Best Robo Advisor for Digital Financial Planning October 2020
Posted on October 1, 2020
Best Robo Advisor for Digital Financial Planning
Runner-Up: Personal Capital
Honorable Mention: Schwab
High-quality financial planning has traditionally been reserved for wealthy individuals. The advent of digital advice has lowered barriers for professional money management and democratized financial services. Wealthfront, Personal Capital, and Schwab have all embraced this trend and offer robust planning tools.
These companies offer tools that can handle complex, multi-goal plans and show users the interaction of all their goals in a single, uniﬁed plan. Automated account aggregation available at these robos provides users with a comprehensive view of their ﬁnancial picture, regardless of where their assets are held. Wealthfront and Personal Capital provide their planning tools for free to non-clients. Historically, independent robo advisors have oﬀered the best digital ﬁnancial planning experiences. However, Schwab’s upgrade of its ﬁnancial planning tools at the premium service level earned them an honorable mention in this category.
Wealthfront once again takes the top spot for best digital planning tools. Its platform can capably model six diﬀerent planning scenarios: retirement, saving for college, buying a home, large one-time expenses, income windfalls, and taking extended time from work to travel. Whenever adding a new goal, Wealthfront has built an intuitive questionnaire that walks users through the variables that are considered in the analysis, projecting how a new goal will impact each of their other investing and spending goals. For example, the extended travel goal considers users’ current income, net worth, and estimated travel costs to help them determine the potential impact on their holistic ﬁnancial plan. Once set up, all goals are plotted along a timeline for easy visualization.
Wealthfront has also taken steps in recent months to bolster its ﬁnancial planning platform. Wealthfront is developing a platform called “Self-Driving Money,” aimed at further reducing the friction of saving and meeting ﬁnancial goals. Self-Driving Money is still evolving but Wealthfront has built the first steps. Users can now deposit paychecks into their Wealthfront cash accounts. According to Wealthfront, it will soon take that paycheck and automatically split it optimally across paying bills, saving, and investing. Wealthfront has also hinted at a platform to help users acquire mortgages, which will likely take into consideration a user’s overall planning needs. We rate Wealthfront as the best robo advisor for digital financial planning based on what is currently available on the platform, and we are also excited to see what new features will be released in the future.
Like Wealthfront, Personal Capital’s planning tool can model a broad set of goals in a uniﬁed plan. Personal Capital provides users with a retirement planner, savings planner, investment checkup tool, and retirement fee analyzer. Using the retirement analysis tool, individuals can factor seven diﬀerent types of income events and ten diﬀerent spending goals covering a wide range of client needs. However, there are limitations to the tools provided. For example, Personal Capital’s home purchase tool takes into consideration the down payment and age at which the purchase will occur, but does not adjust spending to account for a change in the user’s mortgage payments, property taxes, etc.
In contrast, Wealthfront’s tool considers users’ current housing costs, income, where they want to purchase, the length of the mortgage, and other variables to give users a range of home values they can aﬀord. Wealthfront then shows how homeownership will aﬀect a user’s net worth over time by plotting it in its uniﬁed plan. While Personal Capital oﬀers a wider breadth of planning options, Wealthfront wins as the Best Robo for Digital Financial Planning due to its more dynamic, data-driven planning tools. Notably, both platforms provide their planning tools for free to users without needing to open and contribute to an account. Regardless of whether a user needs a simple single-goal plan or a complex multi-goal plan, either planner is capable of producing a quality plan.
Schwab deserves an honorable mention in this category after it revamped its ﬁnancial planning experience in 2019 and introduced a set of features to help retirees with income during retirement in 2020. The planning experience is significantly upgraded at the Premium service tier, but only limited functionality is available at the digital-only service tier. Within the Premium platform, investors can build multiple ﬁnancial goals with diﬀerent risk tolerances that factor in assets held in outside accounts. The new tool also allows for 16 diﬀerent goals, including starting a business, leaving an inheritance, and anticipated healthcare needs, among others. Additionally, Schwab allows users to customize the importance of each goal, ranking them between needs, wants, and wishes. The tool then walks users through a questionnaire that factors in all available money sources, including Social Security, pensions, insurance, stock options, etc. They allow a user to allocate certain accounts towards speciﬁc goals. After assessing risk tolerance, the planning tool runs a Monte Carlo simulation, helping users understand the probability of successfully achieving their goals. This tool is powered by Money Guide Pro, a leading planning software commonly used by ﬁnancial professionals. When combined with a scheduled call with a ﬁnancial planner, Schwab’s platform provides signiﬁcant value. Unfortunately, this level of planning is not available until clients have over $25,000 in invested assets on the platform and have signed up for the Premium service tier.
The Robo Ranking™ is the only comprehensive ranking of robo advisors that includes not only the features and services but also portfolio performance, sourced from real accounts tracked by Backend Benchmarking. The Robo Ranking™ goes well beyond performance and grades the robos across more than 45 specific metrics. We scored each robo on various high-level categories, such as features, financial planning, customer experience, access to live advisors, transparency and conflicts of interest, size and tenure, account minimums, costs, and performance. Each metric where we grade the robos is specific and unambiguous. See the full scoring rubric herePosted in Best Robos
Tagged Backend Benchmarking, CFP, Digital Advice, Financial Planning, Personal Capital, Robo Ranking, Schwab, The Robo Report, Wealth Management, Wealthfront