WiseBanyan Review – Is This Free Robo-Advisor For Real?

Robo Advisors have become a centerpiece of passive investing. WiseBanyan stands out from other robo advisors for one key reasons–it’s free. In this WiseBanyan review, we cover its features and pricing.

WiseBanyan Review

WiseBanyan Summary

WiseBanyan promises financial wisdom without fees. In fact, the company takes pride in being the world’s first free financial advisor. It stands out for offering services without any management fees, trading fees, or rebalancing fees. In addition, there isn’t a required account minimum for WiseBanyan users.

However, fees do kick in once you opt to upgrade to any of WiseBanyan’s premium services. Clients can mix and match services to create personalized premium packages. These packages include detailed investment strategies, increased personalization, and additional automation services.

It’s worth learning about WiseBanyan if you’re interested in navigating your own financial ship with just a little bit of help for organizing and planning your investments using easy tools that provide bank-level security.

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How WiseBanyan Works

WiseBanyan creates a recommended portfolio for each new user. As part of the sign-up process, you will answer a few simple questions. WiseBanyan designed these questions to determine a client’s personal goals and risk score. The process takes just a couple of minutes.

The process results in a recommended stock/bond allocation that looks like this:

wisebanyan allocation

 

Users are able to adjust their portfolios as they please. Using the slider you see in the above image, a client can easily change her stock and bond allocation.

Clients then decide how much to invest. WiseBanyan makes it easy to set up automatic monthly deposits. From there, WiseBanyan invests a client’s money based on the stock and bond allocation.

ETFs

WiseBanyan uses ETFs to build its portfolios. These ETFs consist of the following:

  • U.S. Markets: Vanguard Total Stock Market ETF: VTI
  • Foreign Developed Markets: Vanguard FTSE Developed Markets ETF: VEA
  • Emerging Market Equities: Vanguard FTSE Emerging Markets ETF: VWO
  • U.S. Government Bonds: Vanguard Intermediate Term Government Bond Index ETF: VGIT
  • Short Term U.S. Government Bonds: Vanguard Short-Term Government Bond Index ETF: VGSH
  • Investment Grade Corporate Bonds: iShares Investment Grade Corporate Bond ETF: LQD
  • Short Term Investment Grade Corporate Bonds: Vanguard Short-Term Corporate Bond ETF: VCSH
  • Short Term High Yield Bonds: State Street Global Advisors Barclays Short Term High Yield Bond Index ETF: SJNK
  • TIPS: iShares Barclays TIPS Bond Fund ETF: TIP
  • Real Estate: Vanguard REIT ETF: VNQ

WiseBanyan currently does not offer exposure to natural resources, municipal bonds, or emerging-market bonds. Each of the above ETFs is a low-cost index fund approach to investing.

 

Investing Goals

WiseBanyan also offers a goal-based approach to meeting financial benchmarks. The goal-based approach is ideal for people who are new to the world of saving and investing.

The WiseBanyan platform provides easy tools for helping users create goals. Users can calculate recommendations for how much money they should be putting aside based on factors like income, net worth, and time left to retirement. Users can then set up individual accounts for each milestone or goal. Users can arrange to have funds deposited automatically into each separate goal account.

Premium Packages

WiseBanyan offers what it calls its Tax Protection Package. Unlike its core service, the Tax Protection Package is a paid service. That said, it’s very inexpensive. It costs just 0.24% a year or $20 a month, whichever is less.

The package consists of three features: WiseHarvesting, Selective Trading, and IRA Conversion.

WiseHarvesting

The WiseHarvesting program is actually where the company earns its revenue. WiseHarvesting is a paid tax-loss harvesting feature that clients can sign up for to automatically monitor opportunities to reduce taxes. With WiseHarvesting, WiseBanyan will sell ETF shares at a loss and replace them with similar, but not identical, ETFs. This process generates tax losses that save investors money at tax time.

Resource: Our Guide to Tax Loss Harvesting & Robo-Advisors

Selective Trading

One issue with tax loss harvesting is the wash sale rule. You lose the tax benefits if you sell at a loss and then repurchase the same or very similar investment within 30 days. WiseBanyan’s WiseHarvesting feature is smart enough to avoid this issue within your WiseBanyan account. But what about your other accounts?

WiseBanyan has no way of knowing what investments you have in other accounts. It also doesn’t know when you buy and sell in these other accounts. If you were to purchase the same ETF in another account during the 30 days after the WiseHarvesting feature had sold that investment, the wash sale rule would nullify your tax benefits.

To avoid this problem, WiseBanyan offers what it calls Selective Trading. If you regularly buy and sell an ETF that is also held in your WiseBanyan account, you can tell WiseBanyan not to include that ETF in its WiseHarvesting service.

Here’s how WiseBanyan describes the service:

After you remove ETFs from trading, we will liquidate these ETFs, and stop buying the removed ETFs going forward (until you tell us to resume). This should minimize potential wash sales as well as let you leave your outside accounts untouched.

IRA Conversion

The final service is WiseBanyan’s IRA Conversion. This service helps clients create a backdoor Roth IRA. If that term is new to you, you can get all the details here. We also have a podcast on the topic:

Account Types

If WiseBanyan has a major drawback, it’s account types. WiseBanyan offers four account types:

  • Individual Taxable Account
  • Traditional IRA
  • Roth IRA
  • SEP IRA

It does not offer a joint taxable account with a spouse or setting up a trust or custodial account for a child. If these account types are important to you, WiseBanyan is not the right option.

Interview with WiseBanyan Founder

We had a chance to sit down with Herbert Moore, founder of WiseBanyan. In this interview, we discuss the service they offer and the robo advisor industry more generally:

9.3

Fees

10.0/10

Ease of Use

10.0/10

Diversification

10.0/10

Account Types

7.0/10

Pros

  • Relatively low fees
  • Automated rebalancing
  • Tax loss harvesting
  • Beautiful website

Cons

  • Limited control of portfolio
  • Limited number of account types

Topics: Insurance

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