Robo advisors have thrived during the pandemic.
Robo advisors saw a surge in account openings during the first half of 2020. This is even after the top five robo advisors grew 38% year over year though the end of 2019, according to Backend Benchmarking. To help investors sort through the ever-increasing options available, Backend Benchmarking publishes a biannual Robo Ranking, which analyzes and ranks robo advisors. After opening accounts at each robo advisor, the company scores them based on more than 45 metrics, including the quality of financial planning services offered, product features, access to live advisors, user interface, transparency, cost, performance and account minimums. Here are the top 10 robo advisors of 2020 from the second-quarter report.
For the first time, SigFig overtook Fidelity Go to claim the top robo advisor spot. SigFig earned its crown thanks to its strong performance, low fees and access to human financial advisors. In fact, it had the best performance relative to its benchmark over the 2.5 years used in the analysis. “SigFig boasts an exceptional track record of performance, a competitive management fee of 0.25% annually and access to financial advisors at no additional cost,” says Thomas Leahy, a research analyst at Backend Benchmarking. “These features make it an excellent overall choice for most investors.”
Also climbing up the ranking is TD Ameritrade’s robo advisor platform. “TD’s robo combines modern, automated investing and old-school advice,” Leahy says. It earned a perfect 15 out of 15 in the financial planning category and 8 out of 10 for its access to financial advisors. “Clients can call or visit a financial consultant in TD branches, making it an ideal choice for those who want a traditional sit-down experience,” he says. “However, clients need to be aware that this platform may change after TD’s acquisition by Schwab.” Schwab expects the acquisition to be completed this year and integration efforts to begin immediately thereafter.
After being the top-ranked robo advisor for three consecutive reports, Fidelity Go has slid to No. 3. While this marks a decline in its relative ranking, the robo still has a lot to offer. “With a strong record of performance, a growing suite of digital tools and a transparent all-in cost structure, it’s no surprise Fidelity Go has won two Best Overall Robo awards,” Leahy says. “It’s particularly well-suited for new investors, especially with its new tool Fidelity Spire, an integrated app for cash management and financial education.”
Coming in with an overall score of just more than 72 out of 100, TIAA’s robo advisor claims the No. 4 spot. “TIAA is a top-performing robo that, for a $5,000 investment minimum, provides access to advisors, financial planning and different investment options,” Leahy says. “TIAA professionals can leverage the broader firm for more complex questions including trusts and wealth planning.” Investment options within the robo advisor include socially responsible investing and an actively managed portfolio. It’s also worth noting that the company now requires users to sign up over the phone as opposed to solely online.
Fifth overall, “Vanguard won Best Robo for Complex Financial Planning due to its live advice-centric platform, Personal Advisor Services, which offers hybrid advice for only 0.3%,” Leahy says. Many other robos offer more in-depth planning at a higher-fee service tier. This makes Vanguard “ideal for investors who want a live advisor to break down a financial plan‘s complexities while having the low cost and automated investing of a robo,” Leahy says. The report notes that Vanguard’s Personal Advisor Services digital planning tools are not as “feature rich” or as flexible as Personal Capital’s, which was the category runner-up, but Vanguard makes up for this in its traditional approach to high-quality advice.
“E-Trade Core is a strong overall offering with low fees and a minimum of only $500,” Leahy says. “For planning questions, there is a staff of professionals who can assist investors in addition to a suite of online tools.” The robo fell short in overall features, earning only a 2.8 out of 10. It also received only a 5.62 out of 10 for customer experience. “However, with Morgan Stanley recently acquiring E-Trade, the platform may experience significant changes,” Leahy notes.
No. 7 on the list of best robo advisors is Betterment. “Betterment won Best Robo for First-Time Investors due to its intuitive set of digital tools and a sleek user interface ideal for the digital investor,” Leahy says. The robo’s lackluster performance has held it back from earning a higher overall ranking, but it does well in most other categories, notably ranking second-best (behind Personal Capital) for transparency and conflicts of interest. “For an extra cost, there’s access to (certified financial planners) via Betterment Premium or individual planning sessions if clients need expert advice,” Leahy says. “Lastly, Betterment Everyday is a popular high-yield cash account that adds to Betterment’s modern features.”
“The only robo that uniquely caters to women, Ellevest stands out for its low cost, low minimum and membership-fee pricing,” Leahy says. “Ellevest’s multiple tiers include an affordable fee of $1 per month for just the essentials and up to $9 per month for multigoal plans,” earning it a near-perfect score on the cost metric. The robo advisor also recognizes investment performance is not the only financial hurdle women must overcome. It’s “the only robo that offers career coaches to help with negotiations or interview preparation,” Leahy says. And just because it caters to women doesn’t mean men can’t use the platform, too.
New to this quarter’s Robo Report, Wells Fargo Intuitive Investor earned a respectable ninth spot in the rankings. “If an investor reaches the $5,000 minimum for Wells Fargo’s Intuitive investor, they are getting access to financial advisors between 8 a.m. to 8 p.m. Eastern Time, along with competitive fees, performance and tools,” Leahy says. “This is a good choice for clients who would like to speak to a team of professionals more regularly.” It is less of a good choice for those looking for lots of features, as the platform earned only a 3 out of 10. Being newer, it’s also hanging near the bottom of the pack in terms of size and tenure.
With three different tiers depending on your initial deposit, investors can do a lot with Wealthsimple’s robo advisor. “At Wealthsimple’s Basic level, for assets under $100,000, an investor can do a lot for a 0.5% fee,” Leahy says. “Clients can schedule a portfolio review with an expert and round up expenses to the nearest dollar and invest the difference.” You can also choose to use a socially responsible portfolio and/or a halal portfolio at the Basic level. For $100,000 and up, you can get access to Wealthsimple Black, which comes with a lower fee of 0.4% and a financial planning session. The highest tier for $500,000 and more is Generation. This gets you holistic financial planning to help you build a legacy with individualized portfolios and a dedicated team of advisors.
Here are the top robo advisors in 2020:
— TD Ameritrade
— Fidelity Go
— E-Trade Core
— Wells Fargo
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Update 09/14/20: This slideshow was published at an earlier date and has been updated with new information.