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Expert FutureAdvisor Review – Robo-Advisor with Financial Advisor Access

FutureAdvisor Expert Review

FutureAdvisor is a robo advisory firm that manages your existing investment accounts.  With FutureAdvisor, you don’t need to transfer your assets to their platform! The service automatically monitors, re-balances and tax manages your current investments. Low-cost index funds are added where necessary to strengthen your portfolio.

Based in San Francisco, FutureAdvisor was founded in 2010 by Microsoft refugees, Bo Lu and Jon Xu. They started the platform in response to friends who were having difficulty knowing where to invest their money. The service is comprised of chartered financial analysts, data scientists, designers, engineers, marketers and service specialists. FutureAdvisor is a subsidary of BlackRock, the world’s largest investment management firm, with more than $5.4 trillion in assets under management (AUM).

FutureAdvisor offers both free and premium services, and integrates with major investment brokerage firms.

FutureAdvisor Robo-advisor Features at a Glance

OverviewAutomated online investment management robo-advisor platform
Minimum Investment Amount$10,000
Fee StructureFree version; Premium version 0.50% of AUM
Top FeaturesThe service uses funds that you already own, but supplements them where necessary to achieve the desired asset allocation; you can maintain certain investment positions in your portfolio alongside the recommended allocations; the platform includes access to financial advisors
Free ServicesSign up for free, and get personalized account-by-account recommendations for your portfolio; Comprehensive retirement analysis
Contact & Investing AdviceAvailable 24/7 by email only on free version; Phone support available for premium service only
Investment FundsDiversified index funds from 12 different asset classes
Accounts AvailableIndividual and joint taxable accounts; traditional, Roth, rollover and SEP IRAs
PromotionsN/A

What Differentiates FutureAdvisor Robo-Advisor From Competitors

Along with SigFig, FutureAdvisor is one of the few robo-advisors that doesn’t require you to transfer your assets into their platform. They manage your assets in your existing TD Ameritrade and/or Fidelity accounts.

FutureAdvisor provides access to financial advisors and service specialists. These financial pros can help with investing questions about what is going on with your portfolio. Don’t understand why to invest in foreign stock funds? The financial advisor will help.

One of the more interesting features of FutureAdvisor is that the platform allows you to hold a small amount of personally selected securities in your account. However, the vast majority of your asset allocations will be ETF’s selected and managed by the service.

Another benefit is the inclusion of value and global real estate funds in your portfolio mix. Value funds include the Vanguard Value Index Fund and iShares MSCI EAFE Value ETF with TD Ameritrade, and iShares MSCI EAFE Value ETF with Fidelity. Global real estate positions will include SPDR Dow Jones International Real Estate ETF with TD Ameritrade, and Vanguard Global ex-US Real Estate Index Fund with Fidelity accounts. There are also U.S. REIT funds as well.

401(k) plan management. FutureAdvisor can manage some 401(k) plans. But if they can’t, they will provide investment advice for your plan.

Who Benefits from the FutureAdvisor Robo-Advisor?

If you already have a brokerage account with either Fidelity Investments or with TD Ameritrade, and you’d like to add a robo advisor to the account without having to switch over to another service, FutureAdvisor is a natural addition.

You’ll benefit from FutureAdvisor if you’re seeking unlimited access to financial advisors for answers to any investment related question.

If you’d like automated portfolio management that includes value investing. Value investing is the process of buying stocks in companies and industries that are considered out-of-favor in the current market. These are company stock’s often available at discounts compared to stocks that are currently performing better.

Value investing is considered a successful long-term investment strategy.

FutureAdvisor Review – Robo-Advisor Drill Down

FutureAdvisor manages accounts held with Fidelity or TD Ameritrade. If you already invest through those platforms, FutureAdvisor can be added as your investment advisor. If not, you will need to move your investment accounts over to those two brokers. If your accounts must be transferred from another broker, FutureAdvisor work to minimize capital gains in the transfer process. Transferred account balances under $10,000 are liquidated, and those above are transferred as is.

FutureAdvisor doesn’t take over your account, but adds an investment management layer to the accounts. Management includes investment selection, trading and rebalancing.

The service uses a combination of the FutureAdvisor human investment team, and their software Recommendations Engine. The asset allocation strategy incorporates Modern Portfolio Theory (MPT), as is typical with robo-advisors. When you sign up for the service, you will receive a preview of your initial rebalance two days in advance, by email.

One of theFutureAdvisor basic investment methodologies is to reduce risk as you approach retirement. This will be a gradual process of reducing equities in favor of bonds.

Investment allocations. FutureAdvisor uses 12 asset classes in portfolio construction. The classes are:

  • US equities
  • US small-cap equities
  • US value equities
  • International stock markets
  • International small-cap stocks
  • International value stocks
  • Emerging markets stocks
  • Domestic investment grade bonds
  • International bonds
  • Domestic real estate
  • International real estate
  • Treasury Inflation Protected Securities (TIPS)

A portfolio constructed for a 40-year-old who has a moderate risk tolerance would look something like the model below. The presentation compares the FutureAdvisor portfolio (on the right) with the average for a typical 40-year-old.

