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Blackrock is the biggest financial management service in the world, with nearly $6 trillion in assets managed. This has led some people to call Blackrock the world’s largest “shadow bank”. We’re not here to discuss Blackrock UK itself, but to cover the robo advisor they bought to compete with Wealthfront, Betterment, and Personal Capital.
FutureAdvisor does compete with these established robo advisors, but unlike many other competitors, it isn’t simply a rehash of the Betterment service and user interface. FutureAdvisors does have an intuitive, fancy app, and they do help create portfolios according to Modern Portfolio Theory, but they offer free services and personalized advice the other robo advisors just can’t touch.
FutureAdvisor is a little more expensive than the competition, but their additional features may be worth it. Fortunately, you can try a version of FutureAdvisor for absolutely free. With a minimum account balance of $10,000, you can have FutureAdvisor manage or coach all of the investments you have, no matter where they are located. It’s an interesting and somewhat complex service that we’ll break down below.
The free version of FutureAdvisor is perhaps most similar to Personal Capital. Like Personal Capital, it allows you to link all of your financial and investment accounts, no matter where they are held. From there, the company’s algorithms take a look at your scattered portfolio and makes recommendations about how you could optimize it based on the precepts of Modern Portfolio Theory.
As anyone with experience with robo advisors would likely expect, this means that FutureAdvisor will make use of ETFs and index funds. These highly diversified and affordable products indeed make up the backbone of FutureAdvisor portfolios. However, with a free account you won’t actually get any management services from FutureAdvisor. It’s just a free look at the philosophy of the company, by which they would manage your funds if you were to use their service.
You could always make your own portfolio with any broker you like based on the information you get from the free version of FutureAdvisor. You could also benefit simply from having all of your financial information in one place, through the organizing lens of a single intuitive app interface.
However, the free version of FutureAdvisor is somewhat limited in the value it offers its users. It doesn’t offer budgeting or daily personal finance advice the same way Personal Finance or Mint does. It’s a great macro perspective on your investment life, but if you really want to dig into the meat of FutureAdvisor, you’ve got to get FutureAdvisor Premium.
It’s on FutureAdvisor Premium that things start to get interesting. Blackrock accepts clients with a minimum $10,000 deposited, and charges them 0.50% annually. This is twice what Betterment charges, but the benefit you get is not exactly the same as what you’d get from Betterment. You can be the judge of whether or not this additional cost is worth it to you.
FutureAdvisor can still look at all of the financial accounts you have anywhere, but the ones they will ultimately manage must be held at either TD Ameritrade or Fidelity. Linked thus, FutureAdvisor can begin to buy and sell within these accounts according to your specifications and goals. You’ll still be charged for the trade fees in these platforms (in addition to the 0.50% you pay annually for FutureAdvisor), but slowly and surely your accounts will be optimized for best growth, risk, and stability, at least according to FutureAdvisor.
To this writer, the ETFs and funds chosen for the FutureAdvisor portfolios are pretty scant, though not poorly chosen. We’ve got two domestic stock ETFs (VTI and IVV), two international index funds (EFV and FNDV), and two REITs (Why REITs? VNQ and RWX). There are six bond funds as well, US bonds, US Treasuries, and international.
The coolest part of FutureAdvisor is the fact that you can get in touch with a personal advisor anytime you want and work to improve or understand better your portfolio and goals. The extent to which you are able to use this advisor’s advice to deviate from the FutureAdvisor portfolio is unclear, but perhaps our readers can fill us in on their own experiences.
FutureAdvisor can manage quite a variety of accounts (though, remember, they’re not held within FutureAdvisor itself). These include 401(k) assistance services, and full management of Taxable accounts, Roth IRA, Traditional IRA, SEP IRA, Rollover IRA, Coverdell, and 529.
The 529 plans are a unique perk, offering management of student funds and even covering disbursements. We like to point this out as many other robo advisor services don’t offer this feature, and it will be of value to a growing segment of student investors.
FutureAdvisor is unlike Betterment and Wealthfront, in that they offer management of external accounts held with TD Ameritrade and Fidelity. This is a great option for people who already use these services and would like to take part in the Modern Portfolio Theory movement used by so many robo advisors. We also think students who use 529 accounts for school will also find great value with FutureAdvisors, as will people who want to be able to talk to a real live human being account manager on the phone whenever they want.
On the other hand, we think FutureAdvisor is expensive for what it is (0.50% annually), especially for an account made up of so few ETFs and funds. It’s true that these funds are already diversified in and of themselves, but you’ll have no flexibility to go after unsupported sectors unless you work something out with your advisor.
FutureAdvisor tax-loss harvesting may somewhat make up for their higher cost, but at the end of the day we’re just not convinced this is enough to make this robo advisor stand head and shoulders above the rest. We’re interested to hear more from our readers about personal experiences with FutureAdvisors. As this company starts to prove its mettle in the long term (it’s just 2 years old) maybe we’ll amend our opinion. For now, we think it’s good enough, but that most people would be better served by one of several competitors.