It may feel like you need an advanced degree to manage your money and investments, but that's far from true. These days, all you need to do to succeed in investing is answer a few questions and fund your account. A computer can take care of the rest!
Such products use different investment algorithms and theories but fundamentally work in the same way. When setting up a new account, you answer questions about your age and investment goals. Based on those answers, the program assigns you to an expert-designed portfolio made of low-fee ETFs weighted to your individual needs.
Using a combination of pre-built and customized portfolios, robo advisors allow you to invest with the low fees and results that typically outperform human fund managers. Today, we will take a look at three of the top robo advisors — Charles Schwab Intelligent Portfolios, Wealthfront and Wealthsimple — to see which may be the best for you.
|Minimum to Open Account||$500||$5,000||$0|
|Advice Options||Automated||Automated||Human Assisted|
|Socially Responsible Investing|
About Charles Schwab Intelligent Portfolios
Schwab Intelligent Portfolios is an automated managed portfolio product from Charles Schwab. Schwab is a massive U.S. brokerage with $3.59 trillion in assets under management as of March 31, 2019. As of the end of 2018, Schwab Intelligent Portfolios held $33.4 billion in assets and ranked among the biggest in the industry.
Schwab Intelligent Portfolios is fee-free and available for those with at least $5,000 to invest. Schwab Intelligent Portfolios PremiumTM is a hybrid robo advisor that includes access to a human certified financial planner (CFP) with a $25,000 minimum. It charges a $300 setup fee and then $30 per month.
Wealthfront started as a robo-advisor company before branching out into other financial products. Wealthfront charges a 0.25%-per-year fee. It requires a $500 minimum deposit to get started. Wealthfront includes tax-loss harvesting, and additional features unlock as your portfolio grows in size.
At the beginning of 2019, Wealthfront held $11 billion in client assets. It also has a high-yield cash management account and a portfolio line-of-credit lending product. Wealthfront also offers free online financial planning tools that anyone can use regardless of whether or not they invest with Wealthfront.
Wealthsimple is a robo advisor with a luxury-focused customer experience. Accounts with less than $100,000 in assets are charged a 0.5% annual fee. Once you hit the six-figure mark, the fee goes down to 0.4% and gives two important additional benefits. First is access to a human financial planner. Second is access to more than 1,200 airport lounges with a complimentary Priority Pass Select membership.
The airport lounge access feature is common with luxury credit cards but unheard of in the investment world. Depending on how much you travel, that can be a valuable and appreciated benefit. Account holders with $500,000 or more get access to additional personalized services and planning.
How Are They the Same?
All three services offer many features. First, let's take a look at how they're similar.
|Investment Account Types||All three offer individual taxable, joint, Roth IRA, traditional IRA, SEP IRA, Rollover IRA and trust accounts.|
|Investment Types||All three services allow you to invest in exchange traded funds (ETFs).|
|Tax-loss Harvesting||All three robo advisors provide tax-loss harvesting services.|
|Mobile Apps||All three services emphasize investing with an Android or Apple mobile device.|
How Are They Different?
Here are some of the big differences among the three sites.
|Socially Responsible Investing||Wealthfront and Wealthsimple offer socially responsible investing portfolios, while Schwab does not.|
|Fees||Schwab's basic robo-advisor services is fee-free; Wealthfront charges 0.25%/year; Wealthsimple charges 0.40–0.50%/year.|
|Minimum Investments||Schwab Intelligent Portfolios requires an initial deposit of $5,000; Wealthfront's minimum is $500; Wealthfront doesn't have a required minimum.|
Charles Schwab Intelligent Portfolios
Schwab Intelligent Portfolios is unique in its low costs and the ability to offer its own family of ETFs. While Schwab Intelligent Portfolios doesn't exclusively use Schwab ETFs, it offers industry-leading low pricing as well. The robo advisor alone is free and the average Schwab passive ETFs charge just 0.05%.
