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 quarterly Robo Report, which analyzes 41 of the most well-known robo advisors. To gauge performance, the company opened accounts with equal allocations with each advisor. Here are 10 of the top robo advisors of 2020 from the third-quarter report.
Titan Invest isn’t your typical robo advisor, which may be why it has dominated in terms of performance in the atypical year that is 2020. “Instead of using a low-cost, passive approach built with ETFs (exchange-traded funds), Titan actively picks stocks, uses a tactical hedge and aims to outperform the market,” says Thomas Leahy, a research analyst with Backend Benchmarking. Thus far, this hedge fund-esque strategy has been successful for the robo advisor: Titan Invest returned 24.62% year to date and outperformed other robo advisor equity returns by almost 31% over the previous one-year period. “Titan is a great choice for investors who want an opportunity to beat the market while still enjoying some of the benefits of a robo advisor, including a low minimum of $100 and a sleek digital interface,” Leahy says. Just be aware that Titan Invest is a U.S.-only, all-equity advisor that does not provide financial planning at this time.
Morgan Stanley Robotics + Data + AI
As the name suggests, the Morgan Stanley Robotics portfolio on Morgan Stanley’s Access Investing platform invests in robotics, data analysis and artificial intelligence. The portfolio was the second-best overall performer during the one-year period ending Sept. 30, 2020, according to the Robo Report. This outperformance may be in part thanks to the portfolio’s heavy bias toward high-growth areas, including ETFs like the ARK Innovation ETF (ticker: ARKK), which has seen exceptional performance in recent years. “This choice makes sense for investors who want access to themed portfolio options with a sleek robo interface,” Leahy says, although the $5,000 minimum may be a barrier for some. The portfolio has an annual fee of 0.35%, plus the fees associated with the underlying mutual fund and ETF investments used by the portfolio.
Morgan Stanley SRI
Any investor still questioning if socially responsible investing, or SRI, hurts returns needs to see the results of this latest Robo Report. “For every pair of SRI and standard robos, the SRI portfolios had better equity performance over the two-year period despite higher fees for the underlying funds,” the report states. Year-to-date results were mixed, but the overall advantage still went to the SRI portfolios. The Morgan Stanley Access Investing SRI portfolio gives credence to this fact, Leahy says. “This SRI portfolio boasts a first-place finish in two-year equity returns for the period ending Sept. 30, even though its underlying fees for the SRI funds are higher.” Backend Benchmarking attributes this outperformance to SRI portfolios’ greater exposure to growth stocks, which have significantly outperformed value stocks in recent years. “This is a top choice for those looking for an automated, socially responsible option,” Leahy says, although, as with all Morgan Stanley Access Investing portfolios, it has a $5,000 minimum.
Further testament to the dominance of SRI in recent years, Wealthsimple’s SRI also made the podium for top year-to-date performance. It came in third for overall performance and second in fixed income, behind Wealthsimple’s non-SRI portfolio. Leahy says this performance was propelled by its long-term allocation to U.S. Treasurys and Treasury inflation-protected securities, or TIPS. “Wealthsimple’s SRI portfolio is a natural choice for investors looking to express social conscientiousness while accessing a great platform that includes access to live advisors at its Basic tier,” he says.
For investors who aren’t strictly socially conscious, Wealthsimple’s standard investing portfolio is also compelling. With three different tiers depending on the 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. In addition to access to SRI and Halal investing, the platform offers a zero minimum and access to a financial expert at no additional cost. For $100,000 and more, 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. “Also, Wealthsimple’s stock portfolio is unique in that it holds a large allocation of iShares minimum volatility ETFs for its foreign equities,” Leahy says. “Both of which may prove beneficial if those areas of the market come under duress.”
The top-ranking robo advisor in the last biannual Robo Ranking, SigFig, again won an impressive number of performance awards in the third quarter, Leahy says, including first place for total performance over the prior four-year and three-year periods. “Its long-term performance was bolstered by a large-cap bias, an emphasis on high-quality bonds and favoring emerging markets over developed markets in the foreign equities space,” he says. “With a low management fee of 0.25%, access to a financial expert with a $10,000 balance, great historical returns and a strong suite of digital tools, SigFig is a strong all-around choice.”
SoFi also took multiple awards for long-term performance, including the best equity performance of any robo advisor in the three-year period ending Sept. 30. “Its portfolio benefited from a large-cap U.S. bias and a significant tilt toward growth,” Leahy says. “Its SoFi Select 500 ETF (SFY), for example, holds the largest 500 U.S. companies and weights them according to growth metrics instead of market capitalization.” With a $1 minimum investment and no management fee, SoFi makes it easy to start investing. “SoFi is a great choice for investors who believe the trend of U.S. growth companies will continue to be top performers or those who may benefit from SoFi’s other services, including student debt management, and want their investments and other services under the same roof,” Leahy says.
“Fidelity Go has come up as a top performer throughout the life of the Robo Report and recently won first place in four-year equity returns and second place in three-year equity returns for the periods ending Sept. 30, 2020,” Leahy says. Its performance was bolstered by no-cost Fidelity Flex mutual funds and a large allocation to the Fidelity Flex 500 Index Fund (FDFIX), a fund that tracks the S&P 500, which was a strong performer during the time period. “For investors looking for a passive ETF portfolio, with low cost, a quality digital platform and a strong performance history, Fidelity Go is a great pick,” Leahy says. “The new Fidelity Spire app, which educates the user as they plan, makes it an especially good choice for those building their investment knowledge base.”
The Axos Invest robo advisor earned its spot in the top 10 robo advisors of 2020 list for its trailing three- and four-year performance ending Sept. 30, 2020. The robo had the second-best total portfolio performance for both these time periods. The platform’s Portfolio Plus feature has 32 asset classes for investors to choose from to give you more control over your allocation. With a 0.24% annual fee, it comes in on the lower side in terms of expense. The platform also has a $500 investment minimum.
For fixed-income investors, Schwab’s robo advisor is worth checking out. It had the best fixed-income performance over the four-year period ending Sept. 30. That said, outside of fixed income, Schwab’s performance has been lackluster. Schwab’s Domestic Focus portfolio had the worst performance relative to its benchmark on an absolute basis, according to the report. Year to date, its equity holdings underperformed the average robo advisor by more than 6.5%. This was driven mainly by a value tilt and heavy allocation to small-cap stocks, according to the report. Likewise, Schwab’s standard portfolio lagged all other robos over the longer term. Like Morgan Stanley, Schwab’s robo advisor has a $5,000 minimum.
Here are the top robo advisors in 2020:
— Titan Invest
— Morgan Stanley Robotics + Data + AI
— Morgan Stanley SRI
— Wealthsimple SRI
— Fidelity Go
— Axos Invest
More from U.S. News
Update 12/14/20: This slideshow was published at an earlier date and has been updated with new information.