Online brokers are so keen to handle your money that most will set up a financial plan and review your portfolio at no charge. They can also manage your investments, for a fee, or help with things such as estate plans and insurance.
Among the seven we surveyed — Ally Invest, E*Trade Financial, Fidelity, Merrill Edge, Charles Schwab, TD Ameritrade and Vanguard — Fidelity, Schwab and Vanguard take the lead. Fidelity and Schwab offer an array of planning services and managed accounts. At Fidelity, fees for separately managed accounts start at 1.20 percent annually but are reduced by “credits” for some of the costs in the portfolios’ fund holdings. For clients with at least $25,000, Schwab offers tailored portfolios of ETFs, with an annual advisory fee of 0.28 percent (capped at $900 per quarter for high-value accounts).
Vanguard customers can get into a managed account with a $50,000 minimum investment. Annual fees are 0.30 percent. These accounts hold Vanguard ETFs and the Admiral share class of its mutual funds, which charge some of the lowest expense ratios in the industry.
E*Trade, Merrill and TD offer managed portfolios, starting at 0.75 percent annually at TD, 0.85 percent at Merrill and 0.90 percent at E*Trade. All three firms provide plenty of choices, though, such as a “supplemental income” portfolio at TD and an aggressive-growth package at E*Trade.
If you don’t have much to invest, you could opt for a “robo” service. These portfolios of ETFs and mutual funds are automatically adjusted to maintain a fixed mix of stocks and bonds. Investment minimums are as low as $2,500 at Ally but typically start at $5,000, with annual management fees of 0.30 percent at Ally, E*Trade and TD. Fidelity charges a bit more, 0.35 percent to 0.40 percent, but its fees include underlying fund expenses. Vanguard doesn’t offer a robo, but its Personal Advisor service is essentially the same thing.
Schwab offers a similar service, charging a management fee of 0.28 percent for a personalized portfolio of ETFs. Customers can also opt for Schwab’s Intelligent Portfolios — baskets of ETFs that the firm selects and rebalances without charging a separate management fee. The downside of these portfolios is that even the most aggressive ones hold 6.9 percent in cash. Maintaining that much cash can drag down returns in a strong market.
At the opposite end of the cost spectrum is Merrill, which charges a 0.45-percent management fee for its robo service. Merrill says that the accounts aren’t just based on algorithms, however, and that customers “have access to a human being whenever they need help.”
(Daren Fonda is a senior associate editor at Kiplinger’s Personal Finance magazine. Send your questions and comments to email@example.com. And for more on this and similar money topics, visit Kiplinger.com.)
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