Thursday, 19 September 2019

Ellevest Review 2019

Ellevest Review 2019
26 Jan
1:22

Women’s financial needs are different from those of men. Not only do women statistically live longer than men, they also tend to make less money, and are more likely to have employment (and therefore, income) gaps during their careers. Women keep 71% of their assets in cash (in other words, not invested), which means less of their money is working for them. All told, women have a longer retirement to plan for with less money available to them.

Traditional financial models often do not take these financial circumstances into account. Ellevest, a robo-advisor that launched in 2016 under the leadership of financial services veteran Sallie Krawcheck, aims to offer women workable solutions to these myriad issues. With customized investment portfolios and goal-based plans, Ellevest provides financial planning for women (and anyone else who is not served by traditional services), tailored to the investor’s individual needs.

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Who should consider Ellevest

Though Ellevest is woman-centered, you do not have to be a woman to sign up with the robo-advisor. The program is a good fit for anyone who feels underserved or overwhelmed by traditional financial services, which may only have a limited selection of investment portfolios or may base suggestions on nothing more than a risk tolerance assessment.

Ellevest is different because it starts by examining the investor’s goals and investment timeline, and it then designs the portfolio based on that information. Investing with Ellevest does not require users to make do with a portfolio that is a bad fit or learn investment theory to build a tailored portfolio.

This makes Ellevest an excellent choice for a newbie investor or someone who feels intimidated by investing. However, the basic Ellevest program may feel a little too automated for anyone who is comfortable with making independent investment decisions.

For customers who want a little more personal control, two additional options give you access to one-on-one personalized guidance from a certified financial planner. The first, Ellevest Premium, requires a minimum investment of $50,000 and charges a 0.5% annual fee. The second option is the Ellevest Private Wealth Management program, which allows you to work one-on-one with a dedicated financial advisor to create a personalized investment plan. The minimum investment to qualify for Private Wealth Management is a cool $1 million.

Unfortunately, independent investors without that kind of money available are stuck with the basic Ellevest program, which they may find too constricting.

Ellevest fees and features

Account minimum
  • $0 for Ellevest Digital, $50,000 for Ellevest Premium
Management fees
  • 0.25% for Ellevest Digital
  • 0.50% for Ellevest Premium (minimum balance of $50,000)
  • Custom pricing for Ellevest Private Wealth Management (minimum balance over $1,000,000)
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $100 full account transfer fee via Folio Investments (Ellevest's custodian)
  • $5 per security partial transfer fee, minimum charge of $25
  • $0 inactivity fee
Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • Rollover IRA
  • Rollover Roth IRA
  • SEP IRA
Portfolio
  • 21 asset classes
Automatic rebalancing
Tax loss harvesting
Tax loss harvesting detail Ellevest's Tax Minimization Methodology (TMM) puts tax-efficient securities into taxable accounts and less tax-efficient securities into tax-deferred retirement accounts.
Offers fractional shares
Ease of use
Mobile app iOS
Customer support Phone, Email

Strengths of Ellevest

  • Personalized investing for women: Ellevest not only acknowledges that women’s financial needs and concerns are different than those of men, they factor those things into their portfolio construction so that women can trust that their investments take longer life, lower pay, and career gaps into account.
  • Goals-based investing: Ellevest starts by asking investors what they want to achieve with their money and then builds a portfolio to help them reach that goal. The program assigns a percentage probability of an investor reaching her goal using a particular portofolio, and Ellevest will not allow investors to go forward with any portfolio with a less than 70% probability of success. Investors can also set multiple financial goals, and not just focus on retirement.
  • No account minimum: As a genuinely beginner-friendly robo-advisor, Ellevest has no minimum requirements for Ellevest Digital.
  • 21 ETF classes: As is common among robo-advisors, Ellevest’s portfolios are made up of a mix of exchange-traded funds (ETFs). However, in keeping with their commitment to designing portfolios around individual investor needs and goals, Ellevest offers 21 different ETF classes, which is more than competitors Betterment or Wealthfront offer. This allows investors to get a portfolio that truly fits.

Drawbacks of Ellevest

  • Difficult-to-use site: Though Ellevest’s site is beautifully designed, it is not user-friendly to any investor hoping to learn more rather than just sign up. Information is spread out across several pages, and it can be difficult to locate the answers to any specific questions. The site is set up to facilitate signing up for an Ellevest account and to educate new investors about financial services, rather than allow well-informed investors to locate nitty-gritty details. There is currently only an iOS app; there is no Android app and the website encourages Android users to access Ellevest via Google Chrome on their phones.
  • No tax-loss harvesting: Rather than using traditional tax-loss harvesting to help investors minimize their tax burden, Ellevest uses what they call Tax Minimization Methodology (TMM) to place more tax-efficient investments in taxable accounts, and less tax-efficient investments in tax-deferred accounts. While this can potentially help investors to reduce their taxes, it is not the same as tax-loss harvesting.
  • Limited account types available: Ellevest only offers taxable accounts, individual retirement accounts (Roth, traditional and SEP IRAs) and 401(k) rollover IRAs. There are no Solo 401(k), joint taxable account, 529 account, or custodial account options.

Is Ellevest safe?

Ellevest is a robo-advisor and not the broker/dealer that will hold your investments. Ellevest uses Folio, a third-party SEC-registered broker/dealer and custodian, for actual investing. Folio is a member of the Securities Investor Protection Corporation (SIPC), which protects individual investor assets for up to $500,000.

Ellevest also uses industry best practices when it comes to securing investor information, and their site uses the highest level of SSL encryption available. They have a vigorous ID verification process to make sure no one can fraudulently access your information, and use a two-step process for withdrawals and deposits.

Final thoughts

If you have ever felt shut out of traditional financial services, Ellevest can be the right option to help you become an investor. With its goals-oriented investment approach and commitment to meeting the needs of women and other individuals whose finances don’t fit the standard mold, Ellevest offers a supportive, diversified, and intelligent approach to managing money.

Any investors who already have some familiarity with the financial industry, or who would like to be more personally involved with their investment decisions could be frustrated by Ellevest, however. With a website user interface that is not designed for research, an app that is only available for Apple users, and a sparse selection of account types, Ellevest’s entry-level robo-advisor does not have as much to offer the more advanced investor. In addition, the lack of tax-loss harvesting could be a turn-off for any investor worried about capital gains taxes.

Both Wealthfront and Betterment may offer some better options to investors who still need personalized advice, but would like a more user-friendly online and mobile experience, more account options, and the ability to use tax-loss harvesting. But remember that Ellevest does offer a more personalized portfolio than either of its competitors because of the 21 ETF classes it offers.

For new investors who have been turned off by traditional financial services, Ellevest offers a much-needed service. If that does not describe you, it may not be the right fit.

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Emily Guy Birken

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Source: https://www.magnifymoney.com/blog/investing/ellevest-review/

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