Wisebanyan vs Vanguard Brokerage for ETF's?

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kpeercy
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Wisebanyan vs Vanguard Brokerage for ETF's?

Post by kpeercy » Sat Jul 02, 2016 6:16 am

I don't want to chunk down $3k or $10k for Vanguard mutual funds, so I chose the route of investing at Wisebanyan, which charges no commission other than the underlying fund expenses for a basic user as myself. Wisebanyan then invests in mostly Vanguard ETF's (VTI, VEA, VWO for stocks, LQD, VCSH, SJNK, VGIT, TIP, VNQ for bonds). It's a robo advisor, so I set my account on 80/20, which means the majority of my account is in VTI. The thing about Wisebanyan is that it is auto-pilot. I make regular deposits and it invests it for me in the above funds. It allows fractional shares, so the maximum left in cash is $0.05.

I've contemplated switching to Vanguard brokerage for the sold purpose of only investing in VTI and BND and skipping out on the others. However, the idea of only being able to buy whole shares and leaving a decent amount of cash sitting frustrates me. Is there anyone out there that has faced a similar question? If it were Betterment or another service charging above and beyond the fund expenses, it would be a no-brainer. However, the zero cost, auto pilot and fractional shares makes it a tough decision for me.

This is a taxable account just meant for wealth accumulation. It has no specific purpose other than growth and I'm financially independent in every other way.

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BL
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Re: Wisebanyan vs Vanguard Brokerage for ETF's?

Post by BL » Sat Jul 02, 2016 6:37 am

If you are looking for "wealth", at some time you must have $3k. That is a starting out number for most Vanguard investor funds, and you can add in small increments, $100 or less, from then on into that same fund. When it totals $10k, it becomes the Admiral class within a short time. There are no $ left over, and you can set up automatic deposits if you like.

livesoft
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Re: Wisebanyan vs Vanguard Brokerage for ETF's?

Post by livesoft » Sat Jul 02, 2016 8:29 am

When I was young, ETFs didn't exist. Even the money market fund required $3,000 minimum to start with. Salaries were lower back then. Most of those funds you mentioned did not exist either.

We bit the bullet and saved up money in a savings account, then bought mutual funds with initial minimums of $3,000. Plus expense ratios were a bit higher back then even for index funds.

I suppose those minimums acted as an incentive to save up enough money to invest in the first place.

You can probably guess that I think rob-o-advisors are a gimmick. They are better than rob-me-advisors though.

I love to use ETFs, but only at brokers that have no commissions such as Vanguard, WellsTrade, TDAmeritrade, et al.

(VNQ is definitely not a bond fund.)
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Dollarsign16
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Re: Wisebanyan vs Vanguard Brokerage for ETF's?

Post by Dollarsign16 » Sat Jul 02, 2016 8:57 am

I've had a Wisebanyan account since January, opened for many of the same reasons the OP states. I have periodic auto transfers into it and have been very satisfied thus far.

Without any fees above the fund expenses it seems to good to be true but no catches so far.

Seems like a no-brainer supplemental account.

KH
Too many people spend money they earned..to buy things they don’t want..to impress people they don’t like. –Will Rogers

livesoft
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Re: Wisebanyan vs Vanguard Brokerage for ETF's?

Post by livesoft » Sat Jul 02, 2016 9:01 am

Let me ask this about Wisebanyan: Can one submit limit orders for individual ETFs? Can one buy/sell at any time they want to? Or are orders not in your control such as they are aggregated and transacted once a day at prices of Wisebanyan's choosing? A cursory look at the wisebanyan web site only showed fluff and no real information, but maybe info is hidden somewhere obvious that I was too impatient to find.
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kpeercy
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Re: Wisebanyan vs Vanguard Brokerage for ETF's?

Post by kpeercy » Sat Jul 02, 2016 9:16 am

BL wrote:If you are looking for "wealth", at some time you must have $3k. That is a starting out number for most Vanguard investor funds, and you can add in small increments, $100 or less, from then on into that same fund. When it totals $10k, it becomes the Admiral class within a short time. There are no $ left over, and you can set up automatic deposits if you like.
Oh, I have enough money. I just don't want to handover a chunk at this point.

kpeercy
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Re: Wisebanyan vs Vanguard Brokerage for ETF's?

