Forum reference:
Fund managers entering competition for automated
technologies, with chart of current passive investment support products
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Source:
The New York Times, November 20, 2015 article and
chart |
![](NYT%20logo.gif)
Your Money
Fidelity Joins
Growing Field of Automated Financial Advice
By
RON LIEBER
NOV. 20, 2015
Fidelity Investments is flirting with the investment robots.
Fidelity is testing its own automated investing platform, which it is
calling Fidelity Go. The move puts the company into head-to-head
competition with so-called robo-adviser start-ups like
Betterment and
Wealthfront, as well as
traditional players like Vanguard and Schwab that recently began
offering similar services.
The
Fidelity details are listed in a Securities and Exchange Commission
filing, and a company phone
representative confirmed the existence of the new service, as did a
Fidelity spokesman.
At the
moment, Fidelity Go is available to only a few hundred of the
company’s employees, though Fidelity plans to invite some customers to
test it early next year and then do a public introduction after that.
Like
the competing products, the company will ask customers to fill out
online questionnaires about their investment goals and risk tolerance.
Then, it will suggest a low-cost portfolio of investments. Fidelity’s
filing said the program would be free for now, though it eventually
expected to charge a fee. The phone representative said it would cost
0.1 percent to 0.2 percent annually, not including the costs of the
mutual or
exchange-traded funds in the
portfolio. Robert Beauregard, a Fidelity spokesman, said the company
was still deciding what fees to charge.
Investment costs are where the rubber often meets the road in
investing success, and Fidelity, in its filing, promised that the
portfolio costs would be “lower than average.” While a “significant”
portion of the portfolios, which will invest in stocks, bonds and
presumably safer short-term investments, will be in investments that
track market indexes, some money will go into Fidelity’s own actively
managed
mutual funds. That provides an
advantage to customers only when those mutual funds outperform the
index fund in its market segment over time. Most actively managed
funds don’t accomplish that. Mr. Beauregard said that Fidelity would
refund a majority of fees it earned from its own funds to Fidelity Go
customers who invested in them.
These
services have proved attractive to investors who say they believe that
trying to beat the market is foolish and do not want the hassle of
finding the best index funds and remembering to buy and sell them at
the right times to make sure their portfolios are not getting too
risky or too safe.
Over
the last several years, Betterment and Wealthfront have each gathered
about $3 billion in assets.
Schwab’s Intelligent Portfolios
offering, which
it introduced in March, had
collected $4.1 billion as of Sept. 30.
Vanguard reports $26 billion
in its service, $16 billion of
which it says is new to the firm, with the rest coming from existing
accounts. It offers financial planning with people, in addition to
automated investment management, for its 0.3 percent annual fee.
A
version of this article appears in print on November 21, 2015, on page
B5 of the New York edition with the headline: Fidelity Plans Test of
Advice by Robot.
© 2015 The
New York Times Company |
Inexpensive Advice for Index and Exchange-Traded
Fund Investments
These
companies offer help picking and rebalancing index and exchange-traded
funds or similar investments, and none charge more than about 0.5
percent of your assets each year for the privilege.
Related Article
Company/Product |
Costs |
Minimum Balance Requirement |
Comments |
AssetBuilder |
0.20 to 0.45 percent
of assets, depending on balance, plus trading costs |
$50,000 |
Uses investments from a company
called Dimensional Fund Advisors, which creates funds that are
similar to index funds but don’t mimic standard indexes precisely.
Includes help from a human during account opening. |
Betterment |
0.15 to 0.35 percent
of assets |
None, but people with less than
$10,000 must deposit $100 each month or pay a $3 monthly fee |
One feature helps people determine
a safe amount of money to withdraw for retirement each month.
