Aside from this Ally Managed Portfolios robo-advisor review, we've also reviewed Ally Invest's traditional brokerage services.
Charlotte-based Ally Financial Inc. introduced the low-cost Managed Portfolio program in 2014, providing algorithmic asset management services through wholly-owned Ally Invest Advisors, an SEC-registered investment advisor. The high-tech service, based upon Modern Portfolio Theory (MPT) principles, held an estimated $157 million in client funds as of March 2019. It’s fully digital, following the footprint of other Ally products, and clients cannot speak with a financial advisor.
Ally Invest Managed Portfolios charge a competitive 0.30% wrap fee that includes transaction costs and $100 is needed to open a new account or transfer an old one to in-house broker-dealer Ally Invest Securities LLC. Funds are cleared through unaffiliated Apex Clearing Corp., while portfolios are populated with fractional shares of low-cost ETFs. The firm added portfolios that hold 30% cash in September 2019. These portfolios are offered with a zero management fee, and are aimed at those just getting started with investing, with the goal of making new investors more comfortable.
"What we are doing at Ally is removing barriers so everyone has access to the opportunity to build wealth," says Ally Invest president Lule Demissie. "Once the client feels comfortable, they have the choice to upgrade from those free services to others for a fee."
Ally Invest Managed Portfolios allows you to open individual taxable, joint taxable, traditional IRA, Roth IRA, and custodial accounts, as well as rollovers from qualified employment plans.
Competitive advisory fee
Top-tier financial institution
24/7 telephone and live support
Can't speak with a financial advisor
Receives payment for order flow
Weak goal-planning resources
No tax-loss harvesting
The account setup for Ally Invest Managed Portfolios is easy and intuitive. A simple and anonymous questionnaire asks you to select an investment goal from a drop-down list that includes just four entries: prepare for retirement, save for a major purchase, build wealth and generate income from investments. The system then asks you to provide an estimated dollar amount for your goal.
Next, you select an investment horizon and risk tolerance rated on a five-point scale between “very low” and “very high.” Household assets and contribution levels are added on the next page, while the final page presents a choice between taxable and retirement accounts. This section includes a checkbox to “tax optimize” the taxable account with municipal bonds, which are bought through fractional ETF shares.
Your profile is then used to generate a recommendation for one of five standard model portfolios: Conservative, Moderate, Moderate Growth, Growth, and Aggressive Growth. Each proposal includes an ETF listing that shows the security classes in the portfolio. The breakdown also provides a link to a detailed historical performance that’s often missing at rival robo-advisors. You can redo the questions or adjust your answers to evaluate different portfolio mixes. These portfolios default to the high-cash fee-free selections, though at this point you can opt for a portfolio with a smaller cash allocation after opening your account.
A $100 minimum deposit is required to fund the account, which can be established as individual taxable, joint taxable, traditional IRA, Roth IRA, custodial, or a rollover from a qualified employer plan.
Ally Invest Managed Portfolios provides adequate goal tracking but few planning tools. An online tracker shows progress towards your goal and odds of achieving it within the investment horizon. The system alerts you whenever the portfolio risks missing the goal, prompting a recommendation for a one-time infusion of cash or setting up a recurring deposit. Goal-planning resources are sparse and hard to find, with few calculators, tools or “how-to” articles. There are resources on other parts of the site, but they are not integrated into the Ally Invest Managed Portfolios platform. This lack of planning tools within the platform is compounded by your inability to get in touch with a financial advisor.
Ally Invest Managed Portfolios’ account interface features a graph with projected long-term returns under various market conditions. You can drill down to asset classes and individual holdings while icons display Center for Financial Research & Analysis (CFRA) ETF reports. The platform also provides a detailed accounting of transactions, gains, losses, and fees including dividends and earned interest. From the main screen, you can also make deposits, set up recurring deposits (monthly only, unless you select weekly deposits during initial setup), and initiate withdrawals.
Statements about the overnight bank sweep program are confusing, with the SEC-mandated ADV-2 disclosure noting that “Ally Bank and Ally Invest Securities may earn interest on the cash balances and Apex may or may not pay you interest on the cash balances.” It’s an important issue because retaining a portion of earned interest reduces client returns. A spokesman indicated the sweep program paid 0.75% in March 2019.
Third-party investment accounts are not taken into consideration when building portfolio recommendations and they offer no banking services or integration with other Ally products.
