Given that there are more than 200 robo-advisors in the U.S. it can be tricky to know which one offers the best investment management service for your needs. In this article, check out the differences between two major investment apps: WiseBanyan vs Wealthfront.
WiseBanyan bills itself as being the world’s first free financial advisor. Unlike most robo-advisors, WiseBanyan doesn’t have an account minimum and doesn’t charge any fees whatsoever for asset management. Instead, this provider makes money through add-on products such as its tax-loss harvesting service (called WiseHarvesting).
Because WiseBanyan is free to use and has no minimum balance requirement (you will need to deposit at least $1 to open an account), it’s incredibly easy for beginner investors to get started. After answering some questions about risk and financial goals, WiseBanyan automatically builds and manages a diversified portfolio of ETFs.
One point to note is that WiseBanyan only offers individual taxable accounts, such as Personal Investment Accounts or traditional, SEP or Roth IRAs. That means that you can’t open a joint account or a custodial account for your children.
This app scores 4.2 / 5 at Google Play and 4.6 / 5 over at the App Store. On Google Play, one reviewer highly rated the app, saying that it was awesome and that they hadn’t found a “catch” with their free robo-investing service as yet! The only slight criticism from this person was that they wished the app could incorporate employer 401Ks into its dashboard.
Another reviewer claimed that WiseBanyon offers a great and simple way to invest in ETFs and with no fees, more of your money stays invested. The lack of fees along with an automatically managed portfolio is a definite advantage with WiseBanyan; this is apparent across various reviews.
Over at the App Store, one user said she thought the app was perfect if you’re looking to “set and forget” your investment. However, she wouldn’t recommend WiseBanyan for shorter-term investment savings goals, as the wait-time for withdrawal of funds was proving to be inconvenient for her.
A couple of reviewers have requested fingerprint authentication as a login option, and there were a few complaints about glitches as well as poor returns for some users.
Quite a few reviews on Google Play touched on the level of returns that WiseBanyan offers, with some being good and some poor. One reviewer stated that WiseBanyan is an excellent robo-investor and that he’s seen a gain of 20.6% in one year. However, this was with an aggressive investing approach. Another person said that after just 10 days, he’d generated a 0.82% return on his money and that his money market bank account didn’t offer that kind of return in a year.
A user on the critical end of the spectrum said that he couldn’t average more than a 0.7-0.8% return rate with a moderate risk setting and that he could do better with a high yield savings account. WiseBanyan responded to say that their long-term (5-20 years) ETF portfolios have significantly outperformed savings account interest rates.
WiseBanyan calculates a “time-weighted” return (TWR) which measures your portfolio’s compound growth rate. It looks only at how your asset selection is performing and doesn’t take into account recent deposits (the size and timing of them), as this would distort the calculation.
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Wealthfront allows you to invest as well as financially plan for retirement, buying a home or college savings via its Path tool. Its investment strategy revolves predominantly around building a diversified portfolio of tax-efficient low-cost ETFs for its users, hence its popularity with passive investors who prefer a hands-off approach.
Wealthfront offers automatic portfolio rebalancing and daily tax-loss harvesting on all taxable accounts as well as stock-level tax-loss harvesting for taxable accounts with a balance of between $100K and $500K.
This app also has a low account minimum of $500, making it an excellent choice for new investors who may not have much money to get the ball rolling.
With a straightforward annual advisory fee of 0.25%, no charges for withdrawals or to close your account and a wide choice of account types to choose from, Wealthfront seems to be a frontrunner in the industry.
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One excellent review over at the App Store said that the app offers simplicity for any level of investor. The reviewer noted that Wealthfront fees are easily covered by their automated tax-loss harvesting and had already saved him money.
Over at Google Play, one reviewer said that Wealthfront was the best way to invest money (period!). This person had been using it for three years and loved the app, although they preferred the previous version of Wealthfront’s Path tool.
Wealthfront’s great user interface came up in another review, along with its ability to track finances altogether in one place.
One critical reviewer mentioned that the process for withdrawing funds or closing an account is slow and that his portfolio had dropped 6% since he requested to close it. There were a few more reviews that reported technical glitches, with the app not loading correctly or crashing.
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Both WiseBanyan and Wealthfront base their investment strategies around Modern Portfolio Theory (MPT). WiseBanyan seems to be a good choice for people with a small amount of money to invest and for those new to investing, thanks to its lack of asset management fees and no account minimum. Wealthfront may be a better choice for hands-off investors looking to grow their wealth, those looking to open a joint taxable account, or who want to take advantage of their Path tool for financial planning.
Before deciding on a particular app to use, be sure to check out their investment strategy and service as a whole and in full to make sure you choose the right one for your needs.
*The facts and figures presented in this article are correct at the time of publishing.