The second quarter was a strong one for robo advisors as the COVID-19 pandemic continues.
Not only did their portfolios on average match or exceed major market indexes but account openings surged, according to the latest Robo Report, published by Backend Benchmarking.
Their average equity portfolios returned 19.66% in the second quarter — in line with the 20% gain in the S&P 500 — and their average fixed income portfolio gained 4.15% — above the 2.9% return in the Bloomberg Barclays U.S. Aggregate Bond Index.
Plus, new account openings among several digital advisors soared, according to the Robo Report, citing data from Bloomberg.
Since the stock pandemic-fueled market sell-off began in late February (it ended about a month later), Wealthfront reported a 68% increase in new account openings, and TD Ameritrade’s robo-advisor reported a 150% jump in new accounts.
“While COVID-19 has caused widespread disruption in the markets, economies, and everyone’s lives, digital advice providers were well positioned to transfer to remote work, as they are … built for digital communication with clients,” said Ken Schapiro, CEO of Backend Benchmarking.
“Early reports show a surge in account openings at digital advice providers during the volatile first half of the year,” Schapiro explained.
The second quarter saw a continuation of certain trends among robo-advisors, including more consolidation and growing popularity of socially responsible investing, as well as new Robo Report rankings among firms.
New Top-Ranked Robo
The Robo Report rated SigFig the No. 1 robo-advisor for the second quarter due to its strong investment performance, access to live advisors and quality of its platform, displacing Fidelity, which had held the top ranking previously.
Sig Fig has a relatively low account minimum to open a self-directed account — $2,000 — and for an account with access to live advisors —$10,000. Also, it charges just 0.25% annually with no management fee on the first $10,000 invested.
In addition, Sig Fig has a “strong digital tool,” including a built-in retirement planner and links to external brokerage accounts and will analyze customer portfolios and flag issues such as high fees and improper diversification across and within asset types, according to the Robo Report.
It was also one of a handful of digital advisors that did little tax-loss harvesting during the first half.
The Robo Report ranked TD Ameritrade the No. 2 overall robo advisor and Fidelity Go, an earlier leader, third.