My Robo Advisor Experiences

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Topic Author
slyboots
Posts: 22
Joined: Sat Dec 03, 2016 5:37 am

My Robo Advisor Experiences

Post by slyboots »

Hi everyone,

I'm sharing my updated experiences with roboadvisors in order to help others make informed decisions. I will try to update this from time to time (assuming I remember to do so). Would be great if others shared their experiences too.

First of all, why use a robo anyway? For me, at least, I have an insatiable urge to "tinker" or "optimize" my investments. If I managed my portfolio in a full DIY fashion, I expect that I'd have a constantly fluctuating asset allocation and possibly daily rebalancing :) . So handing things over to an outside entity is probably a good thing.

Why a robo vs, say, a target date fund? That's a trickier question. At the end of the day, depending on the robo, a target date fund may give you all or almost all of the benefits at a similar (maybe even cheaper) price. But I like the transparency of the robos, the planning interfaces, and the feeling of ownership of the individual securities underlying the portfolios.

I first started a few years ago with the Schwab Intelligent Portfolios. On paper, this looked pretty good - no fee, wide diversification, tax-loss harvesting, and a great user interface. The issue has been performance. As you can clearly see from Backend Benchmarking's (BB's) "Robo Report" (a valuable resource to anyone interested in robo-advisor accounts), the Schwab value tilt through its fundamental indexing products has resulted in bottom-of-the-table performance. Will value outperform growth going forward? Who the heck knows? But I thought the whole point of BH investing was to be agnostic to "smarter" investing approaches and just own everything, so I am not interested in factor tilts any more. In addition, while I know there have been innumerable debates on this site about the relevance of the "cash drag," BB's recent analysis showed that it creates a performance impediment in up AND down markets. This aligns with my own experience. So I'm migrating away from this service.

About a year ago, I opened a Fidelity Go account. This is probably the barest-bones of the bunch. Very straightforward interface, no factor tilts, simple assets (five funds). It has worked well so far, rebalancing occasionally during recent market turbulence and outperforming Schwab handily. The fees are low but not quite rock bottom: 0.35% of assets, which, in a low-return environment (especially for fixed income) has to be considered. It's a good service and I'll keep a "test" amount of money in it, but it won't be my go-to account.

Earlier this week, I opened a Vanguard Digital Advisor account, which is a new service from our friends in PA. This one has a nice interface that pulls in information from your outside accounts (though, unfortunately, I don't see how you can enter this information manually). Its fees are low at 0.15% (similar to a target date fund). It owns ETFs rather than mutual funds which may present a subtle tax advantage. The portfolio is very simple, with only four funds. Its planning interface implies that it will build in a life cycle glidepath over the coming years, changing my asset mix as I approach retirement (this isn't totally clear- let's see what happens). Based on its low fees and good interface, I'll be putting new money to work using this service going forward (I'm 45yo, 70/30 AA).

I also considered other services. TD looked good but it's about to be absorbed into Schwab. Neither Wealthfront nor Betterment link to Quicken, plus I'd rather work with an incumbent financial institution.

I'll let you know how it goes. Please share your experiences, too!
KSActuary
Posts: 611
Joined: Fri Jan 13, 2012 10:53 pm

Re: My Robo Advisor Experiences

Post by KSActuary »

Great information. Thanks for the heads-up to Backend Backtesting. Another great resource. It will be interesting to watch the Vanguard effort and see if they put real resources behind it to improve service.
Topic Author
slyboots
Posts: 22
Joined: Sat Dec 03, 2016 5:37 am

Re: My Robo Advisor Experiences

Post by slyboots »

Yes, HERE is the Backend Benchmarking commentary on the first quarter of 2020. Obviously you have to take near-term performance with a huge grain of salt, but the big question is, which provider has the right fees and an approach that agrees with your own investment philosophy?

Admittedly, if the Schwab robot had outperformed, I would probably be much more favorable towards it as it has a great interface and Schwab customer service is excellent. So I'm not completely shutting it down - just not allocating new funds to it.
User avatar
Nate79
Posts: 6736
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: My Robo Advisor Experiences

Post by Nate79 »

slyboots wrote: Sat May 09, 2020 6:05 am Yes, HERE is the Backend Benchmarking commentary on the first quarter of 2020. Obviously you have to take near-term performance with a huge grain of salt, but the big question is, which provider has the right fees and an approach that agrees with your own investment philosophy?

