FutureAdvisor Review: Using Robo-Advisors to Manage Investments

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Investing is an important part of planning for retirement and earning passive income. However, knowing how to invest can be difficult for new and experienced investors.

Robo-advisors like FutureAdvisor can make it easier to invest and have a diversified portfolio. If you don’t have the time or desire to self-manage your investments, this FutureAdvisor review can help you decide how to plan your investing goals.

3.9
Overall Rating

Summary

FutureAdvisor manages taxable and retirement accounts for a variety of investing goals using low-cost index funds. But the investment minimum is $5,000 and investors must invest with Fidelity or TD Ameritrade.

  • Account offerings

    4.5

  • Fees

    3.5

  • Investment options

    4

  • Investment minimums

    3.5

Pros

  • Automatic rebalancing
  • Low-fee index fund ETFs
  • Tax-loss harvesting
  • Taxable and retirement accounts

Cons

  • High fees
  • High minimum
  • No financial advisor access
  • No free portfolio analysis

FutureAdvisor Review Highlights

  • Management Fee: 0.50%
  • Account Minimum: $5,000
  • Type of Accounts Managed: Taxable Accounts, traditional IRA, Roth IRA

What is FutureAdvisor?

FutureAdvisor is a “robo-advisor” launched in 2012 and is part of the BlackRock investment firm family. This investing platform manages taxable, retirement and 529 college savings plans.

As a robo-advisor, FutureAdvisor manages your investment portfolio for you. As a result, you don’t have to decide what to invest in. However, FutureAdvisor doesn’t offer access to a live financial advisor for personal planning advice.

Some advantages of using FutureAdvisor include:

  • Automatic rebalancing
  • Tax-loss harvesting
  • Personalized sample portfolio recommendations
  • Investment goal tracking

To keep investing costs low, FutureAdvisor recommends index funds. These funds have low fund fees and diversify in many asset classes. Your recommended portfolio can hold BlackRock’s iShares index funds and other funds without trade commissions.

FutureAdvisor only works with Fidelity or TD Ameritrade investment accounts with a minimum $5,000 balance. You can deposit new cash to open a Fidelity or TD Ameritrade account.

If you already have accounts with Fidelity or TD Ameritrade, you don’t have to even roll over your accounts. You simply add a “management layer” to these accounts. If your accounts are held elsewhere, you’ll need to roll them over to Fidelity or TD Ameritrade.

Account Options

FutureAdvisor manages these account types:

  • Individual or joint taxable accounts
  • Traditional IRA
  • Roth IRA
  • Rollover IRA
  • SEP IRA
  • 529 college savings plans

Investment Minimums

The minimum account balance is $5,000 to use FutureAdvisor. Also, FutureAdvisor requires a cash balance of at least $500 to make new investments.

Advisory Fees

The annual advisory fee is 0.50% of the portfolio balance. FutureAdvisor collects this fee quarterly in 0.125% payments.

Other brokerage fees that Fidelity and TD Ameritrade charge may also apply. Currently, neither broker charges account service fees or trade commissions for the index ETFs that FutureAdvisor may recommend.

Additional fees of up to $50 can apply to mutual fund transactions. FutureAdvisor doesn’t recommend mutual funds to avoid potential fees.

Like any online broker, the ETF expense ratios are in addition to the FutureAdvisor annual fee. Most index ETFs have an annual expense ratio between 0.01% and 0.15%.

Investment Methodology

FutureAdvisor recommends a sample investment portfolio using the investor’s risk tolerance and investing goals. A model portfolio invests in low-fee stock and bond index ETFs with domestic and international exposure.

This investment strategy is similar to most robo-advisors. As an investor grows older, they can switch to a more conservative risk tolerance. Then, FutureAdvisor rebalances the portfolio to address changing investing goals.

Investors can expect FutureAdvisor to rebalance the portfolio between four and six times per year. Rebalancing is necessary when the portfolio drift exceeds the target asset allocation.

Household Investing

FutureAdvisor also offers to manage household investment accounts between two spouses or a spousal equivalent. “Householding” can help FutureAdvisor improve the results of tax-efficient investing and tax-loss harvesting.

There is no additional fee to manage household accounts. However, both accounts must have the same risk tolerance and investment horizon.

What Kind of Index-Based ETFs Does FutureAdvisor Offer?