Post by kpeercy » Sat Jul 02, 2016 9:17 am

livesoft wrote:When I was young, ETFs didn't exist. Even the money market fund required $3,000 minimum to start with. Salaries were lower back then. Most of those funds you mentioned did not exist either.

We bit the bullet and saved up money in a savings account, then bought mutual funds with initial minimums of $3,000. Plus expense ratios were a bit higher back then even for index funds.

I suppose those minimums acted as an incentive to save up enough money to invest in the first place.

You can probably guess that I think rob-o-advisors are a gimmick. They are better than rob-me-advisors though.

I love to use ETFs, but only at brokers that have no commissions such as Vanguard, WellsTrade, TDAmeritrade, et al.

(VNQ is definitely not a bond fund.)

I wouldn't have to save any money. I have more than enough to buy admiral shares now.

kpeercy
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Re: Wisebanyan vs Vanguard Brokerage for ETF's?

Post by kpeercy » Sat Jul 02, 2016 9:18 am

livesoft wrote:Let me ask this about Wisebanyan: Can one submit limit orders for individual ETFs? Can one buy/sell at any time they want to? Or are orders not in your control such as they are aggregated and transacted once a day at prices of Wisebanyan's choosing? A cursory look at the wisebanyan web site only showed fluff and no real information, but maybe info is hidden somewhere obvious that I was too impatient to find.
I think you just put in a sell order and have no control after that.

kpeercy
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Re: Wisebanyan vs Vanguard Brokerage for ETF's?

Post by kpeercy » Sat Jul 02, 2016 9:19 am

kpeercy wrote:
BL wrote:If you are looking for "wealth", at some time you must have $3k. That is a starting out number for most Vanguard investor funds, and you can add in small increments, $100 or less, from then on into that same fund. When it totals $10k, it becomes the Admiral class within a short time. There are no $ left over, and you can set up automatic deposits if you like.
Oh, I have enough money. I just don't want to handover a chunk at this point.
How is there no cash on the sidelines when you can only buy in whole shares?

kpeercy
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Re: Wisebanyan vs Vanguard Brokerage for ETF's?

Post by kpeercy » Sat Jul 02, 2016 9:19 am

kpeercy wrote:
BL wrote:If you are looking for "wealth", at some time you must have $3k. That is a starting out number for most Vanguard investor funds, and you can add in small increments, $100 or less, from then on into that same fund. When it totals $10k, it becomes the Admiral class within a short time. There are no $ left over, and you can set up automatic deposits if you like.
Oh, I have enough money. I just don't want to handover a chunk at this point.
How is there no cash on the sidelines when you can only buy in whole shares?

livesoft
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Re: Wisebanyan vs Vanguard Brokerage for ETF's?

Post by livesoft » Sat Jul 02, 2016 9:19 am

OK, no control means to me: Don't bother with that broker.
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chx
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Re: Wisebanyan vs Vanguard Brokerage for ETF's?

Post by chx » Sat Jul 02, 2016 11:20 am

If you have more than enough to purchase Admiral shares, then shift everything to Vanguard now and buy Admiral shares of the two funds in an 80/20 proportion. Stop worrying about the price of a fractional share sitting in cash, or if that truly worries you, then purchase mutual funds rather than ETFs, so that you can purchases precise dollar amounts.

greybus
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Re: Wisebanyan vs Vanguard Brokerage for ETF's?

Post by greybus » Sat Jul 02, 2016 11:33 am

Sorry for the long post.

