and thinking I could use some help. I have Fidelity, I’ll be 59 this year, probably retire around 67-68 depending on how things work out, and have a pension plan from a company that let me go back in 2004. My current 401K as of today is about $680K. We’ve had decent returns, though last quarter was tough – down about 0.58% – and overall for the year so far is a modest 2.19%.
My concerns with FA:
1. I am very hesitant to give someone else my account login info. I’ve seen nothing about how that is kept safe,etc.
2. The returns I’m seeing are pretty weak. Certainly less than I have achieved on my own (which has been simply putting our money into 4 different funds.)
I was with FA over the last few months but I’ve decided to switch to something else. Primarily, I’m annoyed that they dropped support for any in-depth analysis of my 401(k).
Yeah yeah, they told me all about how changes in a 401(k) could trigger unwanted trades in your brokerage accounts. I know it’s super difficult to keep track of all the stupid, custom funds that 401(k)s frequently include. My thought on the matter is that you don’t promise to “look at the whole picture” and then decide it’s too hard so you’re just going to go look at the same picture everyone else does. If it doesn’t work as intended, you fix it, you don’t just remove it.
Now, all they do is offer very vague recommendations of “try to invest 10% in a REIT if you can but not if the expense is too high” and things like that. If I recall correctly, they do at least show the total amount invested in your 401(k) but it specifically says “excluded from analysis” and it doesn’t count (or even track, apparently) my 401(k) contributions. They provide a nice little summary screen that says I need to contribute x amount per month to meet my retirement goals but they only count money contributed directly to my brokerage accounts. Practically everybody who is participating in an employee-sponsored 401(k) is going to be making significant contributions that FA is just ignoring when that used to be their one really stand-out feature.
Plus, the .5%, no matter how large the accounts being managed, is entirely too much. They use a $100k account in their marketing and that math comes out to about $10 a week or $500 a year. For $500 a year, I better be getting a lot more than some “me too!” automated investments.
Hah! My mistake. I *thought* I had posted something similar to this but overlooked it when reading the article and comments again. Only after posting did I realize the mistake.
Oh well, I stand by it.
I am having problems with the free future advisor account. I am getting a message:
We are unfortunately unable to provide recommendations for you at this time because more than 10% of your assets are unable to be analyzed. Please contact us if you would like our Premium investment team to analyze these holdings for you.
This is under my 401K account but as a result it is not giving me any recommendations on my IRA either. I have emailed future advisor about this and I am not getting a way to fix this or a reason why. It is not giving me an action plan – so I can’t evaluate the free service enough to see if I want the premium one. Has anyone experienced this problem? Is there a solution?
Funny thing is …
When you want to buy a stock or fund or etf … you lookup and quickly find how its doing over the last week/month/year etc.
It was strange to see no such data for these robo strategies. Why is it so hard to publish them?
The vague charts FA provided … is just that, vague. Doesn’t match with folks’s real experience.
If FA (or any robo advisor) is willing to provide a real assessment of their investment decisions over a period of time … like a fund/etf does at MorningStar … I’m willing to take a look at it again.
Again, no offense robo advisors … its just not for me. Don’t want to end up on the losing side yet again.
I have had free acct at FA for a few months. After spending several days looking at several robo-advisors and some reading around the Internet … I decided not to go with any of them. Will delete my free acct at FA.
Something about myself:
– engineer by profession
– lost a lot of 401k and after tax money over the years to various advisors (robo or not)
– My thought process resembles folks like Steve and Mike above. Take heed folks. You don’t need to experiment everything. Somethings you can learn from others.
– being an engineer, I know a thing or two about automation. There is no magic that automates investing. Spend time … not everyday … perhaps once a quarter. Look at your investments, see what you can do to protect yourself. World is changing a lot faster now.
– My target is … not to be homeless and begging … like that special forces vet on TV.
I’ve been trying to sign up to FutureAdvisor for a couple months. I encountered some bug in their DocuSign eSignature process and since then I’ve been struggling to become a Premium service client. They finally sent me an application via mail a couple weeks ago but it didn’t have any of the agreements (client, custody, disclosure) that they’re required to provide. They subsequently provided a standard Fidelity agreement via e-mail, but not the other two. I’ve had a tough time finding someone to talk to there who seems to understand the client onboarding process or can answer my basic questions. I think I tried to sign up for their service about this time in early January 2015 and two months out I’m still just looking in. Curious how difficult it was to leave their service for anyone who has commented here. Just judging by the onboarding process I’m going to pass altogether.
-Mark
I’ve had a FutureAdvisor Premium account since early June 2014, and I *really* regret taking the plunge.
FutureAdvisor’s old dashboard lists forecast annual returns of 4% under poor market conditions and 7.6% under average market conditions. As of today (early March 2014), my overall managed account performance is about -0.8% (over 9 months), yet FutureAdvisor gives my accounts an A+ performance rating. WTF? By FutureAdvisor’s own performance standards, my account performance is abysmal.
