On October 2018, Axos Financial agreed to acquire WiseBanyan Holdings and rebranded it Axos Invest. Much of the tool remained the same, it was simply brought into the Axos Financial brand.
Roboadvisors are extremely popular these days. The value proposition is very clear – pay less in fees, get the same performance.
The most popular roboadvisors are companies like Betterment and Wealthfront (read our Wealthfront review). You open an account, deposit money, and they manage the portfolio on your behalf for a small fee on top of the underlying investments’ expenses.
WiseBanyan is similar to other roboadvisors, especially with the goal setting features that support its claim to be a financial advisor, with one different – zero fees. They’re an SEC registered investment advisor, a member of FINRA/SIPC, and protected up to $500,000 by SIPC. They’ve checked all the legal boxes and are legitimate.
Table of Contents
Opening a WiseBanyan Account
Very straightforward — WiseBanyan asks for your birthday, income & net worth, your investing style (four options of aggressiveness), when you plan to need the money you’re investing, and how you’d behave if your investment lost 10% of its value.
They ask a lot of risk related questions to set your asset allocation. You have the classic, “what would you do if your investments lost 10%” as well other more clever ones, like how much you’d bet on a coin flip (heads you win $10, tails you lose $0; heads you win $50, tails you lose $20; heads win $100, tails lose $50).
A few restrictions on investing accounts – you can only do a personal brokerage, Roth IRA, SEP IRA, or Traditional IRA. Minimum deposit is just a buck and it takes just a few minutes to create an account.
Milestones are WiseBanyan’s goal setting features. You have the option of selecting:
- Build Wealth – Your basic catch-all taxable brokerage account.
- Rainy Day – An emergency fund.
- Retirement – For when you stop working, whether it’s at 65 or 35.
- Custom – A custom “save X by Y date” goal. (Rainy Day is a type of Custom milestone)
Each milestone will be followed by a prompt helping calculate how you may need to save.
The recommended target is 3 months of expenses, which they calculated to be $6,250. WiseBanyan doesn’t collect enough information to accurately recommend a target, which is fine, but I’d argue that 3 months is probably too short. I like to keep 6-months or more in an emergency fund and our monthly expenses are higher than $2,000 a month. Then again, I’m not here for emergency fund advice. 🙂
WiseBanyan recommends an 15% stocks, 85% bonds portfolio (you can adjust this) then begins the process of establishing the account. I’m asked for the first deposit, how much to auto-deposit, and the math is all calculated for me so I hit my goal of $6,250 in 18 months. I claim to deposit $500 and WiseBanyan calculates I need to deposit $70.75 per week to reach my goal in 18 months (78 weeks). You can change the deposit frequency to monthly or quarterly and WiseBanyan updates the amount.
With these updates, you will see how many months you are covered based on what you entered as your income. That’s pretty slick.
For those keeping track at home, that’s $5518.50 in weekly deposits, $500 initial deposits, for a total of $6,018.50 in deposits with an estimated $231.50 in gains to get me to my goal of $6,250.
You can make withdrawals from the accounts, update the deposits, and anything else you can think of with the money. It’s not locked in but the tax implications of your moves are your responsibility.
Reviewing a Personalized Portfolio
I scored a 9.1 (highest is 10) in terms of risk, which meant a a mix of 83% stocks and 17% bonds. A risky 10 had a 91/9 ratio while a conservative 1 flipped the allocations and was 9/91.
My full breakdown was:
- US Equities (VTI) – 49.64%
- Int’l Developed Equities (VEA) – 26.89%
- Int’l Emerging Equities (VWO) – 6.2%
- US Corporate Investment Grade Bonds (LQD) – 4.81%
- Short Term Corporate Bonds (VCSH) – 0.35%
- Short Term High Yield Bonds (SJNK) – 2.89%
- US Treasuries (VGIT) – 4.29%
- US Inflation Protected Bonds (TIP) – 3.43%
- REITs (VNQ) – 1.50%
They’re all low cost Vanguard, SPDR, and iShares ETFs. As you can see, the list of ETFs is sizable and cover nearly every asset class you can imagine. The average expense ratio is low, just 0.12%, as you’d expect if the list is populated with Vanguard, SPDR and iShares names.
In the event you adjust your allocation (or through gains and losses the actual allocation changes from the target), your new contributions are adjusted to move your portfolio to meet that allocation. So let’s say, simplistically, you’re 80% stocks and 20% bonds. If you shift that to 50% stocks and 50% bonds, subsequent deposits will be more bond heavy to move the allocation in the right direction. It will also adjust your portfolio if your allocations exceed 5% from target.
How Does WiseBanyan Make Money?
The other roboadvisors charge a small management fee. Betterment charges anywhere from 0.15% to 0.35% on top of underlying investment fees. Wealthfront charges a 0.25% on assets above the first $10,000 invested ($15,000 for Wallet Hacks readers).
WiseBanyan charges nothing – how? They charge fees for add-on a la carte services like tax loss harvesting.
WiseHarvesting, which is what WiseBanyan calls their tax loss harvesting service, has an annual fee of 0.25% of taxable assets charged monthly but the monthly fee is capped at $20. Other companies offer tax loss harvesting in their base package but they also charge you 0.35% to 0.25% in annual fees just for having an account.
What I Like About WiseBanyan
The milestones – I’ve written about how to build your financial plan without a financial advisor and this feels like a great tool to execute a plan. You have the flexibility to set different goals (and change the name, click on the blue field when you set it up or anytime afterwards on the dashboard) and then see them on the Dashboard all rolled up in the Overview.
I like that it’s free and that you pay for tax loss harvesting, it’ll be interesting to see what additional features they add and how those are priced.
Finally, and this is minor, but you can own fractional shares so all of your money is invested.
What I Didn’t Like
WiseBanyan says it’s the first free financial advisor and it comes pretty close with the use of Milestones. I think the Milestones are a great idea but it needs to have a little more on the planning side of things.
For example, right now you tell it you want to save $6,250 in 18 months for an emergency fund. Great!
But what if you can’t possible make a $350 deposit each month (roughly $6,250 divided by 18)? The system will show you how your timeline changes when you update the auto deposit amount – a nice feature they recently added. It’s good to see how your time to goal changes based on your financial capabilities. If you can only make a $100 deposit each month but you need to get to $6,250 — the timeline reflects that.
Also, it’s missing a little glue to make everything mesh well together like a financial advisor. The Dashboard can show you individual Milestones or them in aggregate, but I’d love to see how different Milestones are progressing, what is falling behind, what is ahead, etc. I feel like we’re getting to the point where it could be a financial planner but right now it’s a few steps away.
WiseBanyan is still relatively small. According to this SEC filing from earlier in 2016, they have just about $90 million in assets under management. Wealthfront and Betterment have assets under management into the billions. One word of caution, don’t read too much into the assets under management metric – it’s a sexy one if you’re a startup investor but not really relevant to what any of these companies are trying to do.
In chats with Vicki Zhou (Co-founder and Co-CEO), one of their core metrics is number of clients (which is around 20,000). They aim to that target because they’re courting people just starting their “saving and investing journey.” It’s one of the reasons why the minimum is just $1 (it was just recently lowered from $10 to $1!). This also means they’re focused on the needs of younger investors, not older ones with potentially larger nest eggs and different needs.
Also, many brokerage firms have entered the roboinvestment marketplace like Vanguard’s Personal Advisor Services and Charles Schwab’s Intelligent Portfolios. It’ll be interesting to see how this plays out.
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Buy, Hold Long says
RoboAdvisors are becoming a more everyday common thing. Online is not only taking over in retail sales but even in the personal finance sector,