This post may contain affiliate links.
WiseBanyan Review

WiseBanyan Review

Description

Hands-off investing, free of fees.. Doesn't that sound great? WiseBanyan definitely has potential. But is there a catch? Find out in this review.

WiseBanyan Review

Introduction

The world of investing was changed forever when Betterment introduced the robo-advisory model. Developed as a solution to the need for affordable financial advice and investment account management, robo-advisors have since become one of the most popular platforms available today.

That rich tradition is carried on by newer companies like WiseBanyan.

Rather than simply offering discounted rates by eliminating the notoriously expensive fees charged by independent financial planners, WiseBanyan is – or, rather, claims – to be “the world's first free financial advisor.”

Usually, we're skeptical of any service's claim to be free. But WiseBanyan genuinely does offer 100% free account management and robo-advisory services.

In fact, the only time you'll pay is when you're adding one of their optional premium packages to your core account, closing an individual retirement account (IRA), exchange-traded funds (ETFs) fees (this is true for all robo-advisors, but WiseBanyan doesn't receive any kickbacks or commissions), and/or transferring your account away.

We'll take a look at all of these fees later in our review.

WiseBanyan also has a remarkably low account minimum. While robo-advisors like Wealthfront have an account minimum of $500, WiseBanyan's requirement for taxable accounts is a mere $1. And if you want to open an IRA, which is tax-deductible, all you need is a $25 deposit.

Axos Financial Inc. (formerly Bofi Holding Inc.), the financial services firm that also owns Bank of the Internet, recently started its acquisition of WiseBanyan. However, the company says that its free management will continue after the acquisition is complete.

We will also be taking a look at some of the drawbacks in WiseBanyan's model. After all, the goal of the article is to find out if WiseBanyan is the company for you.

Quick Facts

  • Management fee: $0 (no management fees) except for IRAs at 0.24% annually (capped at $20)
  • Account minimums: $1 for taxable accounts, $25 for IRAs

WiseBanyan is Best For

As great as WiseBanyan sounds, no online discount brokerage is best for everyone. However, they are an attractive option for their target market:

  • First-time investors (and other novices)
  • Investors who are goals-oriented
  • Those looking for free management services
  • Investors with a low balance

Pros

Where WiseBanyan shines, they shine very brightly indeed. Here are all the areas where we feel they could scarcely do better.

+Free Management

It's their drawcard, of course, but we can't stress how great it is to find quality management services that are truly free. While robo-advisors (and even hybrid-advisors) have made their mark on the industry by drastically cutting financial management and advisory fees, there are very few that offer these services for free.

Of course, this may leave you wondering how WiseBanyan is able to stay in business.

As mentioned in our introduction, the company charges certain additional fees that are entirely elective – namely, those for the premium add-on packages.

The only fees you should expect to pay are fund manager fees. As mentioned earlier, these are standard practice and aren't unique to WiseBanyan. The company does, however, look specifically for those with a low expense ratio, so you'll only pay an average of about 0.12%. WiseBanyan doesn't receive any portion of these fees as kickbacks or commissions.

You can find a full breakdown of individual funds fees here.

+Investments

Most robo- and hybrid-advisors adhere to the modern portfolio theory in developing their investment philosophy. WiseBanyan does the same.

This is why you need to fill out a short questionnaire as part of the sign-up process. WiseBanyan uses your answers to determine your “risk score,” better known as risk tolerance. Based on this figure, the company's computer-generated algorithms develop a recommended portfolio and investment strategy.

These, in turn, will determine the balance of exchange-traded funds (ETFs) WiseBanyan recommends you trade. If you don't like their analysis, you can change your risk score and the robo-advisor will automatically update the recommendations accordingly.

The ETFs that form WiseBanyan's core portfolio offerings are similar to that of rival advisories that work to provide low expense ratio funds. Most of these are drawn from Vanguard and iShares. As mentioned earlier, this means you can expect to pay an average funds fee of 0.12%.

WiseBanyan makes it a little difficult to find out exactly which ETFs are available only through Portfolio Plus. In the relevant section of their FAQs, the links redirect you to a login prompt.

However, you can see a complete list of the ETFs and their individual fees here, including a separation between those available to all customers and those only available with Portfolio Plus.

+Goal-Oriented Investing

Many robo- and hybrid-advisors – including Motif Investing, Ellevest, and Betterment – take a goal-oriented approach to investments. Sometimes called “thematic investing,” this practice allows clients to create “buckets” (or milestones).

WiseBanyan is no different. All you need to do is enter your investment goal – such as buying a house, for example – time horizon, net worth, and income.

The computer-generated algorithms then analyze this information and calculate a recommended investment total you should be putting toward each milestone. If you have the premium Fast Money package activated, you can then use their Auto-Deposit Scheduler feature to automatically have the recommended funds deposited into each bucket portfolio.