Betterment also offers tax-loss harvesting in taxable accounts and
support for trust accounts. |
Charles Schwab (Schwab
Intelligent Portfolios) |
Free
(Schwab does make money when it uses its own funds in the
portfolios) |
$5,000 |
Schwab says it does not disqualify
any funds that don't pay it fees to be considered; it does make
money this way in other parts of its business. |
Fidelity Go |
No announcement yet, since it is
still in beta |
None yet |
In an employee beta as of late
2015, set for invite-only beta in early 2016. Some portfolios may
include a few actively managed Fidelity mutual funds. |
Financial Guard |
$15.95 per month
or $149.95 annually, plus trading costs |
None |
Financial Guard gauges risk,
examines all of a customer's investment accounts and suggests
funds to buy and sell. Customers can request index or
exchange-traded funds, which Financial Guard recommends.
|
Folio Investing
(Unlimited Plan) |
$29 per month
or $290 annually |
None |
Folio Investing has a number of
“Ready to Go” portfolios of exchange-traded funds that customers
can buy in a single transaction. |
FutureAdvisor |
0.5 percent
of assets |
None |
FutureAdvisor will advise on,
watch and rebalance multiple Individual Retirement Accounts and
taxable brokerage accounts at Fidelity or TD Ameritrade. Customers
don't have to sell investments in taxable accounts and potentially
pay capital gains taxes to use the FutureAdvisor service if they
already have money at those firms. |
Hedgeable
(Basic Plan) |
None |
$5,000 |
Hedgeable also offers a Plus Plan
with more active monitoring and charges 0.40 to 0.75 percent of
assets. |
Invessence
|
$250 per year
for balances under $100,000, 0.25 percent of assets for
balances over $100,000 |
$5,000 |
Only in Connecticut, Illinois,
Michigan, New Jersey, New York, North Carolina, Pennsylvania,
Texas and Virginia so far. Invessence does the trading and
rebalancing. |
Jemstep Portfolio Manager |
Free
for first $25,000; $17.99 to $69.99 per month after that,
depending on balance, plus trading costs |
None |
Jemstep also evaluates the
holdings in your 401(k) or other workplace retirement account,
which other services may not do. |
MarketRiders |
$14.95 per month
or $149.95 annually, plus trading costs |
None |
MarketRiders tells you which funds
to buy and when to rebalance but doesn’t do it for you. The
company’s owners started Rebalance IRA for people who want more
help. |
Motif Investing (Horizon
Portfolios) |
None |
$250 |
There is a conservative, moderate
and aggressive portfolio of exchange-traded funds that Motif has
built. Motif does the rebalancing and is itself a brokerage firm. |
Rebalance IRA |
0.5 percent
of assets, plus $250 start-up fee and trading costs |
None, but there’s a $500 minimum
annual fee |
As the name suggests, Rebalance
IRA specializes in retirement accounts; their service includes
human contact with a dedicated adviser. |
SigFig
(Managed Account) |
$10
per month |
$2,000 |
SigFig manages money in your
existing account if it's at Charles Schwab, Fidelity or TD
Ameritrade. There are no trading costs, and the company trades for
you. |
Target-Date Mutual Funds
(Various Companies) |
Vanguard’s are inexpensive and
made up of index funds with average costs of 0.17 percent |
Generally very small, if any |
Sometimes companies stuff
target-date funds with their own actively managed mutual funds,
which can raise costs. Funds from competing companies with the
same target date may have very different ratios of stocks to bonds
and other assets. |
Vanguard
(Personal Advisor Services) |
0.3 percent
of assets |
$100,000 |
Vanguard is alone among this group
in including full-service financial planning in the price. The
company is hoping to lower the minimum balance to $50,000. |
Wealthfront |
Free
for the first $10,000; 0.25 percent after that |
$500 |
Wealthfront does tax-loss
harvesting for all taxable accounts and helps Twitter and Facebook
shareholders sell their stock and diversify in an efficient
fashion. |
WiseBanyan |
None |
None |
WiseBanyan makes money by charging
for various additional financial planning services. |
Costs are
annual unless otherwise noted. There are also underlying fees for the
funds that every one of these services uses, though they tend to be
low since they go into index or similar funds. Trading fees,
commissions and related charges are included unless otherwise noted;
some companies are able to absorb them. Companies that have a range of
fees usually charge less as you give them more money to manage.
The New York Times and Corporate Insight
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