It offers tax-advantaged investments, but lower fees can be found elsewhere.
If you hold accounts with Fidelity or TD Ameritrade and want an investment service to assume responsibility for your investments, FutureAdvisor may be a practical fit. Otherwise, this service’s $5,000 minimum deposit and ongoing maintenance fee may be a deterrent.
What we think of FutureAdvisor
FutureAdvisor is well-equipped, as far as robo-advisors are concerned. It has a healthy selection of accounts, can help you invest with a partner toward combined financial goals and automatically rebalances your investments when they veer too far off target.
But it has two drawbacks that could be a deal breaker for some investors. You need at least $5,000 to open an account, and it charges a 0.50% maintenance fee. The maintenance fee isn’t outrageously high — but it’s also not all that competitive.
And here’s something else to consider: FutureAdvisor isn’t a broker. It’s the robo-advisor arm of BlackRock, a global investment manager headquartered in New York City. BlackRock isn’t a broker either. Any account you open through FutureAdvisor is actually housed with Fidelity Investments or TD Ameritrade. FutureAdvisor simply assumes responsibility for your accounts and manages them on your behalf.
It’s definitely one of the more unique robo-advisors on the market. Ultimately, it’s a convenient service for investors who already have accounts with Fidelity or TD Ameritrade. But for those starting from scratch, more competitive fees can be found elsewhere.
How does FutureAdvisor work?
FutureAdvisor is a robo-advisor: a digital service that manages your investments for you. Like most robo-advisors, FutureAdvisor asks you a series of questions about your investment goals when you sign up. It then uses your responses to draft a personalized portfolio for you to review.
If you like what you see, you fund your account and FutureAdvisor takes care of the rest. It monitors your account and automatically rebalances your portfolio as needed to help you meet your investment goals.
FutureAdvisor has both taxable and retirement accounts to choose from. But you’ll need to deposit at least $5,000 to get started, and you may encounter trading fees if FutureAdvisor moves mutual funds in or out of your portfolio.
Future Advisor charges a 0.50% annual management fee. This fee is withdrawn quarterly and is based on the value of your investment portfolio.
Is FutureAdvisor’s management fee unreasonable? Not necessarily.
But it isn’t all that competitive, either. Not when you compare it to the likes of Betterment and Wealthfront, both of which charge only 0.25% per account. And FutureAdvisor’s 0.50% fee looks especially unappetizing when set alongside platforms like M1 Finance, Schwab and SoFi, which don’t charge any management fees at all.
Another factor to consider: trading fees. FutureAdvisor warns that you may generate trading fees when it rebalances your portfolio depending on your asset allocation strategy. FutureAdvisor accounts are held by Fidelity Investments and TD Ameritrade, both of which charge commissions on mutual funds of $24 to $50 per transaction, depending on the fund.
Pros and cons
FutureAdvisor offers a fair balance of advantages and drawbacks — consider both before you apply.
- Automatic rebalancing. Should your investments divert from your investment goals, FutureAdvisor can get them back on track.
- Householding. This robo-advisor can manage multiple accounts toward collective household goals with shared risk tolerance and investment time horizons.
- Tax-efficient investments. In addition to tax-advantaged investment accounts like IRAs, FutureAdvisor is also equipped to offer tax-loss harvesting: selling down investments at a loss to reduce the impact of capital gains tax.
- Fiduciary responsibility. FutureAdvisor is a fiduciary, which means it’s obligated to put its investors’ interests first.
- Account selection. Taxable and joint accounts are available alongside traditional and Roth IRAs.
- 0.50% fee. FutureAdvisor’s 0.50% annual management fee is higher than most.
- High minimum deposit. To access FutureAdvisor’s services, you’ll need a minimum opening deposit of at least $5,000.
- Signup required. For an up-close look at FutureAdvisor’s features, you’ll need to sign up.
What do current users say?
FutureAdvisor isn’t an accredited business with the Better Business Bureau (BBB) — nor is its parent company, BlackRock. In fact, FutureAdvisor doesn’t have any established presence on Trustpilot, BBB or the Consumer Financial Protection Bureau.
Even Redditors didn’t have much to say — besides complaining about FutureAdvisor’s 0.50% fee and comparing asset allocation strategies.
How do I get started?
To get the ball rolling with Future Advisor, you’ll need to create an account by entering your email address and password. The application process only takes a few minutes, and you’ll need to be prepared to supply some personal information, including your full name, date of birth and annual income.
You’ll then need to answer some questions about your investment goals, including how many years you plan to invest, how much you plan to deposit and how much risk you’re comfortable taking on.
Here’s a breakdown of the process:
- Enter your email address, create a password and select Sign up.
- Enter your full name, date of birth, annual income and hit Next.
- Tell FutureAdvisor more about your investment goals.
- Review your personalized FutureAdvisor portfolio and fund your account.
Alternatives to FutureAdvisor
FutureAdvisor has plenty going for it, including tax-advantaged investments and the ability to guide multiple accounts toward combined household goals. But it’s far from the only robo-advisor on the market, and there are numerous robo-advisor alternatives.
For example, let’s say you want to open an investment account but don’t have $5,000. Look for a platform with a more manageable minimum deposit, like Acorns, which lets you get started with only $5.
Or maybe you’re looking to cut costs and want a robo-advisor with lower fees. If that’s the case, check out Betterment or SoFi.
No matter what, review your platform options by comparing features, fees and investor feedback to find the robo-advisor best suited to your needs.