I've been a BH for 20 years and have been dutifully auto-depositing into Admiral funds. That being said, I also opened a Wisebanyan account for the convenience. I've posted before that everyone is at a different stage with different net worths and someone near retirement or a huge nest egg may have a different view than someone who is still accumulating. If I'm auto-depositing every 2 weeks or every month, I can either do it manually (and have to calculate my spreadsheet every time, *and* remember to do it), or put it on auto-pilot. However, if I auto-deposit into VG, I can only specify dollar amounts. If I wanted to add to the fund that needed to be "topped" off, I would have to remember to do it manually. Yes, this takes only 5 minutes, but the whole point is to automate it to remove human emotion/error/laziness from the equation.

I consider myself quite frugal and a typical BH, and have looked at almost all of the options, and here's my take. Betterment and Wealthfront are fine but charge AUM 0.15%-0.25%. Better than a real advisor charging 1%, but you might as well go with Vanguard Personal Advisor for 0.3% then or Schwab due to their size (which on a prior post viewtopic.php?t=160555&start=200#p2420538, I calculated to be slightly more expensive than Betterment with the cash drag and their more expensive fundamental ETFs). Fidelity's roboadvisor is coming later this year, which will use some active funds, and probably cost around 0.3-0.4% including expense ratios (http://www.wsj.com/articles/fidelity-in ... 1459287488)

If you are not planning to trade or place limit orders or have free commissions, or you want to add money every few weeks or auto-deposit the money, then maybe you shouldn't be buying ETF in your own brokerage account, since you will lose some on every transaction with spreads, etc. Better off trying to buy the associated VG MF if you have the cash. But not everyone does.

Wisebanyan is a RIA/fiduciary, so they are supposed to at least try to get best execution. They use block trades and Apex, which many robos use. And they say they are not paid to refer trades, advertise, sell info or make money off clients trades. You can read a lot more in ADV Part 2: http://www.adviserinfo.sec.gov/IAPD/Con ... _ID=375566. For what it's worth, they seem to be ethical and their business practices do not seem aimed to overtly or discretely funnel cash away from you. (I do not work for Wisebanyan, and have had an account with them for 2 months. I stand to gain if they stay in business)

Wisebanyan if free if you don't use them for TLH. They cap TLH fees if you do use it. They invest in reasonable cheap ETFs. Their AA is also reasonable if not growth heavy (see http://www.etf.com/sections/blog/22982- ... nopaging=1 for a slightly dated, although very good review of AA of many roboadvisors). They have some nice features like creating subaccounts of money whereby each bucket can have a different AA (stock/bond mix - they still use the same ETFs) so you can target different goals in different time frames [for example, a house down payment or emergency fund can have different AA mix than a general wealth fund]. You can elect to contribute different amounts to each subaccount on different automated schedule, and continue to TLH automatically. This won't affect the wash sale rules since they will add up all of the trades in the subaccounts and do it all at one time. They invest in fractional shares. Overall I think they are trying to copy Betterment, as they also have similar features.

Are they perfect? Absolutely not. The biggest problem I see is their size (far smaller than everyone else http://www.adviserinfo.sec.gov/IAPD/con ... _PK=150953) and lack of future profitability. They are supposed to make money by charging ala carte fees for TLH, tax prep, etc. They are planning to roll out an enhanced index for tax deferred accounts using synthetic options http://www.doughroller.net/investing/in ... isebanyan/. They also apparently have customized portfolios for HNWI and charged 0.5% AUM. Unless they can really operate on a shoestring budget, they are waiting for someone to buy them before they run out of VC. In that case, the free model may go away, and you'll be left with orphan ETFs in your Apex account, or be forced to sell and incur capital gains. And they seem to have a hard time getting press or attention probably due to lack of marketing money and lack of referrals (WCI didn't even mention them http://whitecoatinvestor.com/the-pros-a ... oadvisors/ so I had to comment!) People who are currently clients and refer new clients get 10% off future TLH fees, which doesn't equate to much money.

What are some other free/semi-cheap options besides robo-advisors? All-in-one fund? Sure, but may not be tax optimal and no TLH, but it's easy. Motif's Horizon funds (https://www.motifinvesting.com/offers/horizon) are like a glorified target fund/robo-advisor. No commission to trade, no AUM fee, auto-rebalancing but no TLH. But you have much less control over AA (seemed pretty global bond heavy) and they may change AA in future. Or use Foliofn and pay $290/year for unlimited window* trades and make your own AA, and then you can auto-deposit based on your AA. But no automated TLH.