If you feel that you can afford to pay more toward any particular goal, or you prefer a more aggressive investment strategy, you can also adjust the recommended asset allocation for each goal.

It's also worthwhile to highlight two other features offered by WiseBanyan that help with goal-based investing:

  • The Partner feature (and, presumably, the Family Accounts feature once added), which forms part of the Teamwork package. As explained earlier, this allows you and your spouse (or any other life partner) to set, track, and save toward milestones together.

    Both of you will need to have a WiseBanyan account with the Teamwork package activated, but only one of you will need to actively set the milestone. You can then share it with your partner. This can help with goals that require a higher amount, as the robo-advisor will recalculate your individual investment strategies. You may find that you can afford to contribute less and use a more conservative investment strategy because the burden is shared between the two of you.

    • If paying $2/month for the Fast Money premium package in order to make use of Auto-Deposit Scheduler is an added expense you'd rather avoid, you'll be happy to know there's a free option. Formulas allows you to create round up dividend match, bargain hunting, and level up formulas to help you reach your milestones faster.

      There isn't much information available in the FAQ section on what each of these formulas do exactly. However, so long as you're using a taxable account to manage your milestone portfolios, these formulas will help you direct extra funds from your linked bank account toward fulfilling those goals.

Cons

While there's clearly a lot to love about WiseBanyan, there's also a number of drawbacks – sacrifices you'll need to make in order to enjoy their otherwise free services. How much of a contention point each of these will be is up to you, of course.

-Limited Account Selection

WiseBanyan only offers the following account types:

That's it. It's a very short list and certainly limits the type of investors who are going to be able to take full advantage of WiseBanyan's services.

For example, you won't be able to open a taxable joint account with your partner, which has a number of advantages. You also won't be able to create a trust or custodial account to help provide for your child's (or children's) future (though as mentioned earlier, the Family Accounts feature will introduce these once WiseBanyan launches it).

Other robo-advisors do offer these options already. It's a matter of deciding whether Wisebanyan's lack of management fees and commissions are worth staying with them.

-Transfers

WiseBanyan makes transferring to them from another service more difficult than most others do. They don't support transfers in kind, which means you'll have to liquidate all your investments before being able to transfer.

That kind of hassle is rather off-putting, but if you're signing up as a first-time investor or planning on liquidating in any case, it won't be an issue for you.

What will become an issue, however, is when you later decide to transfer away from WiseBanyan (if you do, that is). There aren't any closing fees for taxable accounts at least, but you'll have to pay $10 per IRA upon closure.

And on top of that, you'll want to liquidate your investments again. Otherwise, Apex Clearing (WiseBanyan's broker-dealer) charges $75 per account.

-Mandatory IRA Fees

While taxable (individual personal) accounts remain free of management fees, that's no longer the case with IRAs.

In early 2018, Wisebanyan sent an email out to their clients notifying them of the change in advance. However, for new clients, it's remarkably difficult to discover this on their site. In fact, you have to do some serious crawling through their FAQs to put the pieces together.

To save you the trouble, all IRAs are now part of the Tax Protection Package, under the IRAutomation feature.

That means you'll have to pay an annual management fee of 0.24% for an IRA, capped at $20 a month and with a minimum of $10 per IRA. The account minimum also jumps up from $1 (for taxable accounts) to $25 per IRA.

-Paid Tax-Loss Harvesting

Tax-loss harvesting is a popular way to maximize your returns by using trading losses to offset your taxable income while maintaining a constant market exposure.

Many robo- and hybrid-advisors offer this service as part of their management fees, some as an optional add-on. Unfortunately, WiseBanyan falls into the latter category.

The company calls its tax-loss harvesting service WiseHarvesting. As you saw earlier, this is one of the features falling under the premium Tax Protection Package – meaning you'll pay 0.24% of your assets value annually to take advantage of it.

Again, this will be capped at $20 a year. This means that as soon as your taxable account hits around $8,400, you'll actually be saving on the fees.

That's only a slight consolation. At 0.24%, WiseHarvesting costs almost as much as the full management fees for a Wealthfront account – and Wealthfront's tax-loss harvesting feature is a far more advanced version.

Is WiseBanyan Right For You?

There's a fair amount of trade-offs that you'll need to take into consideration before you decide to invest through WiseBanyan.

However, if the account types on offer are all you feel you'll need, and especially if you're a first-time investor, we do strongly recommend the service. All the paid add-ons are entirely optional.

And if you later need to add a different kind of account that isn't offered by WiseBanyan, you can always open a second investment account with one of their competitors.

Conclusion

All told, the level of service provided by WiseBanyan is above what one would expect from a free robo-advisor. Even if you do decide to pay for the Tax Protection Package, it quickly becomes relatively cheap.

We certainly give the company two thumbs up.

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 *