FutureAdvisor Review: Should You Let It Manage Your Existing Investments?

Getting professional advisor on your investments often comes with a premium price tag. FutureAdvisor is changing that. The platform offers low-cost advisory services for investors who want streamlined investment management.

FutureAdvisor uses both software recommendations and a human advisory team to make investments. Almost anyone can open an account as long as you have at least $10,000 in investable assets to manage.

That might be a barrier to brand-new investors. But, FutureAdvisor has features and a fee structure more established investors may appreciate. Of course, like any other online investment platform, there might be a drawback or two.

If you're looking for a new advisor online, you're in the right place. Read through our analysis of FutureAdvisor's different aspects first.

FutureAdvisor is Great for...

  • People who already have a Fidelity or TD Ameritrade account
  • Investors who want advisory services for 529 plans
  • DIY investors who want personalized recommendations
  • Investors who want access to a human advisor when they need it

FutureAdvisor Pros & Cons

Pros Cons
  • You can get started for free
  • Rebalancing is automatic
  • Coordinates with your existing investment accounts
  • Tax loss harvesting is included for Premium accounts
  • Fees may be higher than other online advisory platforms
  • High initial account minimum
  • Age restrictions on who can open an account
  • Requires a Fidelity or TD Ameritrade account

Types of Accounts Offered

FutureAdvisor features advisory services for taxable and tax-advantaged investment accounts. The types of accounts offered include:

  • Individual and joint taxable brokerage accounts
  • Traditional and Roth IRAs
  • Rollover IRAs
  • SEP IRAs if you're self-employed
  • Coverdell Education Savings Accounts
  • 529 accounts

Those last two are important because not every online advisor manages college savings. FutureAdvisor will help you to manage your college investments. They can even handle payouts to the school to cover education costs for your kids.

FutureAdvisor doesn't handle any 401(k) accounts. That includes solo 401(k)s if you're self-employed. You also can't get advice for a SIMPLE IRA here either.

Who Can Open a FutureAdvisor Account?

There are a few criteria you'll need to meet to open a FutureAdvisor account. You must:

  • Be a legal U.S. resident
  • Be at least 18 but not older than 68
  • Have at least $10,000 in investable assets

FutureAdvisor's investment model aims to create portfolios for growth, hence the age limit. Once you get into your later 60s and beyond, income generation tends to be the goal. FutureAdvisor's software models aren't designed for that.

You don't need to have an existing investment account to use the platform. FutureAdvisor can help you open a new IRA or taxable brokerage account. You will need to have at least $10,000 to invest.

One other important thing to note. FutureAdvisor doesn't actually hold your investments, it just manages them. The platform partners with Fidelity Investments and TD Ameritrade to offer its services.

If you have an account with either of those companies, then there's nothing extra you need to do.

But if you don't, you'll have to transfer at least $10,000 in assets to one of them to get started with FutureAdvisor.

The upside is that FutureAdvisor can help with this process so the transition is a smooth one.

Different Types of FutureAdvisor Accounts

There are two basic account tiers you can choose from: Free or Premium.

Free

When you sign up for a free account, you won't pay any fees at all. FutureAdvisor will analyze your portfolio and give you personalized recommendations.

That includes accounts at brokerages other than Fidelity or TD Ameritrade. You'd be responsible for handling any trades based on the advice FutureAdvisor offers.

The free service is great if you're a DIY investor who just wants a little extra reassurance. FutureAdvisor even lets you know when you need to rebalance. This helps keep your portfolio in tune with your goals and risk tolerance.

But, there are some valuable features you miss out on that come with the Premium service.

FutureAdvisor Premium: Who Is It Right For?

FutureAdvisor Premium is where it's at if you want comprehensive investment management services. A Premium account offers 24/7 investment monitoring. Professional advisors are available by phone, live chat, or email if you need them.

You also get two other very important features. Those are tax loss harvesting and automatic rebalancing. But why do those features matter?

Rebalancing

Let's talk about rebalancing first. When you create an investment portfolio, it's usually with a specific goal in mind. Your investment decisions are influenced by your time horizon for investing and your risk tolerance.

