Citigroup is jumping into the digital investing advisory space with a series of low-cost portfolios that it will offer to customers. The company has announced the debut of a new robo-adviser that’s free for Priority clients, those who have at least $50,000 in assets or investments with the nation’s third-largest bank by assets. It’s also available free for Citigold customers.
The new robo-adviser – called Citi Wealth Builder – invests client’s money into one of six pre-made portfolios comprised of exchange traded funds (ETFs). The portfolio is selected based on customers’ responses to a questionnaire that assesses their risk tolerance and total assets among other questions. From there, the robo-adviser does the rest, monitoring the portfolio and rebalancing it as needed.
Customers who are members of the Citi Priority and Citigold programs can use the robo-adviser to create one portfolio without an advisory fee. However, they’ll still pay the expenses charged by the ETF investments themselves, which range from 0.18 – 0.24 percent. Additional accounts will be charged 0.55 percent of assets annually, or $55 for each $10,000 invested.
Citi customers who aren’t members of either program can also use the new robo-adviser for the same advisory fee of 0.55 percent of assets annually.
The robo-adviser account requires a minimum initial investment of $1,500 to get started.
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How Citi Wealth Builder compares to other robo-advisers
Like other big bank rivals, Citi is pushing to grow its assets, and its latest move follows a popular strategy in the industry of bundling a range of financial services to encourage customers to do most, if not all, of their banking and investment with one bank.
Citi is among the last of the big banks to offer a robo-adviser, following on the heels of Bank of America, Wells Fargo, JPMorgan Chase and Morgan Stanley. These banks usually charge advisory fees of 0.35 – 0.45 percent of assets annually. So if you can score a free portfolio, Citi’s offering might make sense for you. If you can’t, Citi’s price is actually less attractive than much of its competition.
And pure play robo-advisers including Wealthfront, Betterment and Ellevest, as well as broker Charles Schwab, each offers a lower overall cost for its robo-adviser offering.
For example, Betterment, Ellevest and Wealthfront each offer a robo-adviser with an advisory fee of 0.25 percent and many attractive features such as auto-rebalancing. In addition, their portfolios are typically constructed with ETFs that have lower expense ratios, 0.8 – 0.16 percent.
Charles Schwab may go them one better, though. Schwab Intelligent Portfolios offers an account that charges no advisory fee – typically the single largest cost of a robo-adviser. Its fees for ETFs are also competitive, and the broker offers free auto-rebalancing, though it does require a $5,000 minimum account balance.
But it’s important to remember that Citibank will be offering its robo-adviser as part of a larger suite of banking services provided as part of the Citi Priority program.
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Benefits of the Citi Priority account package
When you have at least $50,000 in assets or investments at Citibank, you can become a Priority client, a program that offers you various benefits:
- Free checks, money orders and official checks
- Discounted pricing on mortgages
- No stop payment fees or ATM foreign exchange fees
- A discount of 0.25 percent on HELOCs and no annual fee
- A discount of 0.25 percent on personal loans and no annual fee
- No annual account fees on wealth management investment accounts
- $4.95 stock trades with Citi Personal Wealth Management
- Increased ThankYou points beyond what you already earn for your Citi credit cards
Along with much of the industry, Citibank is in the midst of gathering deposits, and programs such as Citi Priority are a way to give customers a bundle of services at lower cost for bringing more of their business to the bank.
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Whether Citi’s new robo-adviser makes sense for you depends on your own personal financial situation. But if you can get the robo-adviser service as part of the other perks of being a Citi Priority client, then it starts to make a lot more sense for a wider range of customers.