The Robo Report, published by BackEnd Benchmarking, found that in the two years leading up to 2017’s fourth quarter, Schwab was the best performing robo with a return of 27.7%, according to ThinkAdvisor. Schwab was followed by SigFig, which returned 25.1%, and Personal Capital, with 16.3%, the publication writes.
How Performance Varied Among Robo-Advisors
The report compared the two-year, one-year and quarterly performances of the taxable and individual retirement accounts of the seven leading digital platforms, ThinkAdvisor writes.
The taxable accounts typically had a 60/40 split between stocks and fixed income, but Personal Capital had a higher percentage in stocks at around 70%, according to the publication. Both Schwab and SigFig’s equity and fixed income portfolios were heavily invested in international assets, ThinkAdvisor writes.
Performance of the fixed income portfolios varied widely across the different platforms over the two years, the publication writes. Vanguard had returns of 4% through exclusively investing in municipal bonds, which didn’t perform well following the 2016 presidential election, according to ThinkAdvisor.
Schwab, on the other hand, invested heavily in international and high-yield bonds, and saw returns of 14%, the publication writes.
Furthermore, the report looked at the performance of the taxable portfolios of 20 robo-advisors in the fourth quarter of 2017, which were as high as 4.3% for Wealthfront and as low as 3% for Acorns, according to ThinkAdvisor.
The fourth quarter of 2017 also saw Morgan Stanley and Wells Fargo launch robo-advisors, with the report predicting that Goldman Sachs and JPMorgan Chase will follow suit, writes the publication. However, the report found that despite the proliferation of robo-advisors, as well as growth in their assets under management, people still hold misconceptions about them, ThinkAdvisor writes.
Chief among them is that asset allocation and investment selection are fully automated, according to the publication. While some aspects such as onboarding and tax-loss harvesting are automated, most platforms rely on real people for asset allocation and model portfolio construction, ThinkAdvisor writes.
Secondly, people believe that robo-advisors are for young investors with limited assets, according to the publication. In reality, they are most popular with clients who haven’t had a solution for professional investment advice before, regardless of age or size of assets, ThinkAdvisor writes.
