We all want the best in everything, the best vacuum cleaner, the best smartphone, the best investment allocation. Many businesses make a good profit in helping people figure out what are the best: Yelp for restaurants, TripAdvisor for hotels, CNET for tech gadgets, Morningstar for mutual funds. When I write blog posts, I have to make sure to put the word “best” in the title.
The second best get no love. Their minor flaws get magnified and picked on when people defend their choices for the best. However, the best become the best when they want to be better than the second best. Without the second best, the best may not have been born in the first place. Without the second best on their heels, the best won’t be that good for long.
Robo-advisors such as Wealthfront and Betterment can be seen as the second best. No human advisor to talk to? Dishing out a portfolio allocation too fast? Not considering other accounts and 100 other factors? Fees go up with the account balance? The automated products from Vanguard and Schwab can also been seen as the second best. Extra fee for putting you in an all-in-one equivalent? Opportunity cost on keeping cash? All these are legit concerns that stop them from being the best or ideal, but when you see so many people are doing it much worse, you wish all of them could just go with the second best.
A financial services company notorious for selling products with high expenses and fees did a social media marketing campaign. Their [human] advisors/salespeople asked their clients to “like” them on Facebook. When multiple friends liking their advisor at this company popped into my Facebook feed, I felt really bad seeing they were thanking their advisor while being robbed blind. They would be much better off going with a second best robo-advisor.
Should I say something? People don’t take unsolicited advice well. They chose their advisor. They don’t want to feel stupid about their choice. I kept my mouth shut. I won’t say anything unless I’m asked.
My friends may or may not have heard about robo-advisors. If they had looked into them, they may not have been able to tell whether the negatives raised were major or just minor. As a result they ended up staying with what they have, which is far worse.
The lesson? Don’t let the perfect be the enemy of the good. Get out of the worst first. Of course you have to know what’s bad to begin with. Knowing what’s bad is much more important than knowing what’s the best. If you don’t know what’s bad, at least ask.
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Fred Wallace says
My takeaway from Howard’s column is that he believes Personal Capital is the best robiadviser. They do have a gorgeous website (certainly the “best”) and some amazing tools (also the best), however they really aren’t a robiadviser. With an AUM fee of .89%, they are really more like a traditional financial adviser. Anyone with more than $100k gets assigned a rep at PC to work with. By the way, there’s a new site called Retirementinvesting.com that provides the same quality of advice as Betterment or Wealthfront, however instead of charging .25-.50% per annum, you pay a flat $20 a month and you “do it yourself.” For an investor who likes timely ongoing assistance this is a great option. (I am not associated in anyway with this site).
Harry Sit says
To be clear this is not about which robo-advisor is the best. Worry less whether you have the best or the second best. First worry whether you have the worst.
Bob says
The “Personal Capital” blurb appears at the end of every blog post. I think it is more a part of the standard template, rather than part of the article text.
Harry, is that paid advertising? Or do you just really like them? Or is there some other affiliation?
Harry Sit says
Both. I like their tools to see all your accounts in one place. They also pay me for leads.
Bret says
Retirementinvesting.com seems to be non-existent (page says I can buy the domain name). Always looking for better/cheaper ways to invest, and I’m currently with futureadvisor.com. I’ve been happy with them overall, and they saved me some money with tax-loss harvesting last year. You can even use their service for free and perform your own trades on their advice.
Fred Wallace says
Whoops. My mistake. The name of the site that is worth checking out is RetirementInvestor.com.
Apologies from here!
Harry Sit says
That company isn’t a robo-advisor or any advisor period. It’s just an informational membership website.
From the Terms of Use:
“We are not investment advisors nor do we provide legal, tax or personalized investment advice or make personalized recommendations to buy, sell, short or otherwise place orders relating to any securities, including ETFs, mentioned or discussed.”
Charles says
Actually Personal Capital has been putting the hard sell on me for signing up for their investment services. The fees of 0.89% are definitely way higher than Betterment but you seem to get a bit more out of it. You get an actual human advisor, and they put you in individual stocks which gives you additional tax loss harvesting opportunities. To be honest, I’m torn about whether to use them….
TJ says
How exactly are they giving the hard sell? I get the e-mails but that’s about it.
prl says
Does anyone have any thoughts or opinions with respect to financial engines? They seem like a pretty good robo-advisor to me.