NerdWallet's rating: / 5
Quick facts
- Management fee: None
- Account minimum: $10 to open; no balance requirement
WiseBanyan is best for:
- Beginner investors
- Free management
- Low minimum balance requirement
- IRA accounts
WiseBanyan at a glance
| Overall |
|
|
| Account management fee |  |
None |
| Investment expense ratios | |
ETF expense ratios average 0.12% |
| Portfolio |  |
ETFs from nine asset classes. Additional ETFs may be used for tax-loss harvesting. |
| Account minimum | |
$0 |
| Account fees (annual, transfer, closing) | |
$75 to transfer non-retirement account to another broker; $95 to transfer IRA. No other fees. |
| Accounts supported |  |
• Individual non-retirement accounts • Roth, traditional and SEP IRAs |
| Tax strategy |  |
Extra fee for tax-loss harvesting: 0.25% of assets under management, with cap of $20/month |
| Automatic rebalancing | |
Free on all accounts |
| Customer support | |
Phone support Monday-Friday 12-8 p.m. Eastern; email support. |
| Promotion | |
Refer friends to WiseBanyan and earn credits toward add-on products and services, like tax-loss harvesting and tax preparation services. |
Where WiseBanyan shines
Free management: A big draw of robo-advisors is that they offer financial advice and management for much less than a human financial advisor charges — but few offer their management services completely free, especially regardless of account balance. WiseBanyan’s founders say they wanted to build a company that didn’t have an incentive to earn money at the client’s expense.
How does the company earn money? Through the paid a la carte services it offers, such as tax-loss harvesting. Given that the only taxable accounts it offers are individual non-retirement accounts (tax-loss harvesting isn’t necessary for tax-advantaged accounts like IRAs), it’s unclear how much money it can actually make this way. But WiseBanyan says it will add other paid services and account options in 2016.
No account minimum: No account minimum means that anyone can take advantage of WiseBanyan’s free advice and portfolio management.
Investments: Like many robo-advisors, WiseBanyan’s investment philosophy is based on modern portfolio theory. The company creates a portfolio for each client automatically by asking a few questions. Those questions lead to a “risk score” that helps build the recommended portfolio of exchange-traded funds, weighted to reflect the amount of risk the investor is willing and able to accept. The company says clients can increase or decrease their risk score, and the investment recommendations will automatically update.
WiseBanyan’s ETF portfolio is similar to but generally a bit smaller than that of other robo-advisors. The company’s funds carry an average expense ratio of 0.12% and cover U.S., international and emerging market equities; U.S. government and corporate bonds; short-term high-yield bonds; Treasury inflation-protected securities; and real estate. Many of the ETFs are from Vanguard and iShares. The company does not include municipal bonds, emerging market bonds or natural resources in its asset mix.
Customers must liquidate their investments before transferring an account to WiseBanyan; the company does not support transfers in-kind.
Referral credit system: WiseBanyan has a fairly robust referral system, in which clients can earn credits for friends and family members who open an account using their unique referral link. Those credits can be redeemed for tax-loss harvesting, professional tax-preparation services, and a special request concierge (a client specialist who will perform various tasks related to your WiseBanyan account, such as a backdoor Roth IRA conversion).
Clients earn one credit per referred customer, then various credit amounts can be applied to earn free services:
- 1 credit = four months of free tax-loss harvesting
- 2 credits = access to the special request concierge
- 7 credits = free tax preparation and filing
- 20 credits = free tax-loss harvesting for life
Where WiseBanyan falls short
Waiting list: Here’s a real drawback: WiseBanyan has a waiting list to join. The time in line generally averages two to three weeks; customers can skip the line by referring five friends who sign up for the service. The company says the waiting list ensures that it can control the flow of new clients to its broker-dealer and invest new accounts quickly.
Account selection: Currently WiseBanyan customers can open only individual taxable accounts or traditional, Roth or SEP IRAs. That’s a short list of choices, and it limits the number of clients who will be able to take advantage of the company’s free service. You can’t, for example, open a joint taxable account with your spouse as you can at other robo-advisors and brokers, and you can’t open a trust or a custodial account for your children. The company says this limited selection is the result of a move to a new broker-dealer and clearing firm, and that it hopes to have additional account options available in 2016.
Paid tax-loss harvesting: This service, which the company calls WiseHarvesting, is the first paid add-on option launched by WiseBanyan and it’s the center of its revenue model. The service automatically monitors the account for opportunities to reduce taxes.
Clients with taxable accounts can choose to opt in to the WiseHarvesting service for an annual fee of 0.25% of taxable assets, charged monthly. The fee is capped at $20 a month, which means accounts of $96,000 or more will slowly begin to pay a lower percentage of their assets under management as their account balance grows.
At issue, of course, is that many other robo-advisors offer tax-loss harvesting as part of their base services, with no additional fee. WiseBanyan’s 0.25% fee for the service puts accounts that take advantage of it in line with the overall management fees of Betterment (0.25% on accounts between $10,000 and $100,000) and Wealthfront (0.25% on accounts over $10,000).
The bottom line
In general, WiseBanyan very much feels like a robo-advisor in mid-launch, especially given the wait list and very limited account selection. Those two issues — and the fact that the cost of tax-loss harvesting puts it in step, cost-wise, with other robo-advisors that do charge a general account management fee — prevent NerdWallet from putting it among the ranks of the highest-rated online advisors.
However, there’s certainly an audience for what the company does offer, which is completely free management of IRA accounts with no minimum balance requirement. Investors who fall into that group should certainly consider WiseBanyan.
Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. Email: aoshea@nerdwallet.com. Twitter: @arioshea.
A custodial account can be an excellent way to make a financial gift to a child—whether your own, a relative's, or a friend's. This type of account, established under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA), is set up by an adult for the benefit of a minor. See more here: utma account tax treatment .
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