My brokerage account has benefited somewhat by FutureAdvisor’s automatic tax loss harvesting, which I would be too lazy to do on my own if I were managing the account. However, my Roth IRA and Rollover IRA accounts are not afforded the same benefits, and the lost opportunity costs in those accounts is significantly greater than any fees I might have saved. In particular, my Roth IRA is down almost 10% for a 9 month loss of almost $25k. This when the S&P 500 is up significantly over the same time period.
I’m surprised that the myriad of investment writers who wrote such glowing predictions about FutureAdvisor (and other similar companies) haven’t followed up with more hard hitting articles about the average return for investors participating in these types of services. Perhaps that’s too much to ask of the journalism community?
Buyer beware!
Steve,
With regards to performance each individuals asset allocation is different, so there is no fair way to measure returns within said systems. There have been some back testing of specific portfolio models but again that’s not exactly the same of specific investment returns. None of the firms release the data on their investor returns. So how do you propose we investigate the returns of their customers? We do have test accounts in various firms, but again your results may vary so releasing this information isn’t a fair test.
Lastly less than one year measurement of returns IMHO isn’t a fair review of your returns. You should have at least one year and realistically 5 year return is a fair measurement.
I also switched to using FutureAdvisor in June 2014. I decided to give it a year and compare my returns with the low-cost index funds I have invested in in the past. My returns at FutureAdvisor for the past year are 2%. I agree with other commenters that FutureAdvisor should make it easier to see the returns in the accounts they are managing, and compare those returns to standard benchmarks.
FutureAdvisor has stopped including your 401k as part of their analysis. They gave me several reasons but I wasn’t particularly impressed by any of them. Now, they simply give you advice along the lines of “put x amount in a REIT fund but not if the fee is too high and, if that isn’t available, go for this other suggested type of fund.”
I don’t invest for fun or short-term income, I invest for retirement. Ignoring the investment account that has the largest amount of contributions going into it on a regular basis is ignoring one of the most important part of my investments. That analysis was really FutureAdvisor’s single compelling feature and, without it, … what does FA bring to the table?
I am coming off of about 12 months with FutureAdvisor as a premium member and wanted to comment on them based on this review. In fact, Investorjunkie was one of the sites where I originally learned more about FutureAdvisor. Just a few quick highlights and thoughts on 1 year as a premium member with them.
To the reviewers who comment that FutureAdvisor does not consider things like pension or workplace retirement accounts (the person above “my account…savings bonds”, etc.), that is not true. I have a 403B with an extremely limited set of bond and equity funds and another total bond account at another firm. Since the beginning, FutureAdvisor supported these and considered funds available in my 403b as they looked at rebalancing, fund suggestions and what to sell, etc. You do need to work with their support if your pension/retirement account provider is not automagically supported. They use the same crap import service (Yodle) as other robo-advisor. But, when they needed considerations for my 403b provider, I usually worked with them; this primarily involved me sending FutureAdvisor statements.
I will directly speak to my investment performance with them. My total (workplace and nonworkplace) accounts were considered by FutureAdvisor. Workplace is held at Lincoln Financial and nonworkplace (Roth, etc.) held at Fidelity. After plug-and-chug on some numbers, my CAGR while with FutureAdvisor and for all accounts is about +2%. This is on a roughly 80% stock/equity and 20% bonds portfolio which they “FutureAdvised” on for about 1 year. Yes, you read that right: +2%.
On a side note, my wife and I manage her portfolio at T Rowe Price. Her portfolio is roughly 68% stock & 32% bonds in an IRA. On our own decisions consistent with our investment strategies, we pulled in ~16% on that account over the same time period as my FutureAdvisor time. We judge ourselves competent investors but I really wanted to give futureAdvisor a shot.
The FutureAdvisor performance was entirely based on their own management and on questions I answered in their profile when joining as a premium member. Roughly, retiring at 69 with my current age at 39. YYMV of course. Based on their analysis of my questionnaire answers, I was a low-aggressive investor with mostly As and A+s in the categories they rate such as diversification, etc.
Overall, I’d say they are a good firm if you are REALLY TRULY SINCERELY dis-interested in managing your retirement accounts. I like that they considered all accounts, workplace and nonworkplace, and they seem to work with large retails brokers such as Fidelity, Schwab, etc. Their tech and customer support folks are friendly and knowledgeable. I believe they are U.S. based but don’t quote me on that. I think FutureAdvisor offers a valid service but if you are more comfortable with your own decisions and investment objectives then you might not entirely find their service(s) worthwhile.
Thanks for your comments Mike.
My problem with services like this is that they obstinately refuse to include pensions in their calculations. I will be eligible for military retirement in a few years, which is essentially like investing in 100% US Savings Bonds. Therefore, since I’m stuck with half my retirement in bonds, I don’t want to invest any more of my money into low return investments. These services flatly refuse to allow me to specify 100% stocks.