Ally Invest Managed Portfolios populates your portfolio with fractional shares of low-cost ETFs. The underlying holdings of these ETFs include domestic and foreign fixed income, equity securities, and cash. As Ally Invest Managed Portfolios doesn’t use proprietary funds, the ETFs are cultivated from the usual providers including Vanguard and iShares. Two percent of your assets are set aside in cash to provide a “buffer” but the practice also allows Ally to collect additional income through the bank sweep program which it doesn’t share with you. The fine print states that clients can place “reasonable restriction” on portfolio contents but that function is limited to choosing an alternate portfolio “at their own risk.”
Ally Invest Managed Portfolios follows classic MPT in creating and managing your portfolio. The disclosures provide the only detailed description of portfolio methodology on Ally Invest’s website, indicating that Ally Invest employs a “disciplined investment process based on Modern Portfolio Theory, which seeks to construct a set of efficient portfolios for different levels of risk appetite, utilizing Exchange Traded Funds (‘ETFs’). The investment strategies are diversified across a broad mix of asset classes, geographies, major market sectors, and segments.”
Ally Invest Managed Portfolios provides no tax-loss harvesting or socially-conscious investing but Ally expects to add these services in the future. Right now, you can minimize some of the tax burden through municipal bond funds. The platform automatically rebalances your portfolio to reduce deviation from intended allocations whenever it is required, but there is no regular schedule for this.
The mobile site supports fewer banking functions than the full-featured iOS, Android and Windows mobile apps that connect the wide range of Ally financial products. The iOS app also supports the voice-activated Ally Assist, while all operating systems provide for two-factor authentication. In addition, Ally just released a new mobile app with a user interface (UI) that’s customized to the discretionary management program.
Managed Portfolios is part of the massive Ally website, so finding the program can take a few clicks because it comprises just one of many financial products. An incomplete FAQ fails to complement a professional marketing presentation that’s been written for the layperson, forcing you to hunt for details through disclosures and other fine print. However, the 24/7 customer service helps to limit some of that frustration.
Customer service is available to you by telephone, live chat and email 24-hours per day, seven days per week. Contact attempts produced a variety of waiting times, averaging a slow but adequate one minute and 53 seconds to speak with a representative who was knowledgeable about program details. This is good because a dedicated FAQ contained just five short entries that barely addressed program attributes, forcing you to get on the phone or read all of the fine print.
Education & Security
Ally Invest Managed Portfolios doesn’t offer a lot in terms of specific education resources. As a Managed Portfolio customer, you share educational resources with self-directed clients through the Invest portal, which offers a wide selection of generalized articles and videos in a blog format. Specific content is difficult to find because customization is limited to a simple topic checklist that includes few goal-planning resources, except for retirement.
The site uses 256-bit SSL encryption while mobile apps support two-factor authentication. The wholly-owned Ally Invest Securities LLC holds client funds, providing access to Securities Investor Protection Corporation (SIPC) insurance while Apex Clearing provides excess SIPC insurance up to $37.5 million through Lloyd’s of London.
Commissions & Fees
You may choose one of the high cash allocation portfolios, which are offered free of management fees. If you opt for a portfolio with less cash in it, Ally Invest Managed Portfolios charges a competitive 0.30% advisory fee for assets under management, paid quarterly. The contents of your portfolio carries low ETF expense ratios that average between 0.06% and 0.09%. There are no transaction, service, or termination fees, but Apex Clearing charges for all sorts of paperwork, including wire transfers and account transfers to other broker-dealers.
- Monthly cost to manage a $5,000 portfolio: $0 or $1.25
- Monthly cost to manage a $25,000 portfolio: $0 or $6.25
- Monthly cost to manage a $100,000 portfolio: $0 or $25.00
Is Ally Invest Managed Portfolios a Good Fit For You?
Ally Invest Managed Portfolios offers an excellent fit for current Ally customers who can benefit from the automated management of their portfolio. The easy onboarding process, efficient goal-tracking resources, and the price will please new customers as well, making Managed Portfolios a strong alternative to higher-cost services. While the program is marketed primarily to the millennial generation, older customers may also find good value, especially if they’ve booked inferior returns through self-directed investment.
Ally Invest Managed Portfolios is a true robo-advisor in the sense that it helps you create a portfolio of non-proprietary funds and then manages it for you. You pay the fee if you have chosen a low-cash allocation, and the company finds low-cost funds that balance risk and diversification according to industry best practices. There are some missing features, such as tax-loss harvesting, but the competitive pricing is below that of more feature-rich offerings. Equally as important, the low account minimum makes it even more accessible for young investors.
It is a sign of how far the robo-advisory industry has come when we consider something like Ally Invest Managed Portfolios as a value offering for individual investors – it gets the job done but isn’t too fancy about it. This type of technology was not available for an initial investment of $100 and a fee of 0.30% just a few years ago.
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