Vanguard, Fidelity Top Morningstar’s List of Robo-Advisers

Morningstar named the two firms among their top digital investment advisers along with Schwab, Betterment and Wealthfront.


Morningstar Inc. weighed in on the top robo-advisers for managing investments and providing financial advice as the firm tracks the growing market for tech-driven financial advice and investing with limited human interaction.

Morningstar based its assessment on the “factors that most directly help investors reach their financial goals,” including fees; quality of the investing portfolio and advice offering; and financial planning tools. The five leaders, in order, were: the Vanguard Group Inc., Fidelity Investments, Charles Schwab Corp., Betterment LLC and Wealthfront Inc.

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“Digital investment advice is booming,” Amy Arnott, a portfolio strategist for Morningstar Research Services LLC, wrote in a June 23 post. “As access to these services has increased, so have investors’ questions about their suitability, cost, and range of offerings.”

Arnott wrote that automated advice has been growing in popularity for reasons including “Generation Z’s ability and preference to handle its finances online, the pandemic-driven shift to virtual interactions with advisors, and increasing interest in novel assets like cryptocurrency.”

Vanguard Digital Advisor

Vanguard’s robo-advisers, Digital Advisor and its hybrid sibling, Personal Advisor Services, were the leaders for the second year in a row. The service combines automation and human expertise and includes ESG options, active funds and tax-efficient strategies. It provides customizable portfolios, planning tools and access to financial planners, but it has faced criticism for its customer service and pricing concerns, according to Morningstar.

Fidelity Go

Fidelity Go came in second for its research and asset-allocation team. Taxable or retirement-focused portfolios are determined through a risk-tolerance questionnaire, offering seven risk levels. Ongoing support includes alerts and nudges, but tax-loss harvesting is not available. Participants have access to spending and debt management tools, as well as coaching on retirement planning and budgeting. However, some advisers may not have a Certified Financial Planner designation, according to Morningstar.

Schwab Intelligent Portfolios

Morningstar noted that Schwab’s portfolio-construction process is robust, with portfolios available at 12 risk levels and comprehensive asset-class exposure. However, excessive cash allocations ranging from 6% to 30% hinder returns over time. Schwab Intelligent Portfolios Premium provides a CFP-designated financial planner for investors with $25,000 or more. Despite the cash issue, Schwab remains a top option, according to Morningstar, providing advice on areas including mortgages, college savings, retirement savings and retirement income.

Betterment

Betterment stood out to Morningstar due to its services and value, but investors were advised to focus on its core offering and avoid “gimmicky” extras like cryptocurrency. It offers a glide path for portfolio adjustments and offers low-cost ETFs with exposure to major asset classes. While Betterment has a wide range of services at an affordable price, investors should be aware of its recent fine for misstatement regarding tax-loss harvesting, Morningstar noted. Nevertheless, Betterment provides strong core investment options and a user-friendly interface.

Wealthfront

Morningstar noted that Wealthfront has strengths like low cost and high-quality funds, but it is held back by questionable allocations and strategic shifts. It incorporates behavioral economics research for risk evaluation and offers a thoughtful approach to tax-loss harvesting through direct indexing. However, some of Wealthfront’s strategies follow popular trends, rather than prudent investment practices, with portfolios on the aggressive side and investors allowed to put up to 10% of their assets in cryptocurrency funds, according to Morningstar.

Principal Bolsters Retirement Division With Leadership Hires

Principal adds four industry leaders to support the growth of its U.S. retirement business.


Principal Financial Group announced Tuesday that it has hired four retirement industry leaders to support the growth strategy of its U.S. retirement business.

All four individuals will report to Teresa Hassara, senior vice president of workplace savings and retirement solutions at Principal; Hassara joined the firm about one year ago as the new retirement head.

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“Our customers are looking for more sophisticated approaches to run their companies and to provide the best retirement solutions and services to their employees,” said Hassara in a statement. “Each of these new hires reinforces our commitment to working with businesses, advisers, and consultants in strategic and thoughtful ways to maximize trust and value.”

Jeff Cimini joins as vice president of planning, performance and transformation, a newly created role, to lead operational and business planning. According to LinkedIn, Cimini was previously at Voya Financial, serving as head of strategy and financial management, as well as head of institutional product.

Principal has hired Sean Jordan as head of small and midsize market segments, overseeing the strategy and customer care relationships for the two segments. He is tasked with enhancing alignment across marketing, sales, product development and finance. Jordan will work with Joleen Workman, head of Principal’s large market segment, to develop the right combination of services and products within their respective segments. Jordan’s position is new after splitting the small, mid and large market segments into two leadership roles. Workman previously oversaw all three customer segment strategies as vice president of customer care.  

Monica Oswald will serve Principal as vice president of retirement operations, also a newly created role, responsible for optimizing operational processes for retirement and income solutions. Additionally, she will be strengthening digital experiences and resources for customers and employees, according to the company.

Principal has appointed Andrew Matos as head of stock plan services. He will oversee the firm’s employee stock ownership plan and equity compensation plan capabilities, cornerstones of Principal’s total retirement solutions. With more than 15 years of experience in financial services, Matos will lead the overall strategy and growth of the stock plan services. Matos succeeds Amy Keiser, who now serves as vice president of retirement product and solutions.

The changes to the retirement division comes after the Des Moines, Iowa-based firm announced in February the integration of its global asset management and international pension business under the name of Principal Asset Management. The company’s CEO, Dan Houston, told PLANADVISER in March that the asset management division is the “jet fuel” of the business.

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