Earlier this year I wrote about WiseBanyan.com, an online portfolio advisory service similar to Betterment and Wealthfront. WiseBanyan charges no advisory fees, no trading commissions, and have no minimum opening deposit. They will design, buy, hold, and rebalance a basket of low-cost ETFs for free, and all you are left with are the ETF expense ratios which you’d have to pay anyway.
Thanks in part to your interest as readers, I was able to get off their waitlist and open an account with $10,000 of my own money in March 2014. (Current wait is reportedly less than a month.) Here is my review as an actual user for roughly 6 months.
Application process. The account opening process was similar to other discount brokers and online portfolio managers. You must provide your personal information including Social Security number, net worth, income, investing experience, etc. No credit check. They do check identity, so they may ask for supporting documents if you just moved or something.
There is then a risk questionnaire. The questions can seem mundane but take it seriously, as the 10 answers you provide will directly determine the portfolio asset allocation that they choose for you. There will be no follow-up surveys, e-mails, or phone calls. Here is a screenshot and example question:
Side notes: As a start-up, there are temporary restrictions. They currently do not accept joint, trust, or custodial accounts. They do not accept IRA or 401k rollovers at this time. They also do not accept inbound brokerage account transfers.
Funding. You can fund your deposit electronically, using your bank routing and account number. (They only accept bank wires as an alternative, no paper checks.) The money gets sucked from your bank and the portfolio is bought immediately when they get the money.
I didn’t track this closely, but according to their site the initial deposit takes between 4-5 business days total (3-4 business days for funds transfer, account verification, and ETF purchases, plus one day for data upload). That sounds about right. Future deposits will take 1-2 business days to process.
Fractional shares. WiseBanyan uses FolioFN as their broker-dealer (separate company that hold your assets in the background) which means they can use their ability to keep track of fractional shares. Most discount brokers and other online portfolio managers require you to own whole shares, so you’ll often have something like $57 sitting in cash.
Recall that WiseBanyan has no required minimum deposit or portfolio balance. If you really did open account with $100, they will actually buy less than one share of several low-cost diversified ETFs and you’ll own tiny, tiny portions of thousands of companies with no idle cash. With a normal discount brokerage, that might not even buy you one share of anything (VTI is over $100 a share on its own).
Portfolio asset allocation. I was assigned a portfolio risk score of 7.7, which corresponded to a stocks/bond ratio of 70%/30%.
Here is the target asset allocation that I was assigned:
All portfolios are constructed using the following seven ETFs:
- Vanguard Total Stock Market ETF (VTI)
- Vanguard FTSE Developed Markets ETF (VEA)
- Vanguard FTSE Emerging Markets ETF (VWO)
- iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)
- Vanguard Intermediate-Term Government Bond ETF (VGIT)
- Vanguard REIT ETF (VNQ)
- iShares TIPS Bond ETF (TIP)
My opinion is that the ETF allocations from all “robo-advisors” are at least 80% the same, and with the remaining 20% you can’t really tell who’s going to win performance-wise anyway. They are all backtested using some form of Mean-Variance Optimization (MVO) and Modern Portfolio Theory (MPT).
While not exactly what I would have chosen for myself, I personally think the portfolio above is fine. The ETFs have low costs and come from large, respected providers in Vanguard and iShares. All of the major asset classes are covered. There are no commodities futures or natural resource ETFs, which some experts think are useful and other experts think are useless. Note that REITs are considered to be in the bond category.
Website user interface. It feels very “Web 2.0″ which means it is clean and functional, but won’t win any design awards. The site is not mobile-responsive (they say they are working on it). Here is a screenshot from my personal account:
Smartphone app. There is no smartphone app (also working on it). Considering their young client base, my suggestion is that even a really simple one that just pulls up your updated account balance and positions would be nice. It doesn’t have to include all the functionality of the website. We like to be able to check the balance at any time of day!
Electronic statements are free, but paper statements will cost $10 each or $150 a year their fee schedule. To view your online statement, you actually have to log into the broker-dealer site at FolioClient.com with a separate username and password. It is a bit clunky and another work in progress.
Customer service. I have not had a need to contact them, but I did anyway for the purposes of this review. Calling their customer service phone number at 646-593-8361 during their stated hours of 9am – 7pm EST reached an individual’s voicemail box. I didn’t leave a message. An email sent to email@example.com was answered courteously in two hours by “Vicki” whom I suspect was the co-founder Vicki Zhou.
Future concerns? According to this ETF.com interview, the average client is 34 years old and opens with a $4,000 deposit, much younger and of more modest means than those of their competitors. WiseBanyan is running off venture capital while it grows assets, so it will be interesting to see if it can make it with a bunch of smaller accounts while others target Silicon Valley millionaires. They plan on making money with add-on premium features like tax-loss harvesting or selling covered calls.
Bottom line. WiseBanyan is fully functional and delivers on its promise of free automated portfolio management. However, it is not a finished product and you’ll have to pardon their dust. It is a lean startup and it feels that way; your e-mails and calls may be answered by the CEO and/or co-founder. You may like that or you may prefer more polish, but remember that polish costs money. They are aggressively priced (at zero, ahem) and unique in that they are targeting all investors including the young and those with smaller balances. You could open with $100 and set up an auto-transfer of $10 a week and get a diversified portfolio set up with no commissions and no management fees. Where else can you do that?