This post may contain affiliate links.
FutureAdvisor Review

FutureAdvisor Review

Need A Quick & Easy $370+ Every Month For Free?

Description

With a free retirement tool and advice for DIY, Fidelity, and TD Ameritrade investors, FutureAdvisor is a robo-advisor with a lot to offer.

FutureAdvisor Review

Introduction

Robo-advisors have made a considerable change to the world of investments since Betterment and Wealthfront pioneered the movement.

Designed to challenge the exorbitant cost of hiring an independent financial planner, robo-advisors use expertly crafted computer-generated algorithms to do the same job for a fraction of the price. The market has since become saturated with robo- and hybrid-advisors, some of which are great, some of which are not so great.

FutureAdvisor has added a new twist to the game and made themselves stand out among their larger competitors. As their website claims: “You already have investment accounts, we help make them smarter.”

But how exactly does FutureAdvisor do so?

Well, for one, they offer a range of services without putting a price tag on them. One of these is their much-lauded retirement analysis.

The comprehensive tool allows you to link your existing retirement accounts, specifically 401k, Traditional, Roth, Rollover, and SEP individual retirement accounts (IRAs) to FutureAdvisor. You'll then receive investment recommendations based on your particular portfolio and goals.

It's worth pointing out that FutureAdvisor won't directly manage or hold your accounts, though. You'll need to be an existing Fidelity or TD Ameritrade customer.

The same is very nearly true for their premium service, as the above-mentioned brokerages will continue to hold your account. However, if you do join their premium tier, FutureAdvisor has an agreement to take over account management for you.

As a premium client, you'll benefit from access to a team of financial planners, automatic rebalancing, and tax-loss harvesting services.

There is a catch: FutureAdvisor charges a management fee of 0.50% for premium clients. You'll also need to have an account balance of $10,000 or more, and the company doesn't accept new clients who are already retired.

We'll take a deeper look into all these pros and cons throughout our review. In the end, you'll walk away with a better chance at making a smart investment choice.

Quick Facts

  • Management fee: 0.50% (premium clients only)
  • Account minimum: $10,000 (premium clients only)
  • Promotion: Mint users get 6 months free for FutureAdvisor premium services (see how it works here)

FutureAdvisor is Best For

FutureAdvisor looks and sounds great. But like any other service, there are a few investor types who will be able to make the most out of what the company has to offer – and more so than others.

If you fit the bill for one or more of these types, FutureAdvisor may be a robo-advisor worth looking into:

  • Hands-off investors looking for access to a financial advisor
  • Do-It-Yourself investors who would appreciate a professional second opinion
  • TD Ameritrade and Fidelity clients

Pros

There's definitely a lot to love about what FutureAdvisor has to offer. Here are the areas where we feel the service truly shines.

+Free Tools & Professional Advice

As mentioned in our introduction, FutureAdvisor operates on two levels – a free portfolio analysis service, and FutureAdvisor Premium – which offers direct investment management for Fidelity and TD Ameritrade clients in exchange for an advisory fee of 0.50%.

DIY investors will benefit the most from FutureAdvisor's free, personalized portfolio analysis and investment recommendations. This type of investor commonly makes use of online discount brokerages and/or individual investment account platforms, rather than hiring a professional money manager or utilizing a full-service brokerage.

As such, there's very little in the way of receiving professional advice for DIY investors. But it can be invaluable to have access to that type of advice, even if only as a second opinion.

That's where FutureAdvisor comes in.

Regardless of what discount brokerage or investment account platform you use as a DIY investor, if you sign up for FutureAdvisor's free services, the company will analyze your portfolio for you. Their computer-generated robo-advisor algorithms will then give you trade recommendations based on your portfolio and goals.

FutureAdvisor, like the bulk of its robo- and hybrid-advisor competitors, bases their investment philosophy on the modern portfolio theory.

In brief, this entails:

There are two things worth noting before we continue.

Firstly, not all financial experts are a fan of glide paths: take a look at the counter-argument here. It's up to you to decide whether or not you take FutureAdvisor's glide path recommendations in consideration when managing your own portfolio as a DIY investor.

Just be aware that those recommendations will include these glide paths, as FutureAdvisor doesn't allow you to override their provided advice for more suitable advice.