Admittedly, if the Schwab robot had outperformed, I would probably be much more favorable towards it as it has a great interface and Schwab customer service is excellent. So I'm not completely shutting it down - just not allocating new funds to it.
The Schwab robo did outperform for a number of years. Now that value is down it is underperforming. You have to decide if you want the standard 4 fund portfolio or a value tilt. Since it sounds like you cant stick with a value tilt for the long term you may be better off with a standard portfolio. But what will you do when value comes roaring back and starts outperforming your 4 fund?
dave1054
Posts: 188
Joined: Wed Apr 01, 2009 7:50 am

Re: My Robo Advisor Experiences

Post by dave1054 »

Do not have any robo experience but would love to know your experience vis a vis the constant rebalancing and how difficult it is to do your taxes. Buy and hold is boring but certainly uncomplicates my life.
Topic Author
slyboots
Posts: 22
Joined: Sat Dec 03, 2016 5:37 am

Re: My Robo Advisor Experiences

Post by slyboots »

Nate79 wrote: Sat May 09, 2020 6:39 am
slyboots wrote: Sat May 09, 2020 6:05 am Yes, HERE is the Backend Benchmarking commentary on the first quarter of 2020. Obviously you have to take near-term performance with a huge grain of salt, but the big question is, which provider has the right fees and an approach that agrees with your own investment philosophy?

Admittedly, if the Schwab robot had outperformed, I would probably be much more favorable towards it as it has a great interface and Schwab customer service is excellent. So I'm not completely shutting it down - just not allocating new funds to it.
The Schwab robo did outperform for a number of years. Now that value is down it is underperforming. You have to decide if you want the standard 4 fund portfolio or a value tilt. Since it sounds like you cant stick with a value tilt for the long term you may be better off with a standard portfolio. But what will you do when value comes roaring back and starts outperforming your 4 fund?
Great question! And the honest answer is that I will probably experience regret!

In actual fact my broader portfolio is very value heavy. My single largest position is VTV which I bought heavily in 2009. And as I said, I'm not completely closing down my Schwab SIPs - I'm just not allocating new capital to them.

Nate, I know you have been the source of great information on SIP and are a fan of their product, so kudos and respect to you. Big picture here is that there are some fantastic options for investors out there now, and while none is perfect, there's probably something out there for everyone.
User avatar
Nate79
Posts: 6736
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: My Robo Advisor Experiences

Post by Nate79 »

slyboots wrote: Sat May 09, 2020 9:35 am
Nate79 wrote: Sat May 09, 2020 6:39 am
slyboots wrote: Sat May 09, 2020 6:05 am Yes, HERE is the Backend Benchmarking commentary on the first quarter of 2020. Obviously you have to take near-term performance with a huge grain of salt, but the big question is, which provider has the right fees and an approach that agrees with your own investment philosophy?

Admittedly, if the Schwab robot had outperformed, I would probably be much more favorable towards it as it has a great interface and Schwab customer service is excellent. So I'm not completely shutting it down - just not allocating new funds to it.
The Schwab robo did outperform for a number of years. Now that value is down it is underperforming. You have to decide if you want the standard 4 fund portfolio or a value tilt. Since it sounds like you cant stick with a value tilt for the long term you may be better off with a standard portfolio. But what will you do when value comes roaring back and starts outperforming your 4 fund?
Great question! And the honest answer is that I will probably experience regret!

In actual fact my broader portfolio is very value heavy. My single largest position is VTV which I bought heavily in 2009. And as I said, I'm not completely closing down my Schwab SIPs - I'm just not allocating new capital to them.

Nate, I know you have been the source of great information on SIP and are a fan of their product, so kudos and respect to you. Big picture here is that there are some fantastic options for investors out there now, and while none is perfect, there's probably something out there for everyone.
I only used SIP for a short time but decided I wanted to control my own allocations and fund decisions. It's a fine choice and i think it is important to get all the information about your choices. No matter which portfolio you choose it is important to stick with it.
valleyrock
Posts: 199
Joined: Sun Aug 12, 2018 7:12 am

Re: My Robo Advisor Experiences

Post by valleyrock »

I've been looking at the Schwab Intelligent Portfolios as an alternative in retirement to an annuity, for example.