FutureAdvisor Review-Typical asset allocation and investments for a 40-year old investor

Minimization of “cash drag”. Note that in the portfolio above, there is no cash allocation. The cash exclusion eliminates the cash drag of uninvested funds. FutureAdvisor includes a cash allocation only on portfolios for those over 60. And when it is included, it’s limited to not more than 2.5% of the total portfolio. This is in contrast with Schwab Intelligent Advisors which believes in an investment portfolio cash allocation.

Reblancing. Rebalancing takes place on average, 4 to 6 times per year. In the process, they use a portfolio rebalance algorithm that doesn’t realize over $200 in short-term capital gains taxes.

Tax-loss harvesting. FutureAdvisor employs tax-loss harvesting. They also use tax efficient asset placement. Bonds and real estate-related assets are favored in tax-deferred accounts, since they generate regular income. Equities are preferred in taxable accounts, to take advantage of lower capital gains tax rates.

Retirement planner. The specialty goal-based planner shows whether you’re on track to retire and how to reach your goals if you’re not.

ETF Investments Used

Like most other robo-advisors, FutureAdvisor favors ETF’s from Vanguard and iShares. But the exact mix of ETF’s varies depending on whether TD Ameritrade or Fidelity is the investment platform used.

If the account is held with TD Ameritrade, the following ETF’s are use in portfolio construction:

FutureAdvisor-ETF fund choices for portfolio held at TD Ameritrade portfolio

 

Click here for access to free financial toolkit – money and investment dashboard

If the account is held with Fidelity Investments, the following ETF’s are used in portfolio construction:

 

FutureAdvisor Review - Investment funds for accounts held in a Fidelity account

FutureAdvisor Robo-Advisor Sign-up Process

In order to enroll in FutureAdvisor you must be a legal US resident, between the ages of 18 and 68, have at least $10,000 in investable assets. You need a valid Social Security number or tax identification number.

Once you register for the service – which requires only your email address and the creation of a password – you receive your portfolio allocations. At this point you will not have paid any fee, linked any bank accounts or transferred assets from other brokerage accounts. You can continue to use the service for free for up to three months.

FutureAdvisor Review Sign Up questions

After registering, you need to complete the information requested on two screens. The first is to provide the basics (above). The next will be to used to analyze existing investment accounts or open a new account. Once you’re done, you’ll get your portfolio recommendations.

If you want to go forward with the premium version, your account is linked to a bank account to enable direct transfers and recurring deposits. Once again, unless your accounts are already held with either Fidelity Investments or TD Ameritrade, your accounts will be moved over to either of those two brokerage firms.

FutureAdvisor Review – Robo-Advisor Pros and Cons

FutureAdvisor Robo-Advisor Advantages

  • You can use the account for free, to get your recommended portfolio allocations. The service continues to be available for up to three months thereafter. Although, Personal Capital also offers free portfolio analysis (and free money and investment dashboard).
  • FutureAdvisor offers access to financial advisors for your investment related questions.
  • FutureAdvisor does allow you to hold a small amount of personally selected securities in your portfolio. However the vast majority will be ETF’s managed by the platform.
  • The inclusion of global real estate and value funds is unusual with robo-advisor platforms, who typically invest in the most generic markets.
  • You don’t need to transfer your money to an external third party, if you are invested at TD Ameritrade or Fidelity.

FutureAdvisor Robo-Advisor Disadvantages

  • The fee structure of 0.50% is high among robo-advisors. Betterment and Wealthfront charge just 0.25%, with Wealthfront managing the first $10,000 for free. Meanwhile, Charles Schwab Intelligent Portfolios has no management fee at all.
  • The $10,000 minimum investment amount is on the higher end of the robo-advisory spectrum.

FutureAdvisor Robo-Advisor Review Wrap Up

Calls to financial advisors and the ability to leave assets in their Fidelity or TD Ameritrade accounts are major advantages of the FutureAdvisor platform. Access to value funds and global real estate funds is also unique. Although you could include value and global real estate funds when investing in M1 Finance, and their management fee is zero.

The fee structure on this platform is high enough to warrant considering lower costs alternatives. Although it’s a positive for many investors, particularly those with greater assets, to leave their funds with the existing brokerage firm.

The fact that the service can be used for free initially makes a compelling case to at least give this platform a try. If you like what you see, and you want to take advantage of the automated service, you can make the switch at any time.

If you’d like additional information, or if you’d like to sign up for the service, visit the FutureAdvisor website.

Contributing Columnist Kevin Mercadante is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry. He lives in New Hampshire and can be followed on Twitter at @OutOfYourRut.

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2 Comments

  1. Umberto Poggi
    August 8, 2018 at 1:28 pm — Reply

    Hello
    since I’m planning to expand my porfolio with other iShares ETF, I would like to know if you can give your robot-advisory services to EU customers (i live in Italy).
    Thank you in advance.

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