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Portfolio > Portfolio Construction

Vanguard's Robo Tops New Ranking

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In its summer edition of The Robo Ranking, Backend Benchmarking provided its listing of top robo-advisors over a two-year period. Best overall robo was Vanguard, followed by runner-up Betterment, with an honorable mention to SigFig. The review judged robos on more than just performance.

For example, one reason for Vanguard’s top spot is that, according to the The Robo Ranking, it offered professionally managed accounts, rebalancing, live advisors, full-service financial planning and a two-year annualized return of 9.11%, with a management fee of only 0.30%. The account minimum of $50,000 hasn’t been a deterrent as the Vanguard robo has three times the assets under management as its closest rival, according to the report.

However, Vanguard’s robo wasn’t perfect, according to the paper, as it “lagged in transparency and conflicts of interests category.” Further, the online experience is a bit old, the report intimated, stating those seeking more innovative tools might look elsewhere.

On the other hand, Betterment, as runner-up, has continued to be on the “cutting edge of user experience and technology.” The robo’s two-year annualized return was 8.61%, has no minimum account size for digital-only customers, and $100,000 minimum for its premium service, and charges 0.25% for digital only and 0.40% for premium, which included unlimited chats and calls with advisors.

The report noted that Betterment’s website was “intuitive and helpful,” adding that it allowed users to compare their portfolio to benchmarks. “Although Betterment’s performance has lagged behind the group over the long term, their breadth of services and features propelled them to the second overall score in our ranking. Betterment has a well-rounded, quality platform and a strong value proposition to investors.”

In its honorable mention of SigFig for Best Overall Robo, Backend Benchmarking noted it had a good user interface and customer experience along with an ability to aggregate outside accounts. SigFig has a low minimum, $2,000, and a low cost of 0.25%. Further, its two-year annualized returns were 9.33%.

Other category winners were:

  • Best Robo for Performance at a Low Cost: Vanguard
  • Best Robo for Complex Financial Planning Needs: Personal Capital
  • Best Robo for Digital Financial Planning: Personal Capital
  • Best Robo for First Time Investors: Betterment

Backend Benchmarking uses both qualitative and quantitative factors to come up with its rankings. It uses qualitative reviews of services, platform, company and features, and then uses a quantitative score mainly based on costs and performance. It also uses two-year results, which is why it didn’t provide a comprehensive review of incumbent financial institution robos. It stated those will be provided in its next review, which will be in six months.

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