But when I run the numbers, the Intelligent Portfolios (basically all the the three risk categories one can choose from) all are no
better than a basic drawdown scenario from a bank account at 1% interest. (Actually at about 0.8 percent interest). That's using Schwab's predicted monthly income for their portfolios. I'm not figuring in the tax loss harvesting end of it... these portfolios also are supposed to optimize matters for a combination of taxable and non-taxable accounts, etc. Hence the relief from tinkering, presuming they do it all optimally, so the take home could be higher with tax savings...

One good thing here is that if inflation rears up, these portfolios should result in accompanying payout increases (right?).... Annuities won't do that....

Still, just putting the money in a savings account at 1.2 or 1.5% and drawing it down looks equivalent, if not better (other things being equal), and if rates go up due to inflation, then one can increase the drawdown, etc.

Am I missing something??
atdharris
Posts: 680
Joined: Wed Jan 02, 2019 3:18 pm

Re: My Robo Advisor Experiences

Post by atdharris »

I was looking at opening either a Merrill Edge guided account for my excess cash or using something like Wealthfront. I have a six-figure taxable account already at Merrill along with my Roth, but I can't buy fractional shares of an ETF there, so I won't be able to contribute a fixed amount to the account. Merrill also charged a 0.45% advisory fee and does not offer any type of TLH whereas Wealthfront charges 0.25% and offers TLH.

Anyone have any experience with those? I should probably just max out my 401k even though I am not a fan of many of the funds.
psychodoc
Posts: 46
Joined: Tue Jun 10, 2008 11:21 pm

Re: My Robo Advisor Experiences

Post by psychodoc »

just like the lifestrategy funds, robo allocations can change. for instance, schwab recently altered their domestic:international equity ratio. anyone holding an 'intelligent' portfolio likely was notified, but i haven't seen any comment about it on the forum to date
wickywack
Posts: 90
Joined: Thu Jun 11, 2015 8:09 am

Re: My Robo Advisor Experiences

Post by wickywack »

Do Vanguard or Fidelity robos do tax loss harvesting? Are they otherwise more tax efficient than target date funds are far as rebalancing?
snailderby
Posts: 1323
Joined: Thu Jul 26, 2018 11:30 am

Re: My Robo Advisor Experiences

Post by snailderby »

Thank you for sharing your experience with us, slyboots! I would be curious to hear any thoughts you have on how Vanguard's robo advisor differs from using one of Vanguard's target date funds.
tj
Posts: 3930
Joined: Thu Dec 24, 2009 12:10 am

Re: My Robo Advisor Experiences

Post by tj »

psychodoc wrote: Wed Jul 15, 2020 8:27 pm just like the lifestrategy funds, robo allocations can change. for instance, schwab recently altered their domestic:international equity ratio. anyone holding an 'intelligent' portfolio likely was notified, but i haven't seen any comment about it on the forum to date
What was the change?
User avatar
BoglesRazor
Posts: 67
Joined: Fri Jan 03, 2020 11:02 am

Re: My Robo Advisor Experiences

Post by BoglesRazor »

slyboots wrote: Fri May 08, 2020 7:20 am Hi everyone,

I'm sharing my updated experiences with roboadvisors in order to help others make informed decisions. I will try to update this from time to time (assuming I remember to do so). Would be great if others shared their experiences too.

First of all, why use a robo anyway? For me, at least, I have an insatiable urge to "tinker" or "optimize" my investments. If I managed my portfolio in a full DIY fashion, I expect that I'd have a constantly fluctuating asset allocation and possibly daily rebalancing :) . So handing things over to an outside entity is probably a good thing.

Why a robo vs, say, a target date fund? That's a trickier question. At the end of the day, depending on the robo, a target date fund may give you all or almost all of the benefits at a similar (maybe even cheaper) price. But I like the transparency of the robos, the planning interfaces, and the feeling of ownership of the individual securities underlying the portfolios.

