Some time ago we wrote about the disruption in the financial services space being led by companies like Wealthfront. This
Set it and forget it investing: Wealthfront and Betterment
Most people know that the smartest way to save money on a regular basis is to make it an automated habit. Either arrange for an automatic payroll deduction from your employer (or draw if you're a business owner) or create an automated ACH to take the money out regularly. This is not difficult to sell. People know that if it's taken out of their hands and off their to-do lists, it becomes much easier to save. In an era of disruption it's not surprising to learn that traditional investing is itself being disrupted by smart algorithms and machine learning. The two big players in this space are Wealthfront and Betterment.
What they both offer
They both have billions of dollars of assets under management and are backed by serious VC money. They both have you start the process by taking a quiz (5-10 minutes) to find out what your risk profile is. Both companies then use that risk profile in order to create an asset allocation and portfolio based on your risk tolerance and investing goals.
Both of these companies are taking the asset allocation view of investing (as opposed to individual stock picking) which is championed by Tony Robbins in his book Money: Master the Game. Both of them feature rock-bottom fees in contrast to the old model "financial advisor" fee-based business model, and up the game by featuring as standard things that would normally have only been offered to high net-worth investors in the past, things like automatic tax-loss harvesting and portfolio rebalancing. They are also SPIC insured and have world-class apps, should you wish to keep a close eye on the growth of your nest egg.
This is the robo-advisor backed by Tim Ferriss and although normally the first $10,000 is managed with no fees at all, Tim Ferriss has famously offered to up that by 50% and if you use this link you'll get your first $15,000 invested with zero fees. You can also up that in $5,000 increments depending on whether friends you refer also use the service. After your first $15k you'll be charged a flat .25% (yes, that's one quarter of one percent) on the rest of your portfolio. You have to invest $500 minimum and they now offer 529 College Savings plans among their products.
This is the platform backed by people like Mr. Money Mustache and while it features no minimum investing amount, it also offers no free investing. Fees range from .35% to .15% depending on what you invest (if you invest more, your rate goes down), but at $2M of investment, those percentages disappear and you are simply charged an annual $5,000 fee. This link (from Mr. Money Mustache) will get you one fee-free month. Betterment also offers a new product called RetireGuide which can help you plan for retirement including projected Social Security payments.
Which is best for you?
That's not a question we can answer definitively, because we don't know what your investment goals, risk tolerance, or time horizon is, for starters. But, we do know that automated investing results in more reliable savings, and that these robo-brokers are genuinely disrupting the financial services space, to the tune of more money in your pocket, both now, and decades from now when you start drawing those funds down. The important thing, as always, is to start.
Do you prefer one of these companies? Or another we didn't mention? Let us know in the comments below and we'll put some money in your pocket, by giving you a coupon for 35% off any of our shave services.
About Ben Davis
A serial entrepreneur, Ben Davis is founder of The Gents Place and a leading investor in gentlemen's refinement and confidence.
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