BlackRock-owned FutureAdvisor provides algorithmic investment advisory services for client funds held through institutional management accounts at Fidelity and TD Ameritrade. FutureAdvisor transfers client funds held at other institutions into these accounts at the time of setup, or customers can deposit fresh funds directly with the robo-advisor, which then opens an account at one of its partnered brokerages. Clients directly incur any costs or tax implications generated by required account transfers.
To set up a new account, you answer a few basic questions and receive a recommended asset allocation, generated through a customized Monte Carlo simulation that utilizes long-term capital market assumptions to project returns and performance. Once funded, you have little control on assets or management, but you can put a few pre-owned stocks on a “do not sell” list as long as they don’t exceed a small percentage of total portfolio value. Asset allocations are limited to exchange-traded funds (ETFs) and mutual funds, including BlackRock-owned iShares and mutual funds, along with fixed income and REITs.
Integration with Fidelity and TD Ameritrade
Backed by a top-tier financial institution
Broker handles account transfers
Offers tax-loss harvesting
Account transfers add costs
Below-average customer service
Oversimplified portfolio creation and management
FutureAdvisor's account setup is relatively straightforward. You enter your email address and creates a password to access the account setup page, which offers just three types of investment goals: retirement, major purchase, and general investing. You are asked to enter your age, risk tolerance, available capital, and other basic information through a simple entry form. This information is used to generate a proposed allocation between stocks and bonds, although the actual exposure is taken through funds, REITs, and fixed-income products.
FutureAdvisor offers you little in the way of client customization, with no socially responsible fund choices or other thematic investing. The completed entry form opens into a single recommended asset allocation pie chart for each goal type that algorithms will seek to fulfill after account funding. You get little or no input on subsequent trade activity.
FutureAdvisor supports individual and joint margin accounts, as well as 529 plans and rollover retirement accounts. However, the platform doesn’t support asset management for retirement accounts at current places of employment. Single goal household accounts provide a handy solution for spouses or other types of partnerships.
The limited goal-planning tools and options are likely to confuse younger account holders, with no category for college or tuition planning marking a major omission. Through FutureAdvisor, you do have access to financial planning tools at the brokerage holding your assets, but assumptions made at Fidelity or TD Ameritrade may generate a different set of projected time frames, asset allocations, and long-term performance projections. Given the lack of planning tools directly through the platform, however, using the brokerage resources appears to be the only choice. The same is true of educational resources, as we will discuss later.
If you have identified retirement as your goal during account setup, you do have the option of linking external accounts to FutureAdvisor for a portfolio analysis. The analysis will look at your current asset allocations, fund fees, and portfolio risk to give you a portfolio health score. The same Monte Carlo simulation is used to project your current overall portfolio against the one that FutureAdvisor recommends. This analysis can be done prior to funding the account, making this a free tool for all intents and purposes.
In terms of goal tracking, you can review progress towards your stated goal and make changes to assumptions through the FutureAdvisor account management portal. There is also a performance chart that projects your portfolio value over time and provides details on asset allocation and account activity. You can make plan changes directly from this screen with a few clicks.
Making deposits to FutureAdvisor requires you to log into the account management page and make a request that is sent to your linked bank account. Unfortunately, no automatic deposit capacity was found during the review. Withdrawals are requested through the same interface, but it takes up to four business days to receive funds. Margin costs follow your brokerage rates, which were above 8.00% for small and medium-sized margin accounts at the time of review. Fidelity and TD Ameritrade offer banking services to retail clients through savings and checking accounts, but there is no apparent functionality for these services in FutureAdvisor’s custodial agreements.
Why is it rated so high if it has these flaws?
There is some conflicting information across FutureAdvisor’s content. The FAQ states the robo-advisor buys and sells no- and low-fee ETFs and mutual funds to rebalance the portfolio, but the fine print reveals that fixed income and REITs are also allocated in the management process. FutureAdvisor doesn’t buy or sell individual stocks, but you are allowed to keep a few equities that were already in the account prior to transfer as long as they don’t comprise a large allocation. The platform provides disclosures intended to sidestep conflicts of interest when purchasing iShares ETFs and BlackRock mutual funds, which are both owned by the broker’s parent.
FutureAdvisor’s algorithms perform an initial rebalancing of accounts that are transferred based on your questionnaire responses and profile. The platform then monitors your positions, automatically making changes in reaction to market volatility and updates to your profile. Drilldowns on the account management page allow you to analyze how well allocations are tracking goals and the platform makes recommendations about additional funding or goal reorientation. Beyond setup, FutureAdvisor rebalances your portfolio between four and six times per year. Although you cannot request rebalancing, changing your risk parameters is likely to trigger an automatic allocation shift.