I first started a few years ago with the Schwab Intelligent Portfolios. On paper, this looked pretty good - no fee, wide diversification, tax-loss harvesting, and a great user interface. The issue has been performance. As you can clearly see from Backend Benchmarking's (BB's) "Robo Report" (a valuable resource to anyone interested in robo-advisor accounts), the Schwab value tilt through its fundamental indexing products has resulted in bottom-of-the-table performance. Will value outperform growth going forward? Who the heck knows? But I thought the whole point of BH investing was to be agnostic to "smarter" investing approaches and just own everything, so I am not interested in factor tilts any more. In addition, while I know there have been innumerable debates on this site about the relevance of the "cash drag," BB's recent analysis showed that it creates a performance impediment in up AND down markets. This aligns with my own experience. So I'm migrating away from this service.

About a year ago, I opened a Fidelity Go account. This is probably the barest-bones of the bunch. Very straightforward interface, no factor tilts, simple assets (five funds). It has worked well so far, rebalancing occasionally during recent market turbulence and outperforming Schwab handily. The fees are low but not quite rock bottom: 0.35% of assets, which, in a low-return environment (especially for fixed income) has to be considered. It's a good service and I'll keep a "test" amount of money in it, but it won't be my go-to account.

Earlier this week, I opened a Vanguard Digital Advisor account, which is a new service from our friends in PA. This one has a nice interface that pulls in information from your outside accounts (though, unfortunately, I don't see how you can enter this information manually). Its fees are low at 0.15% (similar to a target date fund). It owns ETFs rather than mutual funds which may present a subtle tax advantage. The portfolio is very simple, with only four funds. Its planning interface implies that it will build in a life cycle glidepath over the coming years, changing my asset mix as I approach retirement (this isn't totally clear- let's see what happens). Based on its low fees and good interface, I'll be putting new money to work using this service going forward (I'm 45yo, 70/30 AA).

I also considered other services. TD looked good but it's about to be absorbed into Schwab. Neither Wealthfront nor Betterment link to Quicken, plus I'd rather work with an incumbent financial institution.

I'll let you know how it goes. Please share your experiences, too!
I also started out investing in Roboadvisors and the main reason was that I was financially uneducated and wanted someone else to make those decisions for me. However, I was younger then and I didn't have a lot of money to invest. Investing was just quite daunting and my income wasn't that high so I was hesitant to invest in general. Moreover, I also did not know which Roboadvisor to pick so I opened one in each (Wealthfront, Betterment, Wise Banyan, and Motif, which I know is not actually a Robo) - I know, I know.... Anyway, I thought I was doing the right thing to run an "experiment" to see which one was the best by investing equal amounts in each brokerage. However, looking back, it doesn't make sense for a small amount of money because it cannot compound when its overly diversified (these were Roth accounts mostly so I couldn't even contribute more to balance them). I later noticed in my statements that I was only earning something like $0.58 in a fund because I could only afford 1 share (or less because they allowed fractional shares) and this seemed to be a terrible way of growing my money. Even if it was a total stock market index, the share was so low that there was essentially no impact at all. Furthermore, they invested me in like 14 different funds with an allocation of 90/10, but to me this was overly complex. Then I started to read personal finance books, including The 3-Fund Portfolio, which made it so much easier (and it was a nice short book - Thank you, Taylor!).

To make matters worse, I was using a Roboadvisor for about 4 years, but only made something like $1000 with a total investment of less than $15K (Roth and taxable accounts combined). I cannot even tell what the "profit" was because they were Roth so I don't have a cost basis to compare. On top of that, Wise Banyan and Motif went out of business so I got rolled over to secondary brokerages. Ultimately, I did a transfer in kind to Schwab in 2019 and now I manage my own funds. However, I have yet to sell those transferred funds and re-balance because the market is so bad right now. I actually still have $500 in Betterment that are fractional shares, which are not allowed to be rolled into Schwab. I could cash out and pay tax on it (I think I'm eligible for long term capital gains by now), but probably I should cash out the Schwab taxable funds all at the same time so I can process this all on my 2020 tax return. Overall, the amount is so little that I'm not sure how much I would pay in tax (plus I have some losses), but this part I have never done before in my life so that's why I'm stagnating.