Future Advisor has their place for passive investors, however, an excellent question that deserves to be answered if you have a premium account like I did was “What is the gain on the account YTD?” It is not included for a reason…it is abysmal. I can go to any other firm and find out immediately what the gain on the account was…not so Future Advisor. They WILL tell you how much the account has increased / decreased in the past week but not how the account is doing in comparison with other guideposts such as the S&P 500 or the Russell 2000 or you name it. In this case ignorance is not bliss, the opportunity cost of such passive investing far, far exceeds any and / all fees you may have saved investing with Future Advisor and their tax efficient methods. In my case the gains on my Premium Accounts are not worth the lost opportunity cost. Goodbye Future Advisor our relationship may have been fun but not very profitable.
You make an interesting point Joe. I was wondering the same think. Actual investment performance is not indicated on any of the reviews that I have read. This is certainly the elephant in the room.
Dave,
We cannot cannot make any claims regarding returns in reviews for many reasons.
1. SEC and FTC for one does not permit you to make such statements. I for example have an account with Betterment but my returns are mine and therefore unique. I can state my returns but it may not be you returns.
2. Each person that has an account with FutureAdvisor (or any other robo-advisor) asset allocation is different. Or at least the time they entered if two individuals have the same asset allocation. Therefore returns will be different. Don’t forget about dollar cost averaging.
3. There ARE some articles that do take specific asset allocation in the various robo-advisors and compares the returns from each.
So in summary we can only review objectively the service, the asset allocations, and features they offer.
No good for me (or you) if entries are done manually. I don’t trust very quickly so I entered some data manually. It labeled the Federal Thrift Savings Plan as unknown and it was unclear how to enter the dollar amount. But worse, I entered a Vanguard Fund manually which it accepted. But it was again hard to find a place to enter the dollar amount. After stumbling upon a way to enter the dollars I entered $25500 for the fund. This website showed my total assets as Total Assets: $520,710.00. How do they get that? I would not trust their math.
No, of course you don’t need a human financial advisor. Until you do. You have unfettered access to a wide range of investments, and opinions and models, and you have had all of that for at least 2 decades. So why now the bravado to go it alone? 5 straight positive years for equities.
The financial advisor’s role is to remove the human element, emotion, from the investment decisions for something as emotional and personal as your wealth. Emotion drives the retail investor to sell low (Fear) and buy high (greed). There is a reason why the average equity returns for retail investors is less than half of the S&Ps returns. No, of course you don’t need a human financial advisor. Until you do. And when you do, it may be too late.
-said the professional financial advisor with a personal interest in maintaining the status quo
-said the investor who most likely averages half the returns over the long term of that with a financial advisor
Everyone thinks they’re investment pros when the markets are doing well. FA’s earn their worth during times of crisis. Thankfully I had one looking out for me during 08-09.
After getting taken advantage of by Edward Jones for a few years, I switched to FutureAdvisor and execute all my own trades. I have outperformed (compared to the markets) EJ significantly. I don’t have a bunch of EJ specific junk, and I don’t pay them the ridiculous fees.
Investors only have one interest in mind – their OWN money.
Except that’s not true. Empirical data shows that the return in accounts managed by professional investment advisors is on average below S&P500. This even includes hedge funds.
Here’s my 2 cents. FutureAdvisor has managed my accounts since October, 2013. Very good execution with thoughtful, personal and professional communication, everything I hoped for but did not get from my traditional money manager or previous use of my brokerage firm’s Asset Allocation services. Your money manager has model portfolios and based on you age and risk tolerance, they pull one off the shelf and move your money in, charging 1% or more. FutureAdvisor includes my employer’s 401K investment options in the portfolio strategy and makes recommendations that I have to execute since they cannot control my 401K.
I cannot say enough good about FutureAdvisor. They have been vigilant on not selling my pre-existing high appreciation investments and have taken a measured approach minimizing capital gains. FutureAdvisor build a portfolio across 5 of my accounts, including 401K, IRA and post-tax accounts. I have not had better service or execution, even when I have paid much more.
Thanks for reviewing us, Kevin.
David – good question. We actually automatically focus our rebalancing efforts in the tax-free accounts as much as possible. We calculate the tax impact of every trade using lot by lot cost basis information, and have a stringent capital gains and tax policy that we follow during rebalancing or any other trades (you can read more about it in our FAQ[1]). This way, we calculate on a case-by-case basis whether the long-term gain (in diversification, lowering portfolio fees, etc.) is worth the one-time tax trade off.
Good question though. Thanks for pointing out something most people don’t think about enough.
Wouldn’t it be better to do balancing In tax free accounts? By relegating the balancing to taxable accounts would have a higher tax impact.
Hi David – I think that’s the objective, but FutureAdvisors doesn’t directly manage 401(k) plans, and that’s where most people have most of their investment capital. That leaves rebalancing primarily in taxable accounts or IRA accounts. They have to use those accounts to make adustments to a portfolio dominated by 401(k) funds. Of course, they will make recommendations as to how you can make changes within your 401(k).
I may have misread the article… It does seem to favor the accounts it can trade direct? Anyway… I must be doing pretty good with my investments, it’s recommending I sell everything in my retirement accounts and move it somewhere else.