SoFi has been a major partner here at The White Coat Investor for years. Hundreds (? thousands) of readers have refinanced their student loans ($300 back through that affiliate link) with them over the years thanks to their slick interface, constantly improving customer service, and low rates. They also offer a no-PMI mortgage product ($500 back through that affiliate link) similar to the more familiar “doctor mortgages” that some readers have taken advantage of. SoFi also offers low rate personal loans, although I don’t really plug those much because I’m a big believer in paying cash for everything in your life outside of a reasonable amount for an education and a house, but a few readers have used their product and been happy with it.
More recently, they’ve branched out into the financial advisory space, but with an intriguing proposition. SoFi Wealth Management is basically a roboadvisor with a financial planner available by phone. But there’s a catch that distinguishes them from most advisors – they’re free. Check it out:
Free is one of my favorite prices. Well, technically SoFi isn’t free forever, but certainly free for quite a while (and even longer for WCI readers thanks to a special deal I negotiated for you.) SoFi considers this to be a benefit worth $750. I have no idea where they get that figure from, but as I’ve mentioned before, the value of a financial advisor is highly variable depending on how much the investor is capable of doing and willing to do for themselves. The value to you might be $0, or even negative. On the other side of the spectrum, for someone paying tens of thousands in advisory fees for mediocre advice, this service could be worth $20K or more.
How Sofi Wealth Management Works
Like most roboadvisors, SoFi Wealth Management collects some information from you, and then invests your money in a broadly diversified collection of low-cost, passively-managed ETFs which it then automatically rebalances (typically monthly but at least quarterly) going forward. So you’re going to end up with a reasonable portfolio that is managed in a reasonable way. Unless you are a diehard do-it-yourselfer, the asset management function is going to be just fine.
Here’s the mandatory disclosure about the affiliate deal.
You can make an appointment online or by phone to talk to the financial planner at your convenience about the other aspects of your financial life like home buying, managing debt, or planning for children.
The eventual fee for this service is 0.25% of Assets Under Management (AUM) per year, on par with the cheapest roboadvisors out there and far cheaper than a “real” financial advisor, many of whom charge the “industry standard” 1% of AUM or more. You can invest as little as $100 and there is never a fee on assets under $10K (almost 2 years of IRA contributions), and for investments over $10K, there is no fee through the remainder of 2018 (2019 for WCI readers who go through the affiliate links on this page).
You also get free “professional career and salary guidance” (they call this a $795 value), a 0.125% discount on future loans from SoFi (student loan refinance, mortgage, personal loan etc), access to “exclusive SoFI events” (whatever those are), and SIPC insurance on up to $500K in assets.
The Intake Process
So, what is signing up like? Well, let me tell you about it. If you click on “Get Started” on the website, it takes you to this page where you meet Sophie (so clever eh? I’m a little skeptical that the lady in the picture is actually named Sophie):
Okay, so far so good. You give them your name and email and create a password. Then they ask you if you want to open a new account or do a rollover from a 401(k) or IRA into an IRA. I chose to open a new account. They then ask if I want to do “general investing” (presumably a taxable account), build an emergency fund, or save for retirement. I chose general investing and gave them my date of birth. They then recommended an asset allocation to me, which I found surprisingly early in the “financial planning process” since they knew nothing about my assets, goals, or risk tolerance.
If I click on “more details” I get this:
As near as I can tell, there isn’t anything “customized” about this recommendation at all but it’s not like they’ve recommended something to me that is unreasonable. It does let me override their recommendation. If I choose “aggressive” I get this asset allocation:
Alternatively, I can choose to be “moderately conservative” and I get this:
In taxable accounts, they use muni bonds (without asking me what my tax bracket is) and in IRAs they use non-muni bonds like these:
Notice that I’ve gotten all this information without giving them anything besides a name, an email address, and a DOB (all of which could have been fake as there has been no verification so far.)
Next, you get to opening and funding the account. I like this step, as it offers you the opportunity to open the account as a tenants by the entirety account and even tells you which states you can do that in.
I checked Tenants by the Entirety, but it didn’t ask me for any information about my spouse yet, which I thought was odd. The next page asks for my address, income, employment status, citizenship, social security number, liquid net worth, and investment experience. Seems like they might have wanted to ask some of those questions (along with my goals and risk tolerance) before recommending an asset allocation. I decided to stop the process at that point, but the interface was slick, easily understood, and it looked like I would be done in just a couple more minutes. Presumably, they’ll tell me I can’t do Tenants by the Entirety since it isn’t allowed in my state or at least ask for my spouse’s name and then I’ll make an EFT from my bank account to SoFi and sign a disclosure form and we’ll be done.
What Are The Investments?Vanguard ETFs we all know and love. I see the following ETFs in their current portfolios:
- Vanguard Short Term Bond ETF (ER 0.07%)
- Vaneck Vectors High Yield Muni ETF (ER 0.35%)
- IShares National Muni Bond ETF (ER 0.25%)
- Vanguard Total Bond Market ETF (ER 0.05%)
- Vanguard Short Term Bond ETF (0.07%)
- IShares Emerging Market Bond ETF (ER 0.40%)
- SPDR Short Term High Yield Bond ETF (ER 0.4%)
- Vanguard FTSE Developed Markets ETF (ER 0.07%)
- Vanguard Total Stock Market ETF (ER 0.04%)
- Vanguard Emerging Markets Stock ETF (ER 0.14%)
In general, the portfolios favor a heavy international tilt and a significant allocation to emerging market and high-yield bonds.