At best, you'll be able to lock a few select assets. And we do mean few – the company won't allow you to lock any assets that form more than a “relatively small portion” of your portfolio, according to their FAQs.

This is true for premium clients as well, where FutureAdvisor makes investment decisions on your behalf.

Secondly, FutureAdvisor doesn't include tax-loss harvesting in their recommendations for free clients. This can negatively impact the overall tax efficiency of their advice, so as a DIY investor, you may want to adjust their recommendations while applying them.

However, you should also be aware that not all financial experts advise using tax-loss harvesting as a tax-efficiency strategy. You can read about that counter-argument here.

This actually means that DIY investors have a slight advantage over premium clients. Remember, FutureAdvisor doesn't allow clients to adjust or override their investment decisions.

If you belong to the school of thought that believes the tax-loss harvesting risks override its benefits, as a DIY investor you won't have to worry about including them while working with the advice you receive from FutureAdvisor.

It's up to you to decide whether these two factors are pros or cons.

+Top-Rated Online Brokers

While you don't need to be with any specific online brokerage to benefit from FutureAdvisor's free services, you will have to be with TD Ameritrade or Fidelity to become a premium client with direct management.

This could be considered a disadvantage if you're interested in engaging FutureAdvisor's premium services but are with a different brokerage.

However, the need to then transfer your accounts isn't unique to FutureAdvisor. In fact, most robo-advisors offering similar services have the exact same requirement or want you to hold your accounts with them. And FutureAdvisor will assist in the transfer.

Even though such transfers can be a hassle regardless of the assistance, it can still work in your favor. There are few competitors that are able to match TD Ameritrade as a top-rated online broker1. And there are even fewer that live up to the high standards set by Fidelity.2

The advantage is compounded even further if you're already a Fidelity or TD Ameritrade client. You don't have to deal with any transfers. All that needs to happen is giving managerial rights to FutureAdvisor, and they'll immediately take over your account and start trading on your behalf.

This means that, as an existing TD Ameritrade or Fidelity client, giving FutureAdvisor a try is virtually risk-free.

Their premium services initiate with an account rebalancing. According to the FAQs, this is because tax-advantaged account with less than $10,000 in assets need to be liquidated, while those with more than $10,000 can sometimes be transferred without liquidation. Rebalancing ensures that your account is back on track in terms of target allocation and reaching your goals.

FutureAdvisor will only start charging premium clients their 0.50% management fee in the month following this initial rebalancing.

So why do we say it's virtually risk-free for existing Fidelity and TD Ameritrade clients?

For one thing, you won't necessarily have to undergo any rebalancing. And even if you do, due to FutureAdvisor's recommendations, if you decide you're not happy with the service, you can revoke their managerial rights before the beginning of the next month.

+Financial Advisor Support

FutureAdvisor isn't strictly speaking a robo-advisor, but neither are they a hybrid-advisor. Instead, they fall somewhere between the two designations.

Clients are able to contact their team of financial advisors five days a week, via your choice of email or phone call. All you need to do is set up an appointment with one of these advisors.

Additionally, FutureAdvisor doesn't leave account monitoring in the hands of their computer-generated algorithms: a human advisor provides additional monitoring.

This human touch can be invaluable to the discerning investor.

Cons

We've provided a lot of information on how FutureAdvisor operates in the previous section. However, there are a few more things that you need to take into consideration before engaging their services: namely, the following contention points.

-High Account Minimum

This only really applies to investors who want to become premium clients, but it is a considerable contention.

With an account minimum of $10,000 (spread across all your investment accounts), not all investors are going to be able to engage FutureAdvior's premium services. Wealthfront, for example, has a low minimum of just $500 – and many robo-advisors have no minimum at all (or a token minimum of $1).

That said, there are other comparable firms that require significantly more than FutureAdvisor. Vanguard Personal Advisor Services comes with a minimum account balance of $50,000 – and Personal Capital has a minimum of $100,000.

-High Management Fee

While still lower than the management fees charged by independent financial advisors, at 0.50%, FutureAdvisor isn't exactly on the cheap side either.

Compare it to some of the other robo-advisors available:

Share this post

Share on facebook
Share on twitter
Share on linkedin
Share on pinterest
Share on email

Leave a Comment

Your email address will not be published. Required fields are marked *