Kiplinger’s Personal Finance — September 2017

09/2017 KIPLINGER’S PERSONAL FINANCE 59

services. In the Robo Report, published
quarterly, it recounts the performance
of each account, as well as how invest-
ments are divided among major asset
classes (U.S. stocks, foreign stocks,
bonds and cash). “The report allows
people to know what’s under the
hood,” says Condor’s Michael Walliser.
But many of the accounts tracked in
the Robo Report have been open for
less than a year, so there’s not much
of a track record to analyze yet. What’s
more, it’s difficult to compare results
from different services. Some robo
IRAs, for instance, hold stocks and
cash; others hold stocks, bonds and
cash. For what it’s worth, the Robo
Report shows that in the first three
months of 2017, Schwab-managed
IRAs returned 5.2%, and SigFig ac-
counts earned 7.1%, compared with
6.1% for Standard & Poor’s 500-stock
index. Both accounts had more than
90% of their assets in stocks, but Sig-
Fig got a boost from having a surpris-
ingly high 55% of its stock allocation
in foreign firms, compared with 47%
in Schwab’s portfolios.

How to choose. New robo and hybrid

services launch every month. More

than 80 emerged between 2015 and

2016, according to BlackRock, the

money-management giant. With so

many outfits to choose from, how

do you winnow the list? First check

whether your online broker offers a

hybrid robo service. Otherwise, as you

sift through offerings, focus on fees.

After all, that’s the biggest advantage

that these hybrid services have over

traditional money managers. Bear in

mind that with most hybrids, you’ll

pay an annual fee plus the underlying

fund expense ratios.

Next, determine what level of ex-

pertise you need—whether an invest-

ment adviser representative will

suffice or whether you need the over-

view of the big pictures that a certified

financial planner can provide. If you’re

willing to spend a little time, fill out

the online questionnaire at one or

two hybrids to compare their recom-

mended portfolios. Transparency is

a big selling point for robos, so they

will often show you how they will

invest your money—by asset class or

by particular ETF—before you even

open an account.

Finally, consider your personal pref-

erences. Although most robos rely on

index-based ETFs, for instance, fans

of actively managed funds have hybrid

options, too. T. Rowe Price’s Active

Plus portfolios hold only actively man-

aged Price funds. You won’t pay an an-

nual fee for Active Plus, but, ref lecting

the additional costs of active manage-

ment, the portfolios’ average expense

ratios are higher than those of typical

packages that are based on index

funds. And TIAA Personal Portfolio

offers two robo portfolios that hold

actively managed funds, as well as

a third option comprising ETFs and

low-cost index funds. One active port-

folio, called Impact, even focuses on

funds that follow socially responsible

investment strategies (see “Opening

Shot,” on page 20, and “Investing

With a Conscience,” July). As robos

evolve and proliferate, chances are

you’ll eventually find a service that’s

right for you. ■

Robo Roster

WHAT TO EXPECT FROM A HYBRID ADVISER

The services employ advisers with different kinds of expertise. Some offer certified financial planners, others use counselors who have passed

tests that allow them to serve as investment advisers and brokers. To determine total costs, combine a firm’s fees with fund fees.

*Weighted by asset allocation. †Plus accounts: 0.40% (one annual CFP consultation); Premium accounts: 0.50% (unlimited consultations). #Total amount paid by client; reflects reduction

by the amount of all expenses charged by Fidelity funds and a portion of expenses charged by iShares ETFs. ‡ETFs in taxable accounts only. §Clients can request to incorporate non-Vanguard

funds and securities. SOURCE: Fund companies

Service Level of Human Advice Minimum Annual Fee Underlying Type of Funds

Model Portfolio

Expense Ratios*

Betterment Plus/

Betterment Premium Certified financial planners $100,000 0.40% to 0.50%

† ETFs 0.07% to 0.16%

FidelityGo brokers and certified financial plannersInvestment adviser representatives/ 5,000 0.35% to 0.40%# Fidelity index mutual funds and iShares ETFs‡ 0.06% to 0.32%

Schwab Intelligent

Advisory Certified financial planners 25,000 0.28% Schwab and other ETFs 0.07% to 0.22%

T. Rowe Price Active

Plus

Investment adviser

representatives/brokers 50,000 No annual fee

Actively managed T. Rowe Price

mutual funds 0.61% to 0.82%

TIAA Personal

Portfolio

Investment adviser

representatives/brokers 5,000 0.30%

Actively managed mutual funds,

or ETFs and index funds 0.12% to 0.71%

Vanguard Personal

Advisor Services Certified financial planners 50,000 0.30%

Index and actively managed

Vanguard mutual funds and ETFs§ Less than 0.10%

SigFig Investment adviser representatives 2,000 First $10,000 free; 0.25% ETFs 0.05% to 0.16%