UPDATED FOR 2020 REVIEWS. DO NOT PUBLISH YET.
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.
New and Notable Updates
- SoFi has launched its own line of ETFs. Management fees for proprietary ETFs held in investing portfolios are waived until June, 2021.
- SoFi moved its customers out of the previous ETFs used into its proprietary funds in 2019, creating a taxable event for many clients.
- SoFi Automated Investing clients can use any of the other services provided by the parent company, including a cash management service, student loan refinancing, career counseling, and many more.
Social Finance, Inc. (SoFi) was established in 2011 as a student lending organization. and launched the Automated Investing platform in 2014. The firm offers a wide range of financial products at very low cost.
- SoFi Invest was named in our Best for Goal Planning category
- Customers have free access to financial planners via video or chat
- SoFi clients can also take advantage of exclusive events, career counseling services, and discounts on other SoFi products
SoFi Invest won an award in the Best For Goal Planning category in our 2019 Robo Advisor Awards. [NOTE: MAY NEED TO BE CHANGED]
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. The prospective customer can override the choice made by SoFi's algorithm and change the risk profile if desired. At this point, you can schedule a call with a financial advisor, or use the chat function built into the setup flow, if you’re not sure about the choice. There is no charge for this consultation, making it 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. You have to enter personal information, such as your social security number, prior to seeing the proposed portfolio. 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 can bring those accounts in easily. 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 earns no interest, but the portfolio management algorithm automatically invests any balance over $1.
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.
There are no cash management tools built into the automated investing service, but SoFi clients can open a separate SoFi Money account, which has a debit card, bill paying services, and rewards on spending in certain categories. Once you've built up a cash reserve, you can quickly transfer money into your investing account. Cashback and other benefits, including 0.25% interest, are available to customers who deposit at least $500 automatically into a SoFi Money account every month.
SoFi Automated Investing offers you five traditional portfolios with slight variations between taxable and retirement accounts. There are only 11 ETFs listed as portfolio components, two of which are provided by SoFi itself. Lower-fee Vanguard index funds dominate the balance of the listing, which 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 portfolio contains 90-100% stocks.
- Moderately Aggressive portfolios have approximately 80% stocks and 20% bonds.
- Moderate portfolios average 60/40 stock funds and bond funds
- Moderately Conservative portfolio flips that allocation to 40% stocks and 60% bonds
- Conservative portfolios are invested entirely in bond funds.
SoFi Automated Investing portfolios are created and managed according to MPT. The platform assesses your portfolio on a rolling basis, rebalancing when an asset is more than 5% off the target allocation. Portfolios may also be rebalanced when the underlying model is modified or if the client changes the strategy.
One major drawback to the zero fees charged by SoFi is that tax-loss harvesting is not available.
The website is mobile-ready and easy to navigate. The native iOS and Android mobile apps are the same no matter which SoFi services you've signed up for, which may cause confusion because you'll 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, user reviews on their respective platforms are generally highly favorable.
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 2021. 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 2021.
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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