Who Are The Advisors and How Accessible Are They?
You can schedule an appointment with an advisor online, but I’m not a patient person. I thought I’d see what was available right now. So on a weekend morning, I decided to open up an online chat. While waiting for someone to respond, I decided to try to schedule an appointment. There were none available on Sunday or even the next day (Monday) but there were half-hour appointments available all day on Tuesday. After 4 minutes, Beverly responded to me on the chat. Her first question was my last four and DOB.
I actually found the answer before Beverly did. On the page where you make appointments, I found I could make one with Greg Palmieri, who has the CFP designation and an MBA. In fact, Greg works 10 minutes away from my house in Cottonwood Heights, UT (one of SoFi’s facilities) and used to work at USAA.
Bottom line: You’re not going to have access to a financial planner 24/7/365. No big deal, nobody else really offers that either. You will have reasonable access to a CFP by phone.
So what are the downsides of using SoFI for wealth management?
The portfolios aren’t customized in any way, shape, or form. Don’t get me wrong; I think a customized portfolio is dramatically oversold by most financial advisors. You don’t need a customized one; you need a reasonable one. The SoFI portfolios are reasonable. Some people would like to see a little more customization though.
I’m skeptical that the quality of the financial planning advice is going to be as good as what you would get from a GOOD physician-specific financial planner like those I recommend. You’re just going to be better at doctor-specific issues (wacky retirement accounts, student loan management, disability insurance, asset protection, doctor budgets etc) when that’s all you do. I also wonder about the objectivity of advice on student loans and mortgages that would come from a financial advisor associated with a firm that offers student loan refinancing and mortgages.401(k)s, 403(b)s, 457(b)s, SEP-IRAs, individual 401(k)s, Defined Benefit Plans, HSAs, 529s, UTMAs, and the myriad of other financial accounts common in the lives of our readers. I didn’t even see a mention of a Backdoor Roth IRA on the site, although I suspect they can easily handle that even if they don’t have a “Backdoor Roth IRA” button like Betterment. Most of those reading this site, even if they hire SoFI to manage their taxable account and IRA, are still going to have to either hire someone else or manage their 401(k) themselves. If you can do your 401(k) yourself, why can’t you do your taxable account or IRA yourself? If you’re going to hire someone else to manage your 401(k), why wouldn’t you have them do your IRA and taxable account too? This is a problem with pretty much all the roboadvisors though, and hardly specific to SoFi. At least with SoFi, the CFP on the phone could presumably help guide you through managing the 401(k) too even if they don’t do it directly.
SoFi also doesn’t seem to be making any sort of a special effort to do tax-loss harvesting like some of their competitors. Some people choose a roboadvisor purely for that function, as they feel the tax-loss harvesting is likely to more than makeup for the low AUM fee. I won’t delve into that argument here, but this is a downside of SoFi’s product. Honestly, I suspect they’ll add it soon. [Update prior to publication: I heard a rumor 2 hours before publication that TLHing will start being offered as early as this month, but wasn’t able to confirm.]
Who Is SoFi Wealth Management Right For?
Well, it’s easier to say who it is wrong for. It is wrong for someone who is enough of a DIYer that they actually critique SoFi’s asset allocation. If you care that much, do it yourself. Likewise, if you’re such a cheapskate (like me) that you’re not willing to pay 0.25% to have your assets managed.
It is also wrong for someone who wants a financial advisor that they can sit down across from several times a year. SoFi isn’t a “full-service” financial advisor. They’re not going to help with tax prep, estate planning, asset protection, student loan forms, car purchasing etc.
It is also probably wrong for someone who needs to draw up a very physician-specific financial plan. These CFPs aren’t going to help you decide if PAYE/MFS –>PSLF is better than REPAYE –> refinance for you. They’re not going to help you figure out the rules with multiple 401(k)s. They don’t know the investment and distributions options in the 401(a) at the local university hospital. They’re not going to have very many clients running their own small practices.
Who does that leave? It actually leaves lots of people, particularly at the beginning of a career. If you’re not sure what asset allocation to use, SoFi can help with that. If you don’t want to hassle with rebalancing, they’ll take care of that for you. If you’d love to knock another 0.125% off your loans, using SoFI can help with that. If you just need to get started while you spend the next year or two becoming financially literate, they’re perfect. If you can’t find a financial advisor to take you because you’re only investing a few hundred or a few thousand dollars SoFi won’t turn you down. And did I mention they’re free? While there is no price too low for bad advice, that’s not what you’re getting here, and you’re getting it at my favorite price. Use the affiliate link (affiliate means I get paid but it’s still free to you if you use it) below to extend your $0 management fees from the end of 2018 to the end of 2019.
What do you think? What do you see as the strengths and weaknesses of SoFi when compared to traditional advisors and roboadvisors? Would you use a FREE advisor for asset management and financial planning? What will this downward pressure on prices do to the financial planning industry? Comment below!