SoFi Automated Investing review 2023
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SoFi Automated Investing: Best for
- Cost-conscious investors
- SoFi clients
- Newer investors
If costs are your primary concern, SoFi Automated Investing may be the robo-advisor for you. You won’t pay an annual management fee for SoFi managing your portfolio and most of the funds used to build portfolios come with a cost less than 0.10 percent each year. Overall, this puts SoFi as one of the cost leaders in the robo industry. You’ll also have access to human financial advisors for no additional cost and won’t have to worry about them trying to sell you on unnecessary products because they don’t work on commission. You can get started investing at SoFi with just $1, making it a solid option for those just starting out.
Unfortunately, SoFi doesn’t offer tax-loss harvesting, which has become industry standard among leading robo-advisors. You also won’t have access to socially-responsible funds, which is a feature that’s popular with younger investors.
Existing SoFi clients may appreciate having all their assets in one place, but others may find more comprehensive offerings from Wealthfront or Schwab, both of which offer tax-loss harvesting and advanced goal-planning tools.
SoFi Automated Investing: In the details
Pros: Where SoFi Automated Investing stands out
SoFi Automated Investing’s biggest draw is its low cost, and customers should have no arguments around the company’s management fee: zero. That compares favorably to the industry as a whole, where the standard is 0.25 percent, or $25 per $10,000 invested. SoFi is one of a handful of robo-advisors that charge nothing, with Schwab Intelligent Portfolios being another.
SoFi constructs its portfolios with nine ETFs representing broad swaths of the market (emerging markets and small-cap ETFs, for example). SoFi uses a couple of its own funds (more on this later) and most of the rest come from Vanguard, a well-known low-cost leader in funds.
These funds (with just one exception) are cheap, allowing you to build a portfolio that costs very little. In fact, the Vanguard funds used are among the cheapest around, with expense ratios below 0.10 percent, or a cost of $10 annually for every $10,000 invested. In fact, several of the funds cost less than half of that.
All in, it should be easy to build a portfolio that costs little. Between SoFi’s free management and the low-cost funds, you could easily pay less than $10 per year for each $10,000 invested. That puts SoFi among the cheapest portfolios out there.
Automatic rebalancing is included in the package. If your actual portfolio starts to drift from your target allocation (if stocks outperform bonds, for example), SoFi will bring it back in line.
Access to certified financial planners
You’re not paying a management fee, so SoFi must be skimping on service somewhere down the line, right? If so, it doesn’t appear to be in financial advisors. You’ll be set up to speak with certified financial planners (CFPs), who abide by a fiduciary code to act in your best interest. They can help you with answers to less common investing questions and developing a financial plan.
You’ll also be able to reach customer service representatives via the phone seven days a week at convenient times. Being able to get answers to questions with a phone call is becoming increasingly rare, so this is a plus for SoFi.
Easy to get started
It’s easy to get started with a SoFi Automated Investing account. You’ll run through a few questions on your investing goals, when you need the money, and which of five model portfolios you’d like to have (conservative, moderately conservative, moderate, moderately aggressive and aggressive). And then you’re done in a few minutes. (If you need to, you can always go back and quickly edit your model portfolio with a couple clicks.)
Then you’ll be prompted to transfer funds, where you can connect your SoFi account to your bank account. You can do this with instant verification, and you’ll be prompted to set up a recurring deposit. Or you can make a one-time deposit and be on your way. It only takes $1 to get started, so don’t worry if you don’t have a lot to contribute at first. SoFi buys fractional shares in your account, so your money will be fully invested.
The money will be invested in your portfolio as soon as it arrives in the account.
Cash management account
You won’t get a cash management account as part of Automated Investing, but that may be a moot point, since you can open one on the SoFi site anyway. Since you already have a SoFi account, you can open this account quickly and move money between your accounts easily.
A SoFi Banking account offers core bank functionality – mobile banking, money transfer, a debit card and more – without a monthly fee. You’ll also be able to earn an attractive interest rate on the account once you set up direct deposit.
So you’ll get much the same functionality as a cash management account through your robo-advisor account, though you won’t enjoy some features, such as margin loans.
SoFi membership benefits
Using SoFi may entitle you to become a member, giving you access to a number of benefits. These benefits include rate reductions on SoFi loans, local networking events, career coaching and more. You don’t necessarily have to use Automated Investing to receive these benefits, and SoFi offers them to others who use one of its many financial services.
Cons: Where SoFi Automated Investing could improve
No tax-loss harvesting
SoFi doesn’t offer tax-loss harvesting, and it’s a valuable feature across the industry, so it’s surprising that SoFi doesn’t provide it. Tax-loss harvesting allows you to optimize your tax bill while still being invested, and it’s just a smart (and perfectly legal) way to use the tax code to your advantage. It’s a key disadvantage against rivals Wealthfront and Betterment, both of which do offer the tax-saving feature.
No socially responsible investing option
SoFi does not offer a socially responsible investing option as one of its portfolios used in the automated platform, which is a hole in SoFi’s lineup. This has become a common feature for many robo-advisors as younger investors express more of an interest in how their money is invested and the impact it has. Investors interested in taking this approach might consider robo-advisor options such as E-Trade Core Portfolios or Morgan Stanley Access Investing, each of which offers socially-responsible funds.
Lack of transparency
It’s not as easy as it should be to find information on SoFi’s site, and you may have to turn to the fine print and legal documents to find the particulars that you need to know.
When you’re dealing with money, you want the costs to be laid out very clearly, and that’s something that SoFi doesn’t do for its automated investing product. While it’s easy enough to see that it doesn’t charge any management fee (for now), it’s difficult, if not impossible, to find what a typical portfolio might pay in terms of fees. Naturally, each portfolio will pay something a little bit different, depending on the specific funds and how they’re weighted in the portfolio.
The company does disclose what you will pay for its in-house ETFs, both of which have no expense ratio (for now at least) and which may be included in some automated portfolios.
But as for which other ETFs you might invest in? That’s not clear before you actually open an account and click through to the fine print. Contrast this to Schwab Intelligent Portfolios and others, where you see every investible fund and its cost before you even sign up.
Conflict of interest
Because SoFi may invest your portfolio in its own in-house funds, it has a conflict of interest. It discloses this conflict and which of its funds its robo-advisor might invest in after you sign up. As noted above, at least for now the expense ratio on SoFi funds used in the automated investing plan is waived. This may change later on, however, so you may pay fees in the future.
That said, SoFi discloses that its financial advisors are salaried and not paid on commission. That’s an important factor to note, since it eliminates one of the most likely places for egregious misconduct, when an advisor tries to upsell a client on a product they don’t really need.
Compared to portfolios offered by other robo-advisors, SoFi’s portfolio construction will feel basic, with its five model portfolios for taxable accounts and five for retirement accounts. The allocations between stocks and bonds range from an all-bond portfolio (conservative) to all stocks (aggressive).
That said, the simplicity in the portfolios is not necessarily a bad thing, since so much in finance is unnecessarily complex. Given the sophistication of other robo-advisor platforms, you might feel a bit underwhelmed by SoFi’s platform, but don’t let that concern you too much.
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