FutureAdvisor.com offers ETF asset allocation portfolio recommendations for free. For a fee, they will also manage your portfolio, making needed trades on your behalf (and sending you notices beforehand to review). This site will examine all of your holdings in various brokerage accounts and provide recommendations of what to do in each portfolio to achieve a target portfolio based on your age and self-assessed risk profile.
You have to sign up with the website to get started. This is simply a matter of providing an email address and setting up a password. There is no charge for this. After registering, you specify two input parameters to determine your portfolio: age and your self-assessed risk tolerance.
You then have the option to manually enter all your holdings from one or more brokerage accounts. Or more simply, you can enter your login credentials to your various brokerage accounts in order to import information about your holdings automatically. FutureAdvisor indicates that they use “Bank-level 256-bit encryption” and that credentials are not stored. When I signed out and signed back into FutureAdvisor, my portfolio was resynced from the brokerage without me re-entering my brokerage credentials. So it seems as though some credentials were stored or cached.
Screenshot: Enter account credentials for one or more brokerages or manually enter that information. Note: private information is obscured in screenshot.
FutureAdvisor appears to cover all brokerages even smaller ones from some individual banks in addition to the big names like Vanguard and Fidelity. While the site appears to keep your login credentials to the brokerage, it seems that none of the account information about what you own is stored with FutureAdvisor. They login in real-time to your various brokerage accounts to show your portfolio status.
Once you provide your brokerage account credentials. FutureAdvisor securely imports data from all brokerages you specified. They then assess your current portfolio against what I assume are their models and associated benchmarks. They rate things such as performance of the portfolio, fee-efficiency, and tax-efficiency. Performance rating is a bit arbitrary because they are not evaluating the portfolio over its history, they are simply specifying performance assuming you owned that exact portfolio for the time period shown. For fees and tax-efficiency, this is usually very simply looking for expense ratios under 1%. Tax-efficiency is likely looking at whether you own ETF or Mutual Funds in your portfolio and turnover of the portfolio (see my article on ETFs. Vs Mutual Funds.) For diversification, they are looking to see how your holdings are varied across different asset classes.
Screenshot: Performance of current portfolio shown. Note: private information is obscured in screenshot.
Then FutureAdvisor provides your recommended portfolio and buy/sell actions to take in your portfolio to achieve this recommendation.
It appears that they use ETF recommendations and have some standard models. In a nutshell, the analysis of your current portfolio and “personalized” recommended action is basically to sell all or most of your positions and buy their recommended portfolio (unless of course you owned their recommended funds or similar ones already). Also, you only specify two personal criteria – age and risk-appetite. To me this is fairly lightweight analysis and not particularly personalized advice.
There is a ‘Why’ column to indicate why they recommend to buy or sell the position. The information is somewhat generic. If I owned a different fund in a category of their portfolio than their recommended fund, I got the explanation: “Making this trade will enable other trades in this account, bringing you closer to your target portfolio.” If I didn’t own a fund in a category, I received a message that I was underexposed in that category.
There are different recommendations for tax and tax-deferred or non-taxable accounts. I like this as it demonstrates some forethought in knowing that these accounts are treated differently and therefore should be managed differently. See my blog post on the topic of taxable and tax-deferred accounts.
Screenshot: Recommendations to improve each brokerage portfolio with buy/sell actions specified and rationale behind recommendation. Note: private information is obscured in screenshot.
Fees:
It’s free to get the recommended actions in your portfolio. However, you don’t get any automated services to rebalance your portfolio when needed. It’s a one time service. However, you could conceivably manually login periodically to get the recommended actions and make changes manually.
It costs .5% of the portfolio value for them to manage the portfolio for you, specially to make the needed buy/sell trades and monitor the portfolio and make future trades as needed. They indicated this is a good deal as the fee is half of the typical 1% fee charged by financial advisors. For a $100K portfolio, the fee would be $500. $250K portfolio would cost $1250 to manage.
Note that you’re getting the same advice and same service regardless of how much money you have. This is the major negative for me. To some degree, the higher your portfolio value, the more you are charged for the same amount of work. Since the models are simplistic ETF models with fees scaling up based on the size of the portfolio, I’m not sold on this company. Remember, in these types of asset allocation portfolios, you should not be trading very frequently anyway. FutureAdvisor will be making very few trades per year. Most of the trades will be commission-free based on their recommendation. So you’re potentially paying a lot of money to have someone make a few trades for you. You are better off checking every month or quarter to see if changes need to be made and making those trades yourself. It’s not worth paying more that $150 for this type of ETF-based asset-allocation portfolio management.
Bottom-line: FutureAdvisor’s free portfolio recommendation is basically the same as what you get for free from your brokerage. ETF asset-allocation models are very common and easy to find and follow. So there is no highly specialized investment advice. Their recommendations are fairly obvious: usually the low-cost or free ETFs for a brokerage and a standard asset allocation model. However, there is added value in that they do look at all your holding across multiple brokerages. In my opinion, the for-fee management service is too expensive for the service being offered. It’s easy to make trades yourself and since ETF models don’t change that frequently, you won’t have to trade often. I would have preferred another pricing option to receive email alerts for a small subscription fee (under $150 per year) and making the trades myself.
-mariamtariq
The Real Money Story 
They recommended a lot of “sell this, and instead buy this” type of changes, which were too difficult to enact exactly on my own. I’d rather have them do it all. The list of changes was actually long and detailed, and besides that, I didn’t know how to sell exact dollar amounts to divest, and then invest exact dollar amounts, using my Vanguard accounts buy/sell/exchange features. To me, having them “handle” all this seems worth it, if the long-term gains are going to more than pay for the cost of their fees.
Thanks for the comment Ken. Initially, there are a lot of trades because you are basically setting up a new portfolio. But ongoing management should be easier. You’re right though. If you don’t want to worry about trading, then the cost to have them make the trades is better than not taking any action. I found that the portfolios actually don’t need to be rebalanced more than a few times a year. So it’s easy to do that yourself and save a few more dollars. At either rate, they are cheaper than a human advisor!
I am using the free manual service. I’ve found their advice about diversification into different asset classes useful as well as specific recommendations for ETFs. Mostly they recommend Vanguard, but they also seem to have some kind of relationship with Fidelity so as with any financial manager you have to question if they have an incentives to push specific financial products. Also, I question the specific assumptions of their portolio optimization algorithms and can find little independent assessment of the soundness and past performance of their approach, I understand it is based on efficient frontier modern portfolio theory but beyond that I’d like a bit more transparency. I totally agree that you should not be making frequent trades with this approach, but I noticed that their advice can go against this by telling me to sell a fund days after I bought it on their advice and shift to something else. The main value to their service is aggregating across many different brokerage accounts and (I hope/assume) computing all the Betas , etc. for my holdings vs alternative funds to determine an optimal balance.