FutureAdvisor also engages in automated tax-loss harvesting for taxable accounts. The system monitors your taxable holdings on a daily basis. As part of rebalancing, the algorithms will limit realized short-term gains to either $200 or 5% of your portfolio value, whichever is greater. At the same time, the robo-advisor finds positions with harvest taxable losses of at least $500 or 1.5% of your portfolio value to substitute for similar offerings. FutureAdvisor is designed to avoid wash sales, of course.
The FutureAdvisor website is mobile-ready but provides no dedicated mobile apps for any operating systems. However, you can access excellent mobile resources and account management tools through their Fidelity or TD Ameritrade account logins. The broker apps include support for major and secondary operating systems, two-tier authentication, and robust research tools—although no direct trading is permitted in the custodial agreement.
FutureAdvisor hides a lot of the important stuff behind the paywall. The public website contains just a handful of links that highlight major account features, explain services, and disclose legalese requirements. You can create an account and view the first few pages of the account management interface and enter different goals, personal data, and asset levels—watching how algorithms change proposed allocations in reaction to varying inputs. After that, you hit a paywall that requires inputting bank and investment account numbers—along with with detailed routing information—in order to view management features, further planning tools and customer service contacts.
FutureAdvisor’s customer service link opens into a simple message entry form, with no phone numbers, live chat, or service hours. The bottom of this low-tech page tells you to check the FAQ if more information is required. Unfortunately, the FAQ is useful but limited in scope, leaving many important questions unanswered. The account management page features both live chat and a phone number for you to talk with an advisor or representative. This paywall-driven customer service approach is a major negative and likely to force many potential clients to look elsewhere.
Education & Security
There are no educational or research resources on FutureAdvisor’s website. This isn’t considered a major omission in this case, since account holders have access to superior resources at Fidelity or TD Ameritrade.
FutureAdvisor uses 256-bit SSL encryption for all information transfers and keeps no personal data. Instead, they partner with Yodlee, a “trusted third party,” to collect and maintain that information in a secure manner. Brokerage partners hold all client funds, providing access to Securities Investor Protection Corporation (SIPC) and excess insurance.
Commissions & Fees
FutureAdvisor charges a flat 0.50% of managed assets fee annually for advisory services, paid in four installments. Account-holders with funds at brokers other than Fidelity or TD Ameritrade may incur termination and/or transfer costs when those accounts are closed out. In this sense, FutureAdvisor is best thought of as a bolt-on service for TD Ameritrade and Fidelity investors, rather than a competitor to robo-advisors that are complete platforms in and of themselves.
When using FutureAdvisor, you are also charged standard brokerage trading fees, except in the case of no-commission ETFs and mutual funds. However, you do incur all fees charged by ETFs and mutual funds after purchase or early termination. The account management page lists trading activity and commissions, but it’s hard to estimate long-term costs as there is no data comparing the average number of commission vs. no-commission trades in the broader client base.
Is FutureAdvisor a Good Fit for You?
FutureAdvisor’s agreement with Fidelity and TD Ameritrade offers an easy upgrade path if you already have accounts with them. If you are transferring funds held at other brokerages, however, you could incur unexpected costs during asset transfer. As for starting a brand-new account, the high account minimum will dissuade many younger investors who are just starting out. Adding to this, the simple questionnaire is too generalized for those same young investors who need detailed guidance about financial goals. On the opposite end of the scale, the lack of client asset control will frustrate more experienced investors used to a higher level of customization. The weak customer service adds another red flag, making it tough to get the information needed to feel confident prior to actually funding an account.
That said, if you can look beyond these issues, FutureAdvisor could be a solid fit if you want to automate portfolios held with Fidelity or TD Ameritrade. The methodology fits with the Modern Portfolio Theory (MPT) base found at other robo-advisors, and the fee is industry average. Moreover, the tax-loss harvesting program is well thought out and, in a rarity for most robo-advisors, well explained in the FAQs. Even if you aren’t ready to commit to FutureAdvisor, most investors can benefit from creating an account and seeing how their current holdings stand up to FutureAdvisor’s recommended portfolio.
FutureAdvisor can analyze your current tax-deferred and taxable accounts, and propose a rebalancing plan intended to reduce the cost of investing. See how they compare against other robo-advisor we reviewed.
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