M1 Finance, WiseBanyan, Wealthfront, TD Ameritrade and SigFig Command the Robo-Advisor News Headlines
Keeping up with the latest robo-advisor news is a full-time job. From M1 Finance offering borrowing for it’s users to WiseBanyan massively expanding their investment options, the news never stops.
Even if you’re not seeking a robo-advisor to manage your investments, learning about this rapidly expanding fintech arena is fascinating for finance and tech enthusiasts. The main themes of innovation are faster, cheaper and better services.
The new robo-advisor fintech financial management platforms give you the opportunity to get investment management for less than you could’ve imagined, just a few years ago. I remember the 1980’s when 7% mutual fund commissions were common. And, it wasn’t unusual to pony up a $40 commission to buy a stock. Now you can trade stocks for a few bucks.
M1 Finance – Adds Lending With Low Rate
In most cases, folks want to grow their wealth through investing in stocks, bonds and other assets. M1 Finance makes investing easy and free, with their access to thousands of ETFs and stocks. After you craft your investment portfolio, or choose a pre-made option, M1 Finance manages and rebalances your investments – for free.
The DIY plus robo-advisor recently introduced M1 Finance Borrow. If you already have $10,000 invested in your taxable account you’re eligible for a flexible line of credit at a low interest rate. The rate is significantly lower than you’ll pay on your credit card debt.
You can use the money for anything.
This is great if you don’t want to sell your securities to pay for an unexpected expense or to take advantage of another opportunity such as buying income producing real estate.
There’s no required minimum or payback schedule – borrow and pay back whenever. And if you’re a speculator, you can use the loan to invest more money in your M1 Finance ETFs and stocks. Just realize that investment returns go up and down, and if you borrow from your account, you’re still required to repay the interest and loan.
WiseBanyan – Broader Investment Choices for Low Fee
(WiseBanyan is now Axos Invest)
Axos Invest is another robo-advisor that offers investment management for low fees. This one is great for newbies with low minimum investment amount. Axos offers a tax loss harvesting.
Axos also offers investment choices from a few diversified ETFs to 30 distinct ETFs. The scores of additional ETFs include broader stock and bond ETFs as well as targeted funds for unique sectors including blockchain, technology, consumer staples, clean energy and more.
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Wealthfront – Risk Parity for Better Returns?
There’s been extensive media attention surrounding robo-advisor Wealthfront‘s new-ish Risk Parity addition to their PassivePlus features. Simply, risk parity attempts to increase your risk-adjusted returns across various types of investment markets with an enhanced asset allocation strategy. The same asset classes are used but allocated in a unique ‘rules-based’ way.
There are contrasting opinions on the viability of this approach, most noteworthy coming from Cullen Roche of Pragmatic Capital. In “Wealthfront’s Risk Parity Fund is a Raw Deal” he writes, “Although I like the concept of Risk Parity I’ve been really disappointed with the implementation and performance of the actual funds.” Cullen found that typical risk parity funds underperformed Vanguard’s Balanced Index fund, VBINX.
The Wealthfront risk parity management fee was recently reduced from .50% to .25% of AUM.
TD Ameritrade – Lazy Login with Twitter and Facebook
We’re not reporting this in a critical way, as I’m all for easier logins. My old school password “book” is bulging with hundreds of passwords and I might not be the only one with the too-many-passwords syndrome.
The TD Ameritrade robo-advisor recently announced that Essential and Selective Portfolios clients can log in to their accounts through Facebook Messenger and Twitter direct messages. Using these platforms, clients get on-demand market information, educational content, performance videos, and general account information.
Interestingly, TD Ameritrade found that 44% of Essential and Selective portfolios clients are baby boomers. The research points out that not only millennial’s appreciate the simplicity of robo-advisors.
SigFig – Gets a $50 Million Payday
Just out, legacy SigFig robo-advisor, founded in 2007, raised an additional $50 million funding from General Atlantic, Bain Capital Ventures, DEM Ventures, Eaton Vance, New York Life, Nyca Partners, UBS and Union Square Ventures.
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In addition to SigFig’s direct to consumer robo-advisor model, the company is courting financial institution partnerships. Wells Fargo, UBS Group and Citizens Financial are among SigFig’s big bank customers.
SigFig differentiated from its robo-advisory brethren as investors receive professional robo-advisory investment management without selling and transferring existing assets to the SigFig platform. SigFig manages investments as long as they’re held in Fidelity, TD Ameritrade Institutional or Schwab accounts. They offer a limited free service and the paid offering is a reasonable 0.25% of AUM fee.