I read a lot of investing material, but then go phases where I'm either tinkering with my plan or ignoring it completely. When I used to auto-deposit into VG, it would go without a hitch. Then I wanted to do crude value averaging (http://thefinancebuff.com/rebalancing-w ... -cash.html) and ended up not investing regularly. Left to my devices, I may or may not be tempted to try to time my deposits. I'm sure many on this board have the interest, time, discipline and expertise to manage their finances and their emotions, to take advantage of RBDs and TLH effectively. Many of you have enough assets to qualify for free trades, or have grandfathered Wells accounts. Or many are not actively adding to their portfolio, so once a year rebalancing is sufficient. But I can also imaging there are people who want to add money every few weeks or just want to set it and forget it (if you want to set it and forget, I still highly recommend reading and learning everything you can, and if you still don't want to keep an eye on things that carefully, may want to go with a large institutional firm like VG, Fido or Schwab instead of these smaller startups).

I am definitely not a regular poster but wanted to chime in and let people know that the best investment plan/advisor/brokerage is the one that makes you invest vs doing nothing. It may not be the cheapest, the simplest, the most tax efficient or the best performing. Other people may be doing it better, faster, and easier with their method. But there's nothing wrong with convenience either. The best method for you is the one you stick with, the one you are comfortable with and the one you can sleep at night with.

jjface
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Re: Wisebanyan vs Vanguard Brokerage for ETF's?

Post by jjface » Sat Jul 02, 2016 11:38 am

I suppose it is an alternative to an all in one fund. You can buy target retirement funds for $1k at vanguard.

livesoft
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Re: Wisebanyan vs Vanguard Brokerage for ETF's?

Post by livesoft » Sat Jul 02, 2016 11:43 am

Once one has enough money to be above just a few fund minimums of $1,000 or $3,000 each at Vanguard, then one can do the ETF thing with whole shares and just move the leftover cash turds into one of their mutual funds. The mutual funds can be used to do automated periodic investing and on autopilot. But if an ETF interests one, move money to the ETF.
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David Scubadiver
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Re: Wisebanyan vs Vanguard Brokerage for ETF's?

Post by David Scubadiver » Tue Oct 10, 2017 9:03 am

kpeercy wrote:
Sat Jul 02, 2016 9:18 am
livesoft wrote:Let me ask this about Wisebanyan: Can one submit limit orders for individual ETFs? Can one buy/sell at any time they want to? Or are orders not in your control such as they are aggregated and transacted once a day at prices of Wisebanyan's choosing? A cursory look at the wisebanyan web site only showed fluff and no real information, but maybe info is hidden somewhere obvious that I was too impatient to find.
I think you just put in a sell order and have no control after that.
For reference, when you seek to withdraw, you tell them how much you need. If the withdrawal request is made before 1:30, they place the trade at 2. If it is made after 1:30, it is placed at 2 the next day.

Thus, it is similar to a mutual fund in that way, though it is not using the closing price value.

I am using Wisebanyan myself, and so far I like it. I have created a "rainy day fund" that is 85% fixed income and 15% stock; and I have a "Build Wealth" portfolio that is 69% stocks and 32% fixed income.

I trade commission free at Merrill Edge so the "free" aspect of Wisebanyan doesn't really save me anything. On the other hand, I really do like being able to automatically invest $600 a week into the two portfolios and have them do the balancing and tax loss harvesting. I've only been with them for a few days, but I see the allure of this, even with the downside of being unable to place limit orders (something I seldom do unless forced to do so in aftermarket trading) or being able to "buy and sell" at a specific time during the day. If the market drops 1,000 points I will still acquire shares through Merrill Edge, but for "building" my portfolio with a roboadvisor, I like Wisebanyan.

It is not, however, very tax efficient in terms of asset allocation. It won't, unlike the .25% fee advisors, allocate your fixed income holdings to your IRA accounts.

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