Social Finance, Inc. (SoFi) was established in 2011 as a student lending organization. The company has added multiple services since that time, including the Automated Investing platform, which is owned by SoFi Wealth LLC, an SEC Registered Investment Adviser. Brokerage services are provided to SoFi Wealth by SoFi Securities LLC, an affiliated SEC-registered broker-dealer, while client funds are held and cleared through Apex Clearing.
SoFi Invest won an award in the Best For Goal Planning category in our 2019 Robo Advisor Awards.
SoFi Automated Investing is aimed at younger, fee conscious investors who may not have a lot of capital yet. You can start a SoFi account with as little as a $1 investment. Overall, the platform is a solid, if generic, algorithmic approach to managing a portfolio according to Modern Portfolio Theory (MPT) using exchange-traded funds (ETFs). SoFi Automated Investing becomes a lot more attractive when you consider that there are no management fees and low or no-fee options in terms of the portfolio contents.
Excellent goal planning tools
Low minimum and low fees
Access to financial advisors
Additional account services from the broader SoFi platform
Small ETF universe with proprietary funds
Slow customer service
No tax-loss harvesting
A few simple setup pages ask for your age and asset information, as well as an account goal and type. There are no risk tolerance, market experience, or psychological “what-if” inquiries like those that are included in profile collection at most rivals. The system then picks one of five model portfolios for you that range from Conservative to Aggressive. At this point, you can schedule a call with a financial advisor if you’re not sure about the choice. This is an excellent option to have, especially for less experienced investors for whom SoFi may be their first foray into the market.
The setup process then opens into a personal detail and funding section. The advisory agreement and SEC-mandated brochures are easy to find on the account page, providing basic disclosures that are often missing at other robo-advisories. SoFi accepts transfers and 401(k) rollovers, so you are able to easily bring those accounts in. New account types include traditional IRAs, Roth IRAs, individual taxable accounts, and joint taxable accounts.
SoFi’s learning section provides excellent goal setting tools. You pick goals and funding levels at the time of setup and you can discuss “big picture” goals with a financial advisor. The account interface provides basic information on performance, long-term outlook, and trading activity, but there is little hand-holding on how to use this information. In other words, most planning and tracking will be self-directed.
The brief questionnaire and the rapid account set-up could leave you wondering why your portfolio is allocated the way it is, but this is where the initial discussion with the financial advisor comes into play. The idea is that the conversation with the human advisor will prepare you to understand both why your portfolio is built the way it is and how you should monitor it. As with other robo-advisors, SoFi does the portfolio management, but you should always take an interest in the results.
You can make deposits, withdrawals, and set up recurring deposits through the account interface. Beyond that, you have no control over trading activity after funding, and all changes are made by choosing a different model portfolio. Your available cash is swept into an interest-bearing FDIC-insured account, but participating banks pay fees to SoFi, Apex, and a third party for the service, lowering the potential return. In addition, the site doesn’t disclose the current interest rate, which will appear on the monthly statement. In response to our queries, as of April 2020, there is no interest paid on cash balances.
Using SoFi Automated Investing also gives you access to other member services. Here again, there is a clear focus on younger crowds with benefits like exclusive events/experiences, career counseling services, and discounts on other SoFi products. These are outside of the core robo-advisor platform we are reviewing, but they could be a key point of differentiation for some people.
SoFi Automated Investing offers you five traditional portfolios with slight variations between taxable and retirement accounts. The FAQ states that three to seven ETFs are used to create the portfolios using different mixes, but a possibly outdated disclosure indicates that four to 12 ETFs populate the portfolios. A listing of the ETF universe accessed through a setup page context menu shows just 11 securities, including two proprietary funds based on the S&P 500 index. Lower-fee Vanguard index funds dominate the balance of the listing, which is fine as these have been a core element of many passive investing strategies over the years.
The five model portfolios track MPT assumptions used by the vast majority of robo-advisories:
- Aggressive: “for investors willing and able to bear a significant amount of volatility in the pursuit of greater potential growth. This strategy typically allocates over 90% to stock funds.”
- Moderately Aggressive: “for potential long-term growth with somewhat less variable returns for people who don’t mind volatility and have a goal in over 10 years. This strategy typically allocates a majority to stock funds.”
- Moderate: “to reduce the impact of stock price volatility for investors approaching retirement or with a goal beginning in five to ten years.”
