Ellevest Review 2017

ellevest team

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Invest Like A Woman Because Money Is Power” is the bold slogan that greets new users at Ellevest, a robo advisor designed by women for women. Founded by Sallie Krawcheck in partnership with tech entrepreneur, Charlie Kroll, Ellevest has a mission to get women invested in their financial futures and supports them in attaining their financial goals.

Ellevest offers two levels of service, Ellevest Digital and Ellevest Prime. Ellevest Digital is a fully automated robo-advisor service designed for the hands-off investor who wants Ellevest to manage her money without lifting a finger while Ellevest Prime is more like a hybrid robo-advisor service that is more customized to a client’s financial circumstances and involves human oversight.

Like most other robo-advisors, Ellevest relies on exchange-traded funds to build diversified portfolios and has substantially lower fees than most human financial advisors, though fees are higher than many robo-advisor rivals.

Ellevest Spotlight

ELLEVEST SPOTLIGHT
ellevest logo

InvestorMint Rating

3.5 out of 5 stars

  • Ellevest Digital Management Fee: 0.50%
  • Ellevest Prime Management Fee: 0.90% up to first $1million
  • Ellevest Digital Account Minimum: $0
  • Ellevest Prime Account Minimum: $500,000

via Ellevest secure site

Ellevest Digital Vs. Ellevest Prime

Ellevest offers both a purely automated investment management offering as well as a higher tier of service, Ellevest Prime, for higher net worth clients who prefer human oversight and accessibility.

ELLEVEST DIGITAL

Ellevest Digital is a technology-powered robo-advisor designed for the hands-off woman who wants to invest her money in a diversified portfolio of exchange-traded funds at less cost than a traditional financial advisor would charge.

For a single wrap-fee of 0.50%, Ellevest Digital constructs client portfolios based on a goals-based approach. For example, you specify financial goals, such as saving for a new home or buying a new car, and Ellevest will examine your timeline, savings, target amount, and capacity for risk to build a customized investment plan.

Personalized investment plans take into consideration other factors too, including your salary, expected salary growth, and assets in order to make portfolio recommendations.

As you get closer to the target date for your financial goals, portfolio recommendations become increasingly more conservative.

A nice feature provided is insight into how likely it is you will meet your financial goals. Ellevest displays a 70% likelihood of meeting your financial goals, which compares favorably to the 50% benchmark figure used in the industry, so you enjoy a higher degree of confidence in realizing your goals.

ELLEVEST PRIME

For higher net worth clients, Ellevest offers a higher tier of service for a higher fee of 0.90% up to the first $1 million and as low as 0.70% for amounts over $3 million. Between $1 million and $3 million, the fee is 0.80%.

Like its pure robo-advisor solution, Ellevest Prime does not engage in market timing or make bets on specific assets, sector classes, or attempt to time individual securities in order to beat the market. Instead, a selection of the following investments is used to build a diversified portfolio:

  • Common stocks
  • Preferred stocks
  • Bonds
  • Municipal securities
  • Government securities
  • Mutual funds
  • ETFs
  • Unit investment trusts
  • Hedge funds
  • Alternative products

Ellevest Management Fees

Ellevest fees are tiered based on the level of service required and charged monthly in arrears.

The Digital Program annual fee of 0.50% is charged on a monthly basis in arrears based on the market value of the average daily account balance of the securities portfolio in the preceding month.

  • Ellevest Digital: 0.50% annually
  • Ellevest Prime: 0.70% up to first $1 million
  • Ellevest Prime: 0.80% between $1 million and $3 million
  • Ellevest Prime: 0.90% over $3 million

Ellevest Investment Method

Ellevest uses low-fee ETFs to build diversified portfolios that are aligned with clients’ financial goals, time horizons and capacity for risk.

Ellevest astutely realizes that risk tolerance may not be the optimal gauge to assess an investor’s risk profile because when markets are rising investors often overestimate their risk tolerance and when markets are falling they underestimate their risk tolerance.

Instead, Ellevest focuses on capacity for risk as a better tool to incorporate the timeline of reaching a financial goal.

Upon learning what your risk profile is and having a better holistic understanding of your financial goals and time horizons, Ellevest uses low-fee exchange-traded funds, including many from Vanguard, to build a customized, diversified portfolio.

ELLEVEST DIGITAL

Model portfolios are used by Ellevest Digital to manage clients’ assets. Ellevest allocates client monies to ETFs and cash equivalents on a discretionary basis using proprietary algorithms.

For each goal you set, Ellevest invests in a portfolio of ETFs using a method influenced by your time horizon, which you can change at any time.

Your accounts are monitored automatically, managed digitally, and rebalanced periodically according to the model strategy.

Rebalancing does carry a tax risk – for example, if winners are sold near year end, the capital gains taxes may be significant.

If tax loss harvesting is a priority for you, Betterment and Wealthfront may be better alternatives.

ELLEVEST PRIME

The primary difference between Ellevest Digital and Ellevest Prime is human oversight. Ellevest personnel monitor client accounts and make portfolio adjustments as necessary.