TLDR; Avoid Robo advisors unless you have a high amount of money to invest and little time to educate yourself financially. While the fees are reasonable, they are not as cheap as an index fund with ERs of 0.04.
psychodoc
Posts: 46
Joined: Tue Jun 10, 2008 11:21 pm

Re: My Robo Advisor Experiences

Post by psychodoc »

tj,

i wasn't paying attention to every transaction, but i think several things changed:

international equity allocation increased from, i think, 40% to 50%
bonds shifted, i think some long term treasures were dropped, the weighting to muni bonds seemed to increase, the emerging market bond allocations were decreased, and tips were either added or increased

overall equity:bond:cash ratios were not changed.

they sent the following in an email, void of detail:

"What changed:

• We updated long-term return and risk projections for each asset class to reflect evolving market conditions. CSIA updates its projections for each asset class each year based on factors such as inflation, interest rates, earnings projections, and market valuations. To learn more about our process, see how annual portfolio updates keep your portfolio current.

• We replaced two ETFs with ones that are more cost effective. With this in mind, this year we replaced the primary corporate bonds and international developed bonds ETFs with lower cost, comparable ETFs. For a complete list of our ETFs, see here.

What this means for you:

• Between June 18th to June 25th, changes were made reflecting the above, which may have resulted in trades in your portfolio. These updates seek to keep your targeted allocation and intended level of risk consistent with your goals."
CycloRista
Posts: 203
Joined: Sun Feb 16, 2020 11:53 am

Re: My Robo Advisor Experiences

Post by CycloRista »

I've been pleasantly surprised with a Wealthfront account opened >2 years ago (ponied up on a "no fees up to $5k" offer that I figured would be an excellent benchmark against my other accounts).

I also gave Personal Capital a shot (at nearly 3x the fees in a non-ETF account). After 3 years, it was not impressive at all so I moved those funds away from them a few months ago (into self-directed taxable and non accounts held elsewhere).

I opened an Acorns account recently too and seeded it with a bit extra to see how that performs over time.

The litmus test in my opinion will be (not if but) when the next major/sustained bear market rears its ugly head.
tj
Posts: 3930
Joined: Thu Dec 24, 2009 12:10 am

Re: My Robo Advisor Experiences

Post by tj »

psychodoc wrote: Thu Jul 16, 2020 12:59 pm tj,

i wasn't paying attention to every transaction, but i think several things changed:

international equity allocation increased from, i think, 40% to 50%
bonds shifted, i think some long term treasures were dropped, the weighting to muni bonds seemed to increase, the emerging market bond allocations were decreased, and tips were either added or increased

overall equity:bond:cash ratios were not changed.

they sent the following in an email, void of detail:

"What changed:

• We updated long-term return and risk projections for each asset class to reflect evolving market conditions. CSIA updates its projections for each asset class each year based on factors such as inflation, interest rates, earnings projections, and market valuations. To learn more about our process, see how annual portfolio updates keep your portfolio current.

• We replaced two ETFs with ones that are more cost effective. With this in mind, this year we replaced the primary corporate bonds and international developed bonds ETFs with lower cost, comparable ETFs. For a complete list of our ETFs, see here.

What this means for you:

• Between June 18th to June 25th, changes were made reflecting the above, which may have resulted in trades in your portfolio. These updates seek to keep your targeted allocation and intended level of risk consistent with your goals."
Interesting. The ETFs are shown at link below. The Intermediate Corporate Bond and Developed Bond ETF replacements seem to be the Vanguard products. I don't recall waht they were before. I messed with the questionnaire and coudl not manipulate into a portfolio that includes the Developed Market bonds - that must only be in the Intelligent Income product.

The portfolio does look different than from what I remember. US stocks Large and US Small are weighted higher than US Fundamental Large and Small. I don't remember that being the case in the past. Emerging Markets Fundamental and International Large Fundamental also seem higher.


https://intelligent-client.schwab.com/p ... ocess.html
psychodoc
Posts: 46
Joined: Tue Jun 10, 2008 11:21 pm

Re: My Robo Advisor Experiences

Post by psychodoc »

yeah. had i known they were such noticeable changes, i would have paid more attention to the construction beforehand.

as it happens, the new allocations more closely resemble my non-robo advisor retirement funds, so i'm actually satisfied with the changes. hard to say i will be satisfied by further changes in the future, however. I suspect the timing was influenced by the ability to do some gain harvesting that will have been offset by loss-harvesting from the march lows.

