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SoFi Automated Investing Review
Who Should Consider SoFi Invest?
SoFi Invest may appeal to individuals already using SoFi loans or SoFi Checking & Savings accounts, as it offers a streamlined way to manage both finances and portfolios. For beginners seeking a low-cost robo-advisor with access to real financial advisors, SoFi Invest presents an accessible option.
However, while there are no management fees, it's essential to recognize that SoFi Invest isn’t entirely cost-free. The ETFs in the portfolio come with their own fees, and SoFi includes its proprietary ETFs, which means indirect payments. Though the costs are currently low, they may increase when fee waivers expire.
For those looking for a low-fee investing platform, it’s worth comparing SoFi Invest with more established firms, as similar or even lower fees might be found elsewhere.
SoFi also assesses risk tolerance with a basic question about balancing long-term performance against short-term losses. While standard for robo-advisors, this approach lacks the depth found in platforms like Vanguard Digital Advisor, which uses interactive tools to help users better understand their risk preferences.
How SoFi Invest Manages Your Money
SoFi Invest, like other robo-advisors, places funds into a diversified portfolio of ETFs based on risk tolerance and time horizon. However, SoFi’s proprietary ETFs tend to have higher fees, primarily because these funds have accumulated relatively few assets. For instance, the Next 500 ETF manages less than $40 million, while more established ETFs like VOO manage significantly more. Smaller funds charge higher fees to cover operational costs.
In addition to higher fees, smaller funds face a greater risk of closure, which can disrupt a long-term strategy by triggering taxable events. This means investors would need to reinvest in a similar fund, potentially one that could have been chosen from the start.
In essence, by using SoFi Invest, there's an expectation that more investors will adopt these funds over time. If this doesn’t align with long-term goals, other robo-advisors that charge higher fees upfront may offer better stability.
SoFi Active Investing
SoFi also provides taxable brokerage accounts for those who prefer to manage their own trades. This is similar to other firms like Vanguard but is not as common among startup robo-advisors like Betterment and Wealthfront.
SoFi Invest Fees and Costs
SoFi Invest promotes its lack of an annual management fee, which is competitive. In contrast, Vanguard Digital Advisor charges around 0.15%, and Ellevest's lowest tier costs $12 annually. Additionally, many competitors either don’t offer access to financial advisors or charge extra for this service.
However, while SoFi Invest doesn’t charge annual management fees, it may include its own ETFs in the portfolios. The SoFi Select 500 and SoFi Next 500, for example, had fee waivers through June 2022. If these fees increase after the waivers expire, the costs could be higher than similar ETFs elsewhere.
SoFi also offers other specialized ETFs through its active trading platform. These newer funds have higher expense ratios and may not be suitable for a long-term buy-and-hold approach. Below are SoFi's proprietary ETFs and their current expense ratios:
- SoFi Weekly Dividend ETF (WKLY): 0.49%
- SoFi Weekly Income ETF (TGIF): 0.59%
- SoFi Gig Economy ETF (GIGE): 0.59%
- SoFi Social 50 ETF (SFYF): 0.29%
