Which Robo Advisor For My Teen?

August 18, 2014


  Wealthfront Betterment FutureAdvisor Covestor WiseBanyan Invessence
Effective Duration 6.7 6.8 4.2 5.5 6.9 8.4
Yield to Maturity 3.1% 2.9% 1.3% 2.0% 2.3% 4.4%
Credit Spread Sensitivity 6.4 5.9 2.1 3.1 3.5 7.6

Portfolio analysis as of June 30, 2014, using firm-supplied fixed-income weights in 60% equity portfolios and ETF.com's ETF Analytics data and portfolio analytics tool.

Average durations run as low as 4.25 (FutureAdvisor) and as high as 8.60 (Invessence); credit spreads were as low as 2.06 and as high as 7.56 (same as above).

Yields are not as comparable because Wealthfront, Betterment and Invessence offered tax-sensitive portfolios with munis, while Covestor, WiseBanyan and FutureAdvisor currently offer only taxable bonds.

Betterment, FutureAdvisor and, to a minor extent, Invessence, offered non-U.S. bond exposure.

Robo portfolios turn out to be as different as R2-D2 and C-3PO. No two are exactly alike, because they've been programmed by humans—humans with opinions about asset allocation, security selection and portfolio maintenance. The resulting portfolios reflect their makers' convictions.

It's important to understand that none of these 90/10 and 60/40 portfolios is necessarily "right" or "wrong," and they might not represent the typical client at any of the automated online asset-allocation firms, especially those marketing to Silicon Valley's forever-young 20-somethings.

But they're useful anchor points for an exploration of each robo advisor's philosophy.

I'll be writing seven blogs about this relatively new industry within an industry: this piece, plus six more, all focused on exploring the differences in the robo portfolios.

Next time, I'll introduce the robo advisor lineup and give an overview of how each firm approaches investing and portfolio construction. In blog three, I'll open up each portfolio, and analyze the exposures they offer. Blogs four and five will focus ETF.com's expertise in ETF analysis to the robo advisor's ETF selection process, blog six will take a deep dive into the value of tax-loss harvesting. Blog seven brings in all home with our robo-pick.

Contact Elisabeth Kashner, CFA, at [email protected].


Find your next ETF

Reset All