WiseBanyan, the free retail robo-adviser, adds first paid service

Tax-loss harvesting is the first of more branded services to come

Nov 17, 2015 @ 7:00 am

By Alessandra Malito

WiseBanyan, which markets itself as the first free robo-adviser, has announced it will begin charging clients a fee for a new tax-loss harvesting service.

Called WiseHarvesting, the new paid service is just the first in the pipeline of more branding efforts under the robo's name, WiseBanyan chief executive Herbert Moore said. The goal is to offer more unbundled services to clients to boost profit.

"We are a business trying to earn money in the long run," Mr. Moore said. "This is the beginning of our belief that financial services will become more and more unbundled."

"We won't have one size fits all," he added.

There will be no minimum for WiseHarvesting, but clients will be charged an annual fee of 25 basis points of the total assets in a taxable investment account. There will be a cap at $20 a month, which would be for accounts that reach a value of $96,000. Other robos offer this service for no charge, though they charge a fee for their entire platforms.

Charles Schwab & Co. began offering free tax-loss harvesting services for its clients when it launched its first robo in March. Within a few weeks, retail robo Wealthfront slashed its minimum of $100,000 in assets for its tax-loss harvesting services to zero. Betterment offers tax-loss harvesting with no minimum account balance.

It marks the beginning of an unbundling experience for WiseBanyan, which recently moved over all of its clients from an independent broker-dealer to their own. Mr. Moore said the conversion allows the robo to roll out more investment products.

"We hope to roll out more like WiseHarvesting," Mr. Moore said.

He also said the robo adviser will offer a white paper to clients so that they can understand what exactly tax-loss harvesting is and how to take advantage of it. The strategy allows investors to pay less taxes by selling securities at a loss, which helps offset any capital gains liability.

Mr. Moore said the service isn't for everyone, and such educational resources will help clients understand when it makes sense to use tax-loss harvesting tactics. No other services have yet to be announced.

Tom White, chief executive and co-founder of online financial planning provider iQuantifi, said the only consumers who will be able to take advantage of it are high net worth clients.

"If it is young millennials, the majority don't have high net worth," Mr. White said. "If, on the other hand, it is targeted to high net worth individuals that have a good amount of net worth in taxable accounts, then there could be value to that service."

Instead of tax-loss harvesting, which Mr. White considers a marketing gimmick, robos should be focusing on offering financial plans, he said.

Will Ortel, a researcher and content manager at CFA Institute said it makes sense that WiseBanyan is offering a fixed fee model, even if the robo was once simply free.

"A fixed fee model is still much cheaper than an asset-based fee model," Mr. Ortel said. "So it does seem like they are sticking to their knitting, even though they are now charging money."

Corrects sixth paragraph to reflect that Betterment does not require a minimum account balance.


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