What is FutureAdvisor?
FutureAdvisor is a robo advisory firm that manages your existing investment accounts held at TD Ameritrade or Fidelity Investments. With FutureAdvisor, you don’t need to transfer your assets to their platform! The service automatically monitors, re-balances and tax manages your current investments. Low-cost index funds are added where necessary to strengthen your portfolio.
As part of their services, FutureAdvisor can do the necessary paperwork to consolidate investors’ accounts at TD Ameritrade or Fidelity Investments. This includes making tax-conscious decisions about how your existing investments are transferred over.
For would-be clients without investment accounts, FutureAdvisor can assist in opening taxable, Traditional IRA, and Roth IRA accounts.
Based in San Francisco, FutureAdvisor was founded in 2010 by Microsoft refugees, Bo Lu and Jon Xu. They started the platform in response to friends who were having difficulty knowing where to invest their money. The service is comprised of chartered financial analysts, data scientists, designers, engineers, marketers and service specialists. FutureAdvisor is a subsidary of BlackRock, the world’s largest investment management firm, with more than $6.28 trillion in assets under management (AUM).
FutureAdvisor Robo-advisor Features at a Glance
|Overview||Automated online investment management robo-advisor platform|
|Minimum Investment Amount||$5,000|
|Fee Structure||0.50% of AUM, charged quarterly as 0.125%|
|Top Features||The service uses funds that you already own through TD Ameritrade or Fidelity Investments, or helps you to transfer and open accounts at these institutions. FutureAdvisor then adds additional ETFs when necessary to achieve the desired asset allocation; you can maintain certain investment positions in your portfolio alongside the recommended allocations.|
|Free Services||FutureAdvisor can analyze your existing investments before you commit |
to using the service.
|Contact & Investing Advice||Contact form available via website 24/7. Financial advisors available.|
|Investment Funds||Diversified index funds from 14 different asset classes|
|Accounts Available||Individual and joint taxable accounts; traditional, Roth, and rollover IRAs|
What Differentiates FutureAdvisor Robo-Advisor From Competitors?
Along with SigFig, FutureAdvisor is one of the few robo-advisors that doesn’t require you to transfer your assets into their platform. They manage your assets in your existing TD Ameritrade and/or Fidelity Investments accounts. FutureAdvisor can help you transfer your money to these companies, or will assist in opening new accounts at either institution.
FutureAdvisor provides access to financial advisors and service specialists.
These financial pros can help with investing questions about what is going on with your portfolio. Don’t understand why to invest in foreign stock funds? The financial advisor will help.
One of the more interesting features of FutureAdvisor is that the platform allows you to hold a small amount of personally selected securities in your account. However, the vast majority of your asset allocations will be ETF’s selected and managed by the service.
FutureAdvisor’s investment mix is diverse.
Nobel prize winner Eugene Fama and colleague Kenneth French found that over the long term small capitalization and value value stocks outperform the returns of the overall stock market. (Although, in recent years this hasn’t been the case.) To capture this potential out-performance FutureAdvisor includes US and international value and small cap stocks in their investment mix.
The FutureAdvisor robo-advisor also includes international emerging debt or bonds and global real estate funds another nod at broad diversification leading to potentially higher returns.
These factor investments set FutureAdvisor’s investments apart from the pack.
401(k) plan management is available for rollovers.
FutureAdvisor can manage some 401(k) plans, but only if you no longer work at the employer and if the plan is rolled over to an account at TD Ameritrade or Fidelity Investments. FutureAdvisor does not manage 401(k) plans that are being actively contributed to.
Who Benefits from the FutureAdvisor Robo-Advisor?
If you already have a brokerage account with either Fidelity Investments or with TD Ameritrade, and you’d like to add a robo-advisor to the account without having to switch over to another service, FutureAdvisor is a natural addition.
FutureAdvisor is suitable for investors seeking fund management without having to sell all of their current investments.
Clients seeking a robo-advisor that allows you to lock in a small portion of your portfolio might consider FutureAdvisor.
If you’d like a very hands-off investment manager, FutureAdvisor is a great choice. The robo-advisor leverages its algorithms and financial advisors to manage your account for you. Although, SigFig is a similar robo-advisor with a lower management fee.
FutureAdvisor Review Features – Robo-Advisor Drill Down
How Does FutureAdvisor Work?
FutureAdvisor manages investment accounts held with Fidelity or TD Ameritrade. If you already invest through those platforms, FutureAdvisor can be added as your investment advisor. If not, you will need to move your investment accounts over to those two brokers.
If your accounts must be transferred from another broker, FutureAdvisor works to minimize capital gains in the transfer process. In tax-sheltered accounts, like IRA’s, transferred account balances under $10,000 are liquidated, and those with assets above $10,000 are transferred as is.
FutureAdvisor always transfers taxable accounts as-is, regardless of account balance. This avoids taxable gains or losses.
FutureAdvisor doesn’t take over your account, but adds an investment management layer to the accounts. Management includes investment selection, trading and rebalancing.
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FutureAdvisor Investment Strategy and Portfolio
The service uses a combination of the FutureAdvisor human investment team, and their software Recommendations Engine. The asset allocation strategy incorporates Modern Portfolio Theory (MPT), as is typical with robo-advisors.
Once FutureAdvisor begins to manage your account, you can expect to have automatic account rebalancing—another typical robo-advisor feature. However, FutureAdvisor’s algorithms are designed to weigh the potential benefits of rebalancing against the costs, including capital gains taxes and transaction fees.