It doesn't paste well from the website, but here is a snapshot of the holdings:

TOTAL CURRENT ALLOCATION by Asset Classes
Stocks (64.76%)
SCHX : SCHWAB US LARGE CAP ETF IV 11.23%
VB : VANGUARD SMALL CAP ETF IV 4.28%
SCHA : SCHWAB US SMALL CAP ETF 2.77%
FNDX : SCHWAB FUNDAMENTAL US LARGE CO ETF 6.42%
PRF : INVESCO FTSE RAFI US 1000 ETF 0.61%
FNDE : SCHWAB FUNDA EMG MKTS LARGE COM ETF 6.41%
PXH : INVESCO FTSE RAFI EMERGING MARKETS ETF 0.59%
FNDF : SCHWAB FUNDAMENTAL INL LARGE COM ETF 5.54%
PXF : INVESCO FTSE RAFI DEVELOPED MARKETS EX-U.S. ETF 1.38%
SCHE : SCHWAB EMERGING MARKETS EQUITY ETF 3.04%
IEMG : ISHARES CORE MSCI EMERGING ETF 2.10%
FNDA : SCHWAB FUNDAMENTAL US SMALL COM ETF 5.07%
FNDC : SCHWAB FUNDAMENTAL INTL SMAL COM ETF 3.41%
PDN : INVESCO FTSE RAFI DEVELOPED MARKETS EX-U.S. SMALL-MID ETF 0.75%
VEA : VANGUARD FTSE DEVELOPED MATS ETF IV 4.01%
SCHF : SCHWAB INTERNATIONAL EQUITY E ETF IV 0.02%
VSS : VGRD FTSE ALL WRLD EX USSML ETF IV 1.98%
SCHC : SCHWAB INTERNATNAL SMALLCAP EQY ETF 1.34%
SCHH : CHARLES SCHWAB US ETF IV 1.96%
VNQI : VANGUARD GLBAL EX US REAL EST ETF IV 1.60%
HAUZ : XTRACKERS INTER REAL ESTETF 0.25%

Fixed Income (25.07%)
TFI : SPDR NUVEEN BLOOMBERG BARCLAYS MUNICIPAL BOND ETF 10.32%
VTEB : VANGUARD MUNI BND TAX EXEMPT ETF 3.34%
SCHP : SCHWAB US TIPS ETF 10.31%
EMLC : VANECK VECTORS J.P. MORGAN EM LOCAL CURRENCYBOND ETF 1.10%


Commodities (1.96%)
IAU : ISHARES GOLD ETF 1.96%


Cash (8.21%)
CASH 8.21%

For an algorithm to manage, this is fine. For an individual, it would be painful, at best.
pnwlazy
Posts: 18
Joined: Fri May 19, 2017 9:37 am

Re: My Robo Advisor Experiences

Post by pnwlazy »

I was lucky enough to get in on the 'beta test" that was Hedgeable - I think if I deposited more money with them / tried out more of the aggressive options they presented - I probably would have made a lot more money...

I tried out betterment, ended up liquidating my account because they performed ZERO trades, zero rebalances, etc - why pay them just to split my money between some vanguard funds?

I still have money in wealthfront because I got in during the "first $10k managed free" promotion - ZERO trades, zero rebalances, etc in the last 5+ years.

Several years ago, I reallocated a majority of assets to vanguards target date funds.

I was thinking by now, at least ONE of the "robo" advisors would be more "robo" - but I guess they are choosing to call it "Actively Managed" instead of robo.. Why let a computer / ai / robo do what it's programmed to do, after all ? With all the AI built into the industry, and all the HFT going on - one would think it could/should be a pretty active and passive service by now - but I have yet to find it.

Between Covid and the Election - 2021 is going to be like a rollercoaster - I was hoping SOMETHING out there would get me through it a little better and hopefully no worse than a target date fund?
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