21 Best & Worst Robo-Advisors for Client Transparency

Paladin Transparency Index calls out online advisors who don't share critical data with clients

Some robo-advisors are more upfront with fees and other information than others. Some robo-advisors are more upfront with fees and other information than others.

Paladin Research released Tuesday a rating of 21 online financial services companies using a scale of 1 to 5 to gauge how well each firm does at providing investors with information about their services.

In rating the online financial advisors (OFAs), Paladin developed the Paladin Transparency Index to measure the “completeness and accuracy” of information on the online advisors’ websites. Ratings ranged from 5 to 1; a score of 5 indicates firms that show "full transparency," while a score of 3 was given to firms that "obscure certain information," and a PTI Score of 1 was given to firms that "withhold important information."

Paladin founder Jack Waymire told ThinkAdvisor that Paladin developed its rating of the online firms by comparing data obtained from their Terms of Service agreements and Form ADVs filed with the Securities and Exchange Commission, as well as reports the firms file with the Financial Industry Regulatory Authority, with the information that's on their websites, which act as the firms' marketing tools.

These firms' websites "are a lot more important to these [online] advisors because they don't have a sales force," Waymire says. "They are using their websites to sell their service," but some firms are better at disclosing information on their websites that actually appears in their terms of service agreements and ADVs. “They all preach transparency, but they don’t necessarily practice transparency.”

Firms who scored a lower rating fail to disclose, for instance, how many clients they have, their assets under management or their fees. Waymire says that some firms with lower scores have asked him how they can raise their rating. His response: "If you want to raise the rating, get rid of [the number of] Did Not Disclose (DNDs)" mentions in the firm's ranking.

While "robo-advisor" has become the most popular name used to identify online financial advice firms, Waymire argues that the term “robotic” is not a good description, as these firms’ “automated investment processes were programmed by humans” and most of these firms have added human contact by email, telephone, or Skype.

He argues that online advisory firms should provide on their websites “all” information consumers would need to select a top quality online advisor.

Read on to see how Paladin rated 21 online advising firms like WealthFront, Motif Investing, Folio Investing and Motley Fool, in order from lowest to highest:

FinancialGuard

Motley Fool Wealth Management

Paladin Transparency Index (PTI): 2.5

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.fool.com

Year Established: 2013

Headquarters Location: Alexandria, VA

Types of Financial Services: Financial advice and services, financial planning and services

Future Advisor

Paladin Transparency Index (PTI): 2.5

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.futureadvisor.com

Year Established: 2010

Headquarters Location: San Francisco, CA

Types of Financial Services: Investment advice and services

FinancialGuard

Paladin Transparency Index (PTI): 3.0

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.financialguard.com

Year Established: 2011

Headquarters Location: Salt Lake City, UT

Types of Financial Services: Planning services and advice, portfolio consulting

WiseBanyan

Paladin Transparency Index (PTI): 3.0

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.wisebanyan.com

Year Established: 2009

Headquarters Location: New York, NY

Types of Financial Services: Investment advice and services, planning advice and services

FlexScore

FlexScore

Paladin Transparency Index (PTI): 3.0

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.flexscore.com

Year Established: 2013

Headquarters Location: Modesto, CA

Types of Financial Services: Planning services and advice

Covestor

Paladin Transparency Index (PTI) : 3.5

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.covestor.com

Year Established: 2006

Headquarters Location: Boston, MA and London, UK

Types of Financial Services: Investment advice and services

Edelman Financial Services

Paladin Transparency Index (PTI): 3.5

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.edelmanfinancial.com

Year Established: Over 25 years ago

Headquarters Location: Fairfax, VA

Types of Financial Services: Investment advice and services, planning advice and services

SigFig

Paladin Transparency Index (PTI): 3.5

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.sigfig.com

Year Established: 2011

Headquarters Location: San Francisco, CA

Types of Financial Services: Investment advice and services

Folio Investing

Folio Investing

Paladin Transparency Index (PTI): 3.5

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.folioinvesting.com

Year Established: 1999

Headquarters Location: McLean, VA

Types of Financial Services: Investment services (Brokerage)

Jemstep

Paladin Transparency Index (PTI): 3.5

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.jemstep.com

Year Established: 2008

Headquarters Location: Los Altos, CA

Types of Financial Services: Investment advice and service

Market Riders

Paladin Transparency Index (PTI):3.5

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.marketriders.com

Year Established: 2008

Headquarters Location: Palo Alto, CA

Types of Financial Services: Investment advice and services

Motif Investing

Paladin Transparency Index (PTI): 3.5

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.motifinvesting.com

Year Established: 2011

Headquarters Location: San Mateo, CA

Types of Financial Services: Investment services (Brokerage)

Personal Capital

Personal Capital

Paladin Transparency Index (PTI): 4.0

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.personalcapital.com

Year Established: 2011

Headquarters Location: Redwood City, CA

Types of Financial Services: Investment advice and services, planning advice and services

TradeKing Advisors

Paladin Transparency Index (PTI): 4.0

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.tradekingadvisors.com

Year Established: 2014

Headquarters Location: Charlotte, NC

Types of Financial Services: Investment advice and services

Betterment

Paladin Transparency Index (PTI): 4.0

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.betterment.com

Year Established: 2007

Headquarters Location: New York, NY

Types of Financial Services: Investment advice and services

Hedgable

Paladin Transparency Index (PTI): 4.0

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.hedgeable.com

Year Established: 2009

Headquarters Location: New York, NY

Types of Financial Services: Financial advice and services

LearnVest

Leanvest

Paladin Transparency Index (PTI): 4.0

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.learnvest.com

Year Established: 2012

Headquarters Location: New York, NY

Types of Financial Services: Planning advice and services

Asset Builder

Paladin Transparency Index (PTI): 4.5

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.assetbuilder.com

Year Established: 2006

Headquarters Location: Plano, TX

Types of Financial Services: Investment advice and services

Vanguard VPAS

Paladin Transparency Index (PTI): 4.5

Type of Financial Firm: Online Financial Advisor (OFA)

URL: https://investor.vanguard.com/info/advice/personal-advisor/desktop

Year Established: Vanguard advisers (1995) Vanguard Personal Advisor Services (2013)

Headquarters Location: Malvern, PA

Types of Financial Services: Investment advice and services, planning advice and services

RebalanceIRA

RebalanceIRA

Paladin Transparency Index (PTI): 5.0

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.rebalance-ira.com

Year Established: 2011

Headquarters Location: Palo Alto, CA

Types of Financial Services: Investment advice and services

WealthFront

Paladin Transparency Index (PTI): 5.0

Type of Financial Firm: Online Financial Advisor (OFA)

URL: www.wealthfront.com

Year Established: 2008

Headquarters Location: Palo Alto, CA

Types of Financial Services: Investment advice and services

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