NerdWallet published in January its analysis of the best robo-advisors for consumers. Robo-advisors have “officially gone mainstream,” the website stated, pointing to automated platforms released by major brokers like eTrade, Fidelity and TD Ameritrade in the last year.
However, those incumbent firms had little to offer by way of innovation, according to the report. “Most failed to stand out in NerdWallet’s in-depth analysis of the industry, falling short of independent startups like Betterment and Wealthfront or merely mimicking those services at a higher price,” Arielle O’Shea, a writer for NerdWallet, noted. Established firms’ deep roots in the industry may be the very thing that holds them back from creative offerings, she suggested.
NerdWallet’s analysis identified service offerings where today’s robo-advisors are beating their competition, as well as an overall ranking of the best robo-advisors for consumers.
(Betterment fee information has been updated since the firm restructured its fees on Jan. 31 – Ed.)
Best Robo-Advisors for Minimizing Taxes
Honorable Mention: Personal Capital
NerdWallet gave Wealthfront an overall rating of five out of five stars, and gave Personal Capital four stars.
Regarding the platforms’ tax offerings, both offer “superior tax optimization services,” the report found, but Wealthfront edged out Personal Capital by drawing from a larger selection of individual securities. Wealthfront claims to add over 2% to annual investment performance with its direct indexing service, according to the report. Personal Capital pegs its performance increase through tax optimization at 1% annually.
Best Robo-Advisors for IRAs
Honorable Mention: Fidelity Go
Betterment users can link non-Betterment accounts like company 401(k)s and get advice on the full reach of their savings accounts.
However, Fidelity is one of the largest 401(k) providers, according to the report, and investors considering the robo-platform may well be Fidelity customers already. Even if they aren’t, Fidelity Go users have access to the full universe of retirement planning tools and apps, the report found.
What Fidelity Go doesn’t offer is 401(k) management. O’Shea said in an email to ThinkAdvisor that “it’s hard to find a robo-advisor that will directly manage a 401(k) – some hybrid services like Vanguard [Personal Advisor Services] will indirectly advise on 401(k) investments, but not directly manage them.”
Both platforms charge a maximum management fee of 0.35%, although Fidelity Go uses an all-in management fee that includes investment expenses, NerdWallet found. Users have to invest a minimum $5,000 in the Fidelity Go platform, compared to $0 at Betterment.
NerdWallet gave five stars to Betterment and four stars to Fidelity Go.
Best Robo-Advisors for 401(k)s
Honorable Mention: FutureAdvisor