More Wall Street firms offering robo-advisers
Nearly six in 10 Millennials said they were interested in robo-advisers, a BlackRock survey found.
The Wall Street trend of using financially savvy robots to help investors build portfolios online with a few mouse clicks has another convert.
TIAA is the latest entrant into the robo-advisery business, which lets investors create a professionally managed personal account online in minutes without human intervention. As technology becomes a bigger part of daily life and more investors manage their money digitally, financial firms have pushed to provide online investing solutions, which has led to a proliferation of robodriven services.
Part of the competitive allure for Wall Street firms is to appeal to Millennials, now the nation’s largest generation. Nearly six in 10 Millennials said they were interested in robo-advisers, a BlackRock survey found. The business of offering tech-savvy people the ability to build financial plans and fund portfolios has become highly competitive. Firms ranging from mutual fund giant Fidelity and low-cost brokerages such as Charles Schwab to upstart digital companies such as Wealthfront and Betterment now provide individual investors with low-cost, easy-to-use robo-advisers.
“The robo-adviser has officially gone mainstream,” NerdWallet analyst Arielle O’Shea noted.
Like the other services, TIAA’s Personal Portfolio allows a user to go online and answer a few questions about their age, investment goals, time horizon and their feelings about risk. It then recommends a computer-generated portfolio.
Some robo services build investment portfolios using only “passive” funds, such as exchange-traded funds, or ETFs, that track stock indexes such as the Standard & Poor’s 500. Others use “active” funds run by portfolio managers whose goal is to post bigger returns than the market. Some offer a mix of passive and active strategies. Niche offerings such as OpenInvest and GrowInvest focus solely on “impact” investing, or buying funds investing in companies with good grades when it comes to the environment, social causes and corporate governance.
TIAA said its new robo service will allow investors to gain exposure to all three of those types of investments.
Kathie Andrade, CEO of TIAA’s Retail Financial Services business, described the firm’s offering as a “digital coach for your wallet” but with the human touch avail- able if you prefer the support of a financial adviser.
TIAA Personal Portfolio lets users see the exact funds recommended and the underlying fees before financing their account. Minimum investment is $5,000, and there’s a management fee of 0.30%. There’s also a fee charged by the underlying funds themselves. On average, the total funds-specific fee for a socially responsible portfolio is between 0.25% and 0.28%, TIAA said.
Account minimums are lower at digital-only advisers such as Betterment ($0) and Wealthfront ($500), which charge management fees of 0.25% to 0.50% and 0.25%, respectively. Schwab’s Intelligent Portfolios robo offering doesn’t charge a management fee (it charges a fee for the underlying funds) and requires $5,000 to open an account, and Fidelity Go retirement accounts charge 0.35%, an “all-in” fee that includes the underlying fund expenses and have a $5,000 minimum investment. Sociallyresponsible robo-adviser Open Invest has a $3,000 minimum and an all-in fee of 0.50%.