I could have asked my son to test drive each firm's social-worker bot with its income surveys and risk-assessment software, and then analyze the resulting portfolios. But I worried that I would never know whether the differences would be attributable to the firms' investment philosophies, their risk assessment tools or to teenage mood swings. So I opted to keep the equity weights consistent, and see how the portfolios compared with each other.
Put another way, I said, "I'm sorry, Dave, I'm afraid I can't do that," to an evaluation of the risk assessment bots. It's an important point. I didn't ask each advisor for their "risky" and "moderate" portfolio, so we're not evaluating anyone's version of what "moderate" means.
Of course, robots have no heart. They're automatons. Wouldn't you expect them to produce highly similar portfolios when given a "90 percent equity" mandate, regardless of whether they come from Wealthfront, Betterment or upstart WiseBanyan? Hardly.
Check out this table showing the differences in price-earnings multiples (P/E ratios), emerging market allocations and financials exposure among these six 90/10 robo-advisor portfolios.
|Portfolio P/E Ratio||17.8||18.4||19.1||19.1||20.4||20.9|
|Emerging Markets %||25%||9%||17%||21%||6%||14%|
|Financials Sector Weight||23%||24%||36%||28%||23%||20%|
Portfolio analysis as of July 1, 2014, using firm-supplied equity weights in 90 percent equity portfolios and ETF.com's ETF Analytics data and portfolio analytics tool.
In its aggressive 90 percent equity portfolio, Wealthfront allocates 25 percent of its equity position to emerging markets, while WiseBanyan allows a mere 6 percent. Allocations to real estate tip the financials sector's weight in the aggressive portfolios to 28 percent at Covestor, and a whopping 36 percent at FutureAdvisor. Portfolio P/E ratios—as measured using trailing 12-month earnings—range from 17.8 at Wealthfront to 20.9 at Invessence.
The 60/40 portfolios generally showed the same contrasts, though a home-country bias within equities popped up in Wealthfront, WiseBanyan and Invessence's moderate portfolios, with Invessence allocating 80 percent of its equity exposure to U.S. firms.
The fixed-income portfolios ranged from the timid to the bold, as you can see in this overview of the fixed-income portion of the 60/40 portfolios.