- Moderately Conservative: “to generate yield with some exposure to growth assets during the early years of retirement, or for goals in three to five years. It has interest rate risk but lower volatility with the potential to preserve purchasing power.”
- Conservative: “to generate yield in the later years of retirement or for investors with goals in less than three years when growth is less of a concern… This portfolio is usually over 90% bond funds.”
SoFi Automated Investing portfolios are created and managed according to MPT. The platform assesses your portfolio on a quarterly basis at a minimum, rebalancing when an asset is more than 5% off the target allocation. The FAQ states that SoFi may rebalance more often than quarterly if there is a sharp movement in any of the assets.
SoFi further states that principles focus on life goals while relying on academic research that avoids common behavioral mistakes and doesn’t try to beat the market. There are questions whether a self-directed account with a few index funds has the capacity to produce superior long-term results when compared to benchmarks. In reality, however, SoFi’s approach will be more in line with the benchmarks as the ETFs largely mimic these same benchmarks. One thing that SoFi is legitimately lacking, however, is tax-loss harvesting. Some of its competitors in the robo-advisor space offer this, albeit with higher management fees than zero.
The website is mobile-ready and easy to navigate. SoFi provides the same broad-brush iOS and Android mobile apps for all types of account holders, which may cause confusion because clients need to drill through menus, articles and promotions to access their Automated Investing portfolios. The mobile apps have been updated to offer all the features available on the desktop platform. That said, both apps are highly reviewed on their respective platforms.
A dedicated web portal would make it easier to access the Automated Investing section and get specific information. Having so many services share a home can be unwieldy at times. SoFi Invest alone has Stock Bits, Active Investing, Automated Investing and ETFs beneath it and SoFi Invest is just one of eight umbrella categories, each of which has further sub-offerings. If you are going through disclosures and looking for further resources, it is easy to confuse offerings. This confusion has been compounded in the short-term by the rebrand to SoFi Invest from SoFi Wealth and a robust pace of new offerings and features.
SoFi Automated Investing customer service hours are listed as Monday through Thursday from 4:00 a.m. to 9:00 p.m. Pacific Time, and Friday through Sunday from 4:00 a.m. to 5:00 p.m Pacific. There are financial advisors available to speak with clients on the phone or via video chat. Several calls to the dedicated Invest phone number in mid-2019 took more than seven minutes to reach customer service representatives. The website includes live chat links, but coverage is spotty. Clients can also connect through social media.
Education & Security
SoFi provides superb goal planning resources in line with its impressive financial credentials and multiple offerings. These include a variety of goal-focused tools, calculators, checklists, and how-to articles. Many of these are, of course, shared with or generated from SoFi’s other products and services, but that is part of the benefit of embedding a robo-advisor into a growing financial services firm.
SoFi Automated Investing uses 256-bit SSL encryption, while Apex Clearing holds all client funds, providing access to Securities Investor Protection Corporation (SIPC) insurance and excess insurance, as well as FDIC insurance for overnight bank sweeps.
Commissions & Fees
SoFi’s biggest selling point is a lack of management fees and very low expense ratio. Some of the expense ratios are even waived for SoFi clients. That said, there are some additional revenue streams to be aware of. SoFi collects income through Apex Clearing’s lending of fully paid securities, and those profits are not shared with clients. In addition, the company launched two proprietary S&P 500-themed index ETFs that will incur 0.19% expense ratios when a promotional period ends in June 2020. These funds compose up to 64% of the most aggressive portfolio, potentially imposing a hidden fee compared to the popular S&P 500 Trust ETF, which carries a 0.09% expense ratio. SoFi clients will want to watch what happens post-June 2020.
Is SoFi a Good Fit For You?
SoFi’s Automated Investing platform offers a good fit for investors at all ages looking for a program backed by a rapidly growing financial institution. It is even a better fit if you are young or just starting out as an investor. The portfolio construction and management can be a bit uninspiring compared to other robo-advisories with higher fees that cover more features and customization. However, you do get basic MPT management at a bargain price. For many investors, this is more than sufficient.
This solid and simple offering is backed with excellent goal planning and tracking tools as well as the peripheral benefits of being part of the broader SoFi platform. The human touch of the advisor call and the ability to get help in other areas like career planning or managing student loans clearly shows that SoFi is going after a younger demographic, even though the robo-advisor is a good low-fee option for all. Even if you won’t benefit from the wider SoFi offerings, the robo-advisory’s simplicity can easily be overlooked for the real savings in fees.
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