The following are some of the stock and bond funds that FutureAdvisor may recommend:

Stocks

  • US: Vanguard US Total Stock Market (VTI)
  • US: iShares S&P 500 Index ETF (IVV)
  • Foreign: iShares MSCI EAFE Value Index (EFV)
  • Foreign: Schwab Fundamental International Large Company Index (FNDF)
  • Real Estate: Vanguard REIT Index Fund (VNQ)
  • Real Estate: SPDR Dow Jones International RelEst ETF (RWX)

Bonds

  • US: iShares U.S. Aggregate Bond (AGG)
  • US: Schwab US Aggregate Bond (SCHZ)
  • Corporate US Bonds: iShares iBoxx Investment Grade Corporate Bond ETF (LQD)
  • Foreign: Vanguard Total International Bond (BNDX)
  • International Emerging Debt: Vanguard Emerging Markets Government Bond (VWOB)
  • Short-term U.S. inflation-protected Treasury bonds: Vanguard 0–5 Year TIPS (VTIP)

As you can see, FutureAdvisor recommends iShares (managed by BlackRock) and non-iShares index ETFs. Access to multiple ETF providers can reduce your total investing fees and make it easier to diversify. Not only investing in iShares ETFs that BlackRock manages also adds a layer of trust to FutureAdvisor.

If transferring an existing brokerage account to FutureAdvisor, it’s possible to keep existing ETFs and individual stocks. Investors can “lock” individual stock positions with a small asset allocation. However, you most likely won’t be able to override the FutureAdvisor investment recommendations to preserve the potential benefits of a managed portfolio.

Who Should Use FutureAdvisor?

FutureAdvisor can be a good option for new and experienced investors that don’t want to self-manage their portfolio. However, investors must be comfortable using Fidelity or TD Ameritrade. Both online brokers are free to use for most stock and ETF trades.

If you’re like many people who aren’t sure where to start or what to invest your money in, a robo-advisor like FutureAdvisor may be a good option. The fees are low and you won’t need to be hands-on.

Investors that don’t have $5,000 to invest will need to consider another robo-advisor. Also, the 0.50% annual advisory fee is relatively high but not unreasonable.

How to Start Using FutureAdvisor

Signing up is free but you must link your brokerage accounts to start using FutureAdvisor.

Before linking your investment account, FutureAdvisor asks for the following details:

  • Investing goals: General investing, major purchase or retirement
  • Risk tolerance level: Conservative, moderate or aggressive (or somewhere in between)
  • Investment horizon: Years until you want to access your investment balance

From here, FutureAdvisor has you link a Fidelity or TD Ameritrade brokerage account. After linking an account, you will see the personalized asset allocation.

Whether you invest using Fidelity or TD Ameritrade, the minimum account balance is $5,000. FutureAdvisor will make new ETF purchases when the cash balance reaches $500.

Transferring Brokerage Accounts

FutureAdvisor will assist investors with transferring taxable and retirement accounts to Fidelity or TD Ameritrade.

For tax-sheltered IRAs with a balance smaller than $10,000, FutureAdvisor may sell the existing positions. Then, the cash balance reinvests in the portfolio recommendations.

With taxable accounts and tax-sheltered accounts larger than $10,000, FutureAdvisor attempts in-kind transfers. Some selling may be necessary for unsupported funds or stocks that exceed the target asset allocation.

College Fund Help

If you have kids, you want them to get the best education possible, without having to worry about the burden of debt. So, how do you save for their education and for your golden years?

Experts recommend making your retirement accounts a priority. In a pinch, your children can get loans to help them pay for college, but there is no such fallback for you if you don’t have enough for retirement.

Yet, a T. Rowe Price survey found that more than 69% of parents save for their kids’ college funds before they put away money into their retirement funds. You may understand this dilemma but working until you’re 70 or 80 may not be ideal either, especially if you get sick.

If you have a 529 account set up for your kid’s college fund, FutureAdvisor may help you figure out how much you should be putting away and help you manage it. This includes the distributions.

Positives and Negatives

Pros

  • Automatic rebalancing
  • Invests in low-fee index ETFs
  • Tax-loss harvesting
  • Manages taxable and retirement accounts

Cons

  • 0.50% annual advisory fee
  • No human financial advisor access
  • Requires minimum $5,000 investment account balance to join
  • Minimum $500 cash balance to buy more investments

Compared to Betterment or Wealthfront, FutureAdvisor charges slightly higher fees (0.50% vs. Betterment’s 0.25% and Wealthfront’s 0.25%). These robo-advisors have similar investment strategies as FutureAdvisor. Note that Fidelity or TD Ameritrade may have additional fees.

Transaction Fees to Watch Out For

For a proper FutureAdvisor Review, we are including information about additional fees. But you need to watch out for transaction fees with any robo-advisor.

Here are some examples of fees:

  • TD Ameritrade transaction fees may be $24 for mutual fund trades but no fees for stock and ETF trades.
  • Fidelity transaction fees may be a maximum of $50 per mutual fund trade, depending on the fund. The good news is that US stock and ETF trades are free.
  • For tax loss harvesting, there isn’t an ETF trading commission yet each sale can be a taxable event.
  • Account transfer fee: $50 to $100 per account to transfer or close your account.

FutureAdvisor Compared To Similar Products

There are a lot of products out there. Here are some other options that can be better if you have little money to invest or want lower advisory fees.

FutureAdvisor vs. Betterment

One of FutureAdvisor’s biggest competitors is Betterment, which offers similar services, advice, and products, but with slightly varying fees.