Ideally, your portfolio should be properly diversified so that you're not taking more risk than you need to. Periodic rebalancing ensures that you've got the right mix of assets for your goals. FutureAdvisor takes the guesswork out of rebalancing by doing it for you when needed.

Minimizing taxes

Tax loss harvesting is another big plus that not every online advisor offers. Loss harvesting means selling losing investments to offset taxable gains from the winners in your portfolio.

That's important because the less you pay in taxes on your investments, the more of your returns you get to keep.

But, FutureAdvisor Premium isn't free. We'll take a look at the different fees you'll pay a little later.

Investment Options

FutureAdvisor keeps investment options simple by using exchange-traded funds or ETFs for investing. The platform chooses ETFs for one main reason: easier diversification.

ETFs offer broad exposure to different asset classes in the market. They also tend to be more tax-efficient than traditional mutual funds.

For allocation, the ETFs FutureAdvisor uses include both stocks and bonds. The asset classes represented include:

  • U.S. equities
  • U.S. Small-cap stocks
  • U.S. value stocks
  • International stocks
  • Emerging market stocks
  • Investment grade bonds
  • International bonds
  • International real estate
  • Treasury Inflation-Protected Securities

The individual ETFs FutureAdvisor chooses for you are completely personalized. That means you end up with a portfolio that best fits your needs, goals and risk preferences.

Both TD Ameritrade and Fidelity offer iShares and Vanguard ETFs.

Fees

We touched on pricing earlier but now let's dive into how much it costs to have your assets managed by FutureAdvisor.

If you're a free member, the cost is $0 but there are some numbers you need to know if you have a Premium account.

Management fee

First is the management fee. FutureAdvisor charges a flat fee 0.5% of assets managed. This fee is billed in quarterly installments and it's deducted right from your assets.

Compared to some of its competitors, FutureAdvisor's management fee is a bit higher.

At other online advisor platforms, you might find a tiered fee structure. Higher fees may only kick in once you have $100,000 or more in assets. Some even waive the fee on the first $5,000 in assets managed for the first year.

Expense ratios

Then there are the individual expense ratios you pay for each ETF in your portfolio. This is a separate management fee the fund itself charges. These fees average around 0.15% per fund.

While most of the ETFs FutureAdvisor uses are commission-fee, some do carry an additional trading fee when you buy or sell shares.

Bottom line, FutureAdvisor isn't necessarily the most fee-friendly advisory choice. That's definitely something to consider as you're comparing online advisor platforms.

Research Tools

FutureAdvisor's main research tool is its investing library. This is chock full of advice on things like:

  • How to grow your retirement savings
  • How the platform's algorithm works
  • How to cut down your tax bill on your investments.

One thing you won't find though is retirement or investment calculators. Those can be handy if you're trying to crunch the numbers to see whether you're on track to hit your goals.

Online and Mobile Experience

FutureAdvisor accounts can be managed online or through your mobile device. Both interfaces are easy to use and navigate.

You can view your balances at a glance, see if you're on track to your retirement goals and see how much money you've saved on fees and taxes with FutureAdvisor.

Compared to some online advisor platforms, FutureAdvisor's online and mobile service is a little less inclusive feature-wise. But, if you're looking for convenience and an uncomplicated user experience it fits the bill.

What's missing, however, are native mobile applications that allow you to access FutureAdvisor.

Should You Use FutureAdvisor to Manage Your Investments?

The great thing about FutureAdvisor is that you can try it for free. You can see if it fits with your investment style and needs without a commitment. And you don't have to move any of your accounts around to use the free plan.

The Premium service could be a good choice for investors who've already accumulated some assets and want the advantage of professional investment advice. Having to move your accounts to TD Ameritrade or Fidelity if you're not investing with them already might be a minor hiccup to deal with.

College savings management is a nice added benefit for investors who want professional advice on every aspect of their portfolio.

At the end of the day, however, you have to weigh the costs. You could find comparable advisory services elsewhere with lower fees.

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