Saving a 0.25% fee may not sound like a lot, but over decades it can take a huge slice out of your portfolio. The ultra-low ETF fees included in these managed portfolios make this product arguably the cheapest in the industry. The option to add access to a professional financial planner on accounts of over $25,000 makes high-level planning very accessible.
Wealthfront also builds portfolios with low-fee ETFs but gives users some unique options when it comes to managing their money. As an investor’s portfolio grows, they get access to advanced features including stock-level tax-loss harvesting, an enhanced asset allocation and a portfolio rebalancing based on Wealthfront's Smart Beta algorithm. Best of all, you can customize your portfolios and add or opt out of ETFs that make sense for you. And you can get cryptocurrency exposure by adding Grayscale Bitcoin Trust (GBTC) and/or Grayscale Ethereum Trust (ETHE) to your portfolio.
The goal here is ultra-efficient investing. The ability to squeeze additional value out of your portfolio through advanced tax-loss harvesting strategies can add up to big tax savings over time. The free planning tools are a great perk for any investor.
Wealthsimple is focused on automation and simplicity and gives you the option to invest in a socially responsible or Halal-friendly portfolio. Socially responsible investing (SRI) portfolios focus funds in low carbon, clean tech, gender diversity, local initiatives, socially responsible companies and affordable housing. Halal investing avoids prohibited activities and avoids lending businesses.
If you move an account with at least $5,000 to Wealthsimple, it will pay for the other broker's account transfer fee. Oh yeah — accounts with at least $100,000 get access to luxury airport lounges and a financial planning session. Those can be very nice perks.
- Charles Schwab Intelligent Portfolios requires a $5,000 minimum deposit.
- Wealthfront requires a $500 minimum deposit for its low-fee index fund investment accounts.
- Wealthsimple doesn't require a minimum deposit.
- Charles Schwab Intelligent Portfolios is fee-free for basic robo-advisor accounts. Premium accounts charge 0.40%.
- Wealthfront charges an annual advisory fee of 0.25% on all assets under management in investment accounts.
- Wealthsimple charges a 0.5% fee for balances of $99,999 and less and a 0.4% fee on balances above $100,000.
- Charles Schwab Intelligent Portfolios stands out for its lack of a management fee for basic robo-advisor services.
- Wealthfront offers advanced features for customers with larger accounts.
- Wealthsimple specializes in socially responsible investing and also offers its members access to airport lounges.
- Charles Schwab Intelligent Portfolios offers 24/7 customer service via phone or live chat.
- Wealthfront offers guides to its services and investing in general in its Help Center.
- You can call Wealthsimple customer service between 9 a.m. and 8 p.m. Eastern Time Monday through Thursday and 9 a.m. and 5:30 p.m. on Friday. You can also send an email anytime.
As for security, all three of these companies offer excellent data and financial protections. All accounts are regulated and insured at each of these robo advisors. You can invest with any of these companies with no security concerns.
Who Are They Best For?
Each of these investment products is great for a target group of investors. Depending on what you are looking for, you may want to pick the one that most closely aligns with your needs.
Charles Schwab Intelligent Portfolios is best for investors who have a decent amount of money to invest but who don't want to pay high fees. The $5,000 minimum could be a barrier to entry for some new and younger investors, but the lack of fees save users in the long run.
Wealthfront is a great robo advisor for new investors. With a low minimum deposit requirement and a hands-off approach to investing, Wealthfront should be attractive to people who just don't have the time or interest in actively managing their accounts.
Wealthsimple is a great choice for investors serious about socially responsible investing. The robo advisor offers portfolios and investments specifically for SRI and halal investing.
Which Is the Best?
Based on the low cost and great product,Charles Schwab Intelligent Portfolios is the winner. You just can't beat zero management fees.Wealthfront and Wealthsimple are both excellent services, but you'll most likely end up ahead with the lower cost at Schwab.
If you have a specific need that Wealthfront or Wealthsimple meet, you can do well with either. But for my money, I would choose the option with no fee. That's a clear win for your bottom line.