Betterment doesn’t have a minimum opening deposit. Plus, its management fees are lower than FutureAdvisor’s. Betterment charges 0.25% per year, which is less than FutureAdvisor’s 0.50%.

Tax-loss harvesting is free and you have access to similar index ETFs.

Betterment also has a premium option with an annual fee of 0.40%, which gives you unlimited access to its certified financial planning professionals for guidance on life events. In order to open this account, however, you need a minimum of $100,000.

You can also open a cash management account and online checking account with no annual fees. Some people may prefer to have their investments and bank accounts at the same place.

FutureAdvisor vs. Wealthfront

Wealthfront is another option worth considering. You need a minimum opening investment of $500 to open an account.

Wealthfront charges an advisory fee of 0.25% per year.

It doesn’t have any other fees such as trading, withdrawal fees, minimum fees, or transfer fees.

5 Other Investment Robo-Advisors

Choosing a robo-advisor for your long-term investments isn’t always just about who has the lowest fees. Since it’s all online and these companies are fiercely competitive, do your research. While Betterment and Wealthfront lead the pack, there are a number of others you may want to consider.

Other robo-advisors that are worth considering include:

1. Blooom

Blooom is a robo-advisor for 401k’s and other workplace-backed retirement accounts. It’s also possible to have Blooom manage Roth IRAs, traditional IRAs and less-common IRA types.

Depending on which plan you choose, Blooom can place trades and provide financial advisor access.

  • Fees: Between $45 per year and $250 per year, depending on the type of account
  • Account minimum: $0
  • Promotion: Free portfolio analysis

2. WealthSimple

WealthSimple‘s management fees are 0.40%–0.50% of your balance, depending on how large it is. There’s no account minimum and access to a fiduciary financial advisor is available to all members for a portfolio review.

WealthSimple sometimes offers cash bonuses with a qualifying deposit. Click on the link above for information on possible current cash bonuses.

3. Ellevest

Ellevest is a robo-advisor which targets women and invests in companies that advance women.

  • Management fee: $1, $5, $9 per month, depending on which membership you choose
  • Account minimum: $0
  • Promotion: Varies; see website using the link above for details

4. SoFi Robo Invest

Here are some of the basics about SoFi Robo Invest:

  • Buy and sell at no cost
  • No account minimums
  • Invest with as little as $1

An Automated Investing portfolio has no management fees but index fund fees apply. It’s possible to have a taxable or retirement account. The investment strategy depends on your risk tolerance.

5. Schwab Intelligent Portfolios

Here are some of the basics about Schwab Intelligent Portfolios:

  • Management fee: None
  • Account minimum: $5,000

While Schwab’s robo-advisor doesn’t charge an annual fee, the cash balance is higher than most. Aggressive investors may see better returns with another platform.

But I Already Have an IRA, Do I Need a Robo-Advisor?

Of course not. If anything, you probably need more time and money to grow your retirement funds. Choosing to roll your funds into a robo-advisor is really up to you and how you feel about automation of your retirement money.

The more important concerns that need addressing include:

  • Are you saving enough?
  • Maxing out your 401k?
  • Are you on track to retire by age 50? 65? (Or next year, for those who want FIRE.)
  • Are you keeping your spending in check?

According to an eye-opening Time.com piece, in order to be able to afford a comfortable retirement, a 40-year-old couple with a household income of $100,000 should have a savings of 2.6 times their salary, $260,000. By the age of 45, you should have 3.4 times your salary saved.

My Experience with Robo-Advisors

I have good experiences (so far) with robo-advisors. I also love the fact that it’s a hands-off approach to my long-term investments.

Besides adjusting my portfolio every now and then (which is now automatic) and saving as much as I can, I don’t want to be bothered. I suppose I have a level of trust in robots that some would not agree with, but it works for me and I’m satisfied.

So, for people like me, robo-advisors are a great option. I don’t need a real person to tell me to invest in certain funds mainly because I don’t want to pay for it.

I currently use Betterment and have had a really good experience with it. They send a regular cadence of emails that tell me how much they’re reinvesting and if they are rebalancing. It’s probably one of the few subscription emails I actually read. I also log in about once a month to get an in-depth picture of what my portfolio looks like and how it’s performing in general. You can read the review here.

Summary

I hope you find this FutureAdvisor Review helpful. We’re living in the future, folks. Robo-advisors like FutureAdvisor easily allow small investors to understand their portfolios for free and manage them for a low cost.

If you want a low-cost, hands-off approach to your retirement portfolio, consider a robo-advisor like FutureAdvisor. But make sure to do your research and find out what kinds of transaction fees are involved so you can max out how much you’re investing and better prepare for retirement.

What’s your investment style? Are you hands-off or hands-on? Let us know on social media!

All opinions expressed in this article are the authors. We are compensated by businesses that are mentioned in this article through affiliate links.

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