FutureAdvisor gives clients holistic management of existing investment accounts by combining access to two established brokerages with the tech savviness of a robo-advisor. It’s a bit of a hybrid system, which could be an ideal approach for the right investor.
Keep reading to learn more about how FutureAdvisor can manage your investments, how much the service costs, and everything else you can expect from this unique robo-advisor.
How It Works
FutureAdvisor starts the onboarding process just as any other robo-advisor would: by asking a series of questions to determine a personalized set of investment recommendations. You’ll answer questions about your current investments, taxes, time horizon, and future goals.
After that, FutureAdvisor provides you with a detailed plan of recommendations of how to augment your existing portfolio with a better balance of investment picks. All FutureAdvisor users must house their assets in a brokerage account at either Fidelity Investments or TD Ameritrade. FutureAdvisor then manages the money as your fiduciary.
You can expect three primary services from FutureAdvisor: automatic monitoring, rebalancing, and tax management of your accounts. They’ll work with your current portfolio and also add extra low-fee indexes as needed to strengthen your portfolio. In many cases, they’ll keep some or all of your existing investments and simply use those ETFs for diversity.
You can create a mix of tax-advantaged and taxable accounts with FutureAdvisor. For IRAs, you can choose between traditional and Roth. You can also rollover existing IRAs to have all of your accounts managed together. FutureAdvisor allows you to rollover 401ks from former employers, but they won’t manage existing one.
For taxable accounts, you can opt between Individual or joint taxable accounts (or a combination of both). FutureAdvisor also allows for household accounts so you can diversify multiple accounts for both you and your spouse or partner.
When you get started with FutureAdvisor, you must transfer your existing accounts to Fidelity Investments or TD Ameritrade. Typically you need to liquidate your tax-sheltered accounts, which can result in trading fees. Taxable accounts are transferred as-is. FutureAdvisor helps to manage both processes to limit the amount of time your money is out of the market so you don’t miss out on growth opportunities for too long.
Your account is billed quarterly at 0.125% of your directly managed assets. The fee is usually deducted from one of your non-tax sheltered accounts. FutureAdvisor focuses as much as possible on commission-free ETFs to minimize other expenses on your accounts. Average expense ratios range between 0.14% and 0.18%.
Also consider that there are rebalancing transfer fees associated with TD Ameritrade and Fidelity Investments, but those are only completed when FutureAdvisor expects the benefits to outweigh the fees. This is standard when any rebalancing any assets in your portfolio, although prices may vary based on whether you’re trading ETFs or mutual funds.
FutureAdvisor comes with a few different features that helps it stand out from other competitors in the robo-advisor space.
One of the major benefits is that as a FutureAdvisor client, you have unlimited access to licensed advisors and service specialists. They’re available for questions over email or the phone. This is definitely more service than most robo-advisors, though you don’t have a dedicated person assigned to your account. If you like the idea of a robo-advisor but want a little more personalized advice when different events happen in life, this is a great bonus service to take advantage of.
FutureAdvisor allows for household accounts, meaning they’ll manage multiple accounts that are working towards a single goal. Householding allows you to maximize your tax-advantaged accounts while implementing tax-harvesting strategies in your taxable accounts. In addition to using multiple accounts, you can also include other accounts owned by your spouse or partner as long as they’re managed by FutureAdvisor.
Here are a few extras you can expect from FutureAdvisor that you won’t necessarily find with every other option out there.
The first major advantage is that all of your managed accounts get access to tax-loss harvesting. This process helps to offset your gains at the end of the year by selling tax lots with unrealized losses and replacing them with a similar fund in the same asset class. It’s a hallmark feature of robo-advisors, but not all of them actually offer this opportunity. If that’s one of the reasons you’re drawn to investing through a robo-advisor, then keep FutureAdvisor on your shortlist.
FutureAdvisor also implements frequent rebalancing that’s tailored to your needs. There’s no set schedule. Instead,accounts are rebalanced at different times for every person. With an automated robo-advisor constantly monitoring your account, your portfolio will remain balanced as shifts occur in the market.
According to FutureAdvisor, rebalancing typically happens between four and six times a year. The first time is when you initially sign up and move your assets to be managed by FutureAdvisor. Other common scenarios for rebalancing are when your assets move out of your target allocation, or when life changes occur that affect your investment goals. This could include changes in either your risk tolerance or time horizon.
FutureAdvisor is also unique in that you can lock in some individual stocks. While you can’t override the platform’s automatic investment decisions, you’re able to lock in some individual stock holdings. They’ll need to be a small portion of your overall portfolio to keep it balanced, but most robo-advisors don’t allow for individual stock picks at all. It’s definitely a nice bonus if you’re passionate about investing in a few select companies, although necessarily so for a totally DIY investor.
A major downside to choosing FutureAdvisor for your investments is that you must transfer existing funds to one of their preferred brokerages. This means you may incur fees when transferring these existing accounts to either TD Ameritrade or Fidelity. When you close an account from a previous brokerage, you’ll likely pay between $50 and $100 to transfer your funds.
Another disadvantage of using FutureAdvisor? The management fee is expensive; in fact, it’s double what many of the most popular robo-advisors charge. The upside is that you do get that access to advisors, plus tax-loss harvesting is available to all investors regardless of balance. It’s important to weigh the pros and cons to make sure it still makes financial sense for you. The $5,000 threshold is also relatively high compared to other options on the market.
Who It’s Best For
There are a few different scenarios in which FutureAdvisor could be ideal for you. The first is for investors with existing brokerage accounts who want better management of their portfolios. If you feel like you’re continually depositing funds but don’t really have a clear strategy in mind, FutureAdvisor can help make sure your money is diversified in all the right places
This is particularly true if you already have accounts opened with TD Ameritrade or Fidelity. You won’t have to worry about the cost of closing existing accounts and transferring your funds to a new brokerage. Plus, it’s easy to assign FutureAdvisor as your fiduciary because of their existing relationships with these companies.
Because of FutureAdvisor’s high account minimum of $5,000, it’s not ideal for the beginning investor without a chunk of change to start investing right away. Unless you’re ready to fund your account with that amount of money, either from your savings or existing accounts, you’ll need to look elsewhere.
While FutureAdvisor is a robo-advisor, it’s also made for individuals who want to include a small percentage of individual stocks. If you like a limited amount of DIY investing but don’t want to manage a completely separate account with a different company, you have some flexibility to do so with FutureAdvisor. That way you still get to see all of your investments in a single dashboard so you know how your entire portfolio is performing at once.
Finally, spouses and partners can invest towards common goals thanks to household accounts at FutureAdvisor. If you want a holistic view of both of your collective accounts even if they’re not all held jointly, this could be an ideal fit.
The Bottom Line
FutureAdvisor certainly isn’t the cheapest robo-advisor out there today, but you do get some key perks that may be worth the additional cost. Gaining access to financial advisors to bolster your investment strategy definitely comes with a high value, especially since there’s no limit to your questions and you can speak to someone directly on the phone.
For many people FutureAdvisor’s extra benefits like household accounts and tax-loss harvesting may outweigh the expensive management fees and account transfer costs. If you fit into one of these categories, you should certainly consider FutureAdvisor to help grow your portfolio and reach your financial goals.