Think of Ellevest Prime as a more tailored solution to your individual needs, risk profile and financial objectives. Ellevest builds a globally diversified portfolio that may include:

  • Individual debt instruments
  • Mutual funds
  • ETFs
  • Individual equities
  • Closed-end funds
  • Partnerships
  • Private and illiquid investments

Ellevest takes a hands-off approach when it comes to tax management, encouraging clients to speak directly with their own tax advisors, but it will look to apply tax minimization methods, including deferring capital gains and realizing losses when tax benefits outweigh transacting costs.

Ellevest Tools

Ellevest’s stand out tool is its trade-off algorithm which spotlights the trade-off when you allocate more to one investment than another.

Ellevest has a nice trade-off tool which gives you insights into the effects of prioritizing one goal over another. For example, if you are saving up for a new car but set a new goal to go on a fancy vacation abroad, Ellevest will inform you what the impact to your car-buying goal is.

You can view your goals on Mint.com also if you wish. Simply eSign on the Ellevest dashboard and away you go!

Ellevest Pros and Cons

Ellevest prides itself on setting realistic expectations of reaching financial goals by setting a more stringent 70% probability filter of you hitting your objectives than the 50% level used by most advisors. Plus, specific goal-setting is made easy at Ellevest and caters well to beginner investors. Fees are a little hefty compared to the competition and tax matters must be attended to by a third party.

Ellevest Pros Ellevest Cons
Emergency Fund Management Fee: No management fees are charged on monies held in emergency funds. This is highly unusual in the money management industry, which generally charges management fees even on cash held. Product Differentiation: Ellevest clearly targets women, but it is not obvious how its services are necessarily different from other leading robo-advisors, especially given its management fee for basic service is twice that of many rivals, such as Betterment.
Financial Goal Setting: Ellevest provides greater specificity and clarity on financial goal setting than you might find elsewhere.

Instead of investing more generally for the long-term, you get to “bucket” your financial goals so you can specify for example that you are saving for a new home, buying a new car, saving up for a vacation, building an emergency funds cash cushion, preparing for college tuitions, or putting money aside for a wedding.

Tax Loss Harvesting: Ellevest has an eye on tax efficiency by looking to defer gains and compare transactions costs to the benefits of realizing tax losses on Ellevest Prime accounts, but automated tax loss harvesting is not available.
Trade-off Tool: If you’re on track to meet your financial goals, but must pay for something new, what is the effect on when you will reach your financial goals? Those are the insights you glean from Ellevest’s trade-off tool. Management Fees: Fees of 0.50% annually on its basic service, Ellevest Digital, are a lot lower than most traditional advisors but don’t compare favorably to those charged by many of the top robo advisors.

Ellevest Prime, its premier service, also comes near the higher end of the fee spectrum.

Gender Focus: Founder Sallie Krawcheck is committed to the cause of empowering women in various different forms, including her Ellevate network.

Ellevest is another string in her bow, so to speak, by focusing on financially empowering women. While the service offering isn’t substantially different to other robo advisors yet, time will tell whether the gender focus can live up to the marketing claims.

Ellevest Fees & Minimums

Unlike most traditional advisor who charge management fees on both invested assets and cash, Ellevest stands out by charging no management fee on money held in emergency funds. Its management fees on assets however tend to be steep compared to its peers – Betterment charges half as much for its purely automated investment management service.

Category Fees
Account Management Fees 0.50% for Ellevest Digital
0.70%-0.90% for Ellevest Prime
0.0% on emergency funds
Investment Expense Ratio 0.10% → 0.15%
Account Minimum $0 for Ellevest Digital
$500,000 for Ellevest Prime
Annual, Transfer, Closing Fees $100 IRA Transfer Out Fee
Personal Finance Tools Trade-off Goal Setting

Ellevest Accounts

As the new kid on the block, compared to the the likes of Betterment, Wealthfront and Personal Capital, who started almost a decade earlier, Ellevest is playing catch up with the selection of accounts it has on offer.

Type Capability
Taxable Brokerage Account YES
Traditional IRA YES
Roth IRA YES
401(k) YES
403(b) YES

Ellevest Tax Strategy

Some basic tax minimization strategies are included as part of Ellevest Prime, including deferring capital gains taxes and comparing transaction costs to realizing losses for tax purposes, but Ellevest falls short of the mark in the tax arena compared to more established rivals, especially Wealthfront.

Type Capability
Tax Deferring Gains YES
Tax Loss Benefits Vs Transaction Costs Comparison YES
Automated Tax Loss Harvesting NO

Ellevest Summary

Ellevest is the new kid on the proverbial robo-advisor block so it’s not surprising that it doesn’t yet have all the bells and whistles of its more established rivals, but it does stand out in helping clients specify and track specific goals, waiving charges on monies held in emergency funds, and spotlighting the trade-off of altering investment amounts and re-allocating.

Although clearly female-focused in its marketing messaging, Ellevest doesn’t make it especially clear how its services differ for women compared to other robo advisors. It also has a fairly hefty management fee compared to other automated investing solutions, and has a ways to go when it comes to optimizing portfolios for tax efficiency.

For beginner investors, especially those who are hands-off, Ellevest makes it easy to get started and invest in model portfolios that align with your financial goals and account for your risk preferences.

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