One of the FutureAdvisor basic investment methodologies is to reduce risk as you approach retirement. This will be a gradual process of reducing equities in favor of bonds.
Investment allocations. FutureAdvisor uses 14 asset classes in portfolio construction. Each asset class is populated with one or more low fee exchange traded funds.
The asset classes are:
- US Equity Large Cap
- US Equity Small-Cap
- US Value Equities
- International Equity Total
- International Small
- International Equity Value
- Emerging Markets Equity
- US REITs
- International REITs
- Broad US Bonds
- Corporate US Bonds
- US Treasury Inflation Protected Securities (TIPS)
- International Emerging Debt
- High-Yield Bonds
A portfolio constructed for a 40-year-old who has a moderate risk tolerance would look something like the model below. The presentation compares the FutureAdvisor portfolio (on the right) with the average for a typical 40-year-old.
Minimization of “cash drag”. Note that in the portfolio above, there is no cash allocation. The cash exclusion eliminates the cash drag of uninvested funds. This is in contrast with Schwab Intelligent Advisors which believes in an investment portfolio cash allocation.
Rebalancing. Rebalancing takes place 4 to 6 times per year, on average. In the process, they use a portfolio rebalance algorithm that doesn’t realize over $200 or 5% of the position value, whichever is greater, in short-term capital gains taxes. This is done to minimize the high tax burden of short-term capital gains.
FutureAdvisor employs tax-loss harvesting. They also use tax efficient asset placement. Bonds are favored in tax-deferred accounts, since they generate regular income. Equities are preferred in taxable accounts, to take advantage of lower capital gains tax rates.
FutureAdvisor Fees and Minimums
FutureAdvisor pricing has only one account level and charges a set fee for all accounts, determined by the amount of assets under management (AUM).
FutureAdvisor charges 0.50% AUM for all accounts they manage. Clients will be charged 0.125% AUM quarterly. Clients may also end up paying trading fees.
Investors must have $5,000 minimum in assets in either a TD Ameritrade or Fidelity Investments account in order to work with the FutureAdvisor robo-advisor.
Investors can manage individual and joint investment accounts through FutureAdvisor and Traditional, Roth, or rollover IRAs. While FutureAdvisor does not manage active 401(k) plans, they will help clients transfer 401(k) plans from former employers to new retirement accounts at either TD Ameritrade or Fidelity Investments.
FutureAdvisor Free Services
During the sign-up process, FutureAdvisor will analyze your existing portfolios for free. This is marketed as simply an educational feature; FutureAdvisor will not make any changes to these portfolios on your behalf.
FutureAdvisor App – Mobile Access
FutureAdvisor itself does not have a mobile app at this time, though they do give investors access to a comprehensive online dashboard through their website.
Investors who are curious about the performance of their portfolios can instead look to the TD Ameritrade or Fidelity mobile applications.
FutureAdvisor Robo-Advisor Sign-up Process
In order to enroll in FutureAdvisor you must be a legal US resident and US citizen, aged 18 or older, with at least $5,000 in investable assets. You need a valid Social Security number or tax identification number.
Once you register for the service – which requires your email address and the creation of a password—you will enter your name, date of birth, household income level, marital status, financial goal, timeline for the goal, and your initial investment amount. After this point, you will receive your portfolio allocations.
You then have the option to analyze an existing portfolio, which will involve linking a bank or retirement account to the FutureAdvisor service. This portion of the sign-up process is optional and free. You may also choose to proceed to the FutureAdvisor account management plan.
If you want to hire the FutureAdvisor robo-advisor to manage you investments, link your account to a bank account to enable direct transfers and recurring deposits. Once again, unless your accounts are already held with either Fidelity Investments or TD Ameritrade, your accounts will be moved over to either of those two brokerage firms.
FutureAdvisor Review – Robo-Advisor Pros and Cons
FutureAdvisor Robo-Advisor Advantages
- You can use the account for free, to get your recommended portfolio allocations. The service continues to be available for up to three months thereafter. Although, Personal Capital also offers free portfolio analysis (and a free money and investment dashboard).
- Future advisor offers financial advisors and service specialists.
- FutureAdvisor does allow you to hold a small amount of personally selected securities in your portfolio. However the vast majority will be ETF’s managed by the platform.
- The inclusion of global real estate and value funds is unusual with robo-advisor platforms, who typically invest in the most generic markets.
- You don’t need to transfer your money to an external third party, if you are invested at TD Ameritrade or Fidelity.
FutureAdvisor Robo-Advisor Disadvantages
- The fee structure of 0.50% is high among robo-advisors in general, although in line with those that offer financial advisors. Betterment and Wealthfront charge just 0.25%, with lower investment minimums. At Betterment, you could sign up for the digital package and pay a small fee for financial planning advice through their a la carte sessions.
- The platform doesn’t offer an app.
- The website is limited in it’s information and the FAQ section is sparse. Additionally, the FAQ doesn’t discuss the credentials of the financial advisors.
FutureAdvisor Robo-Advisor Review Wrap Up
Calls to financial advisors and the ability to leave assets in their Fidelity or TD Ameritrade accounts are major advantages of the FutureAdvisor platform. Access to value funds and global real estate funds is also unique. Although you could include value and global real estate funds when investing in M1 Finance, and their management fee is zero.
The fee structure on this platform is high enough to warrant considering lower costs alternatives. Although it’s a positive for many investors, particularly those with greater assets, to leave their funds with the existing brokerage firm.
If you’d like additional information, or if you’d like to sign up for the service, visit the FutureAdvisor website.
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Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link. That said, I never recommend anything I don’t believe is valuable.
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