This is the worlds leading source of financial content on the web, ranging from market news to retirement strategies, investing education to insights from advisors.
Forex Forever!

Liftoff: Is This New Robo-Advisor Right for You?

Author: Daniel Davis

Liftoff is the latest entrant in the robo-advisor area. It is the baby of Barry Ritholtz and Josh Brown, partners at Ritholtz Wealth Management. The two highly-regarded wealth managers wanted to give lower-net-worth clients an opportunity to benefit from their financial advisory expertise at an affordable fee. The Liftoff platform is based on the Upside technology. Upside, recently acquired by Envestnet, creates a back-end digital program that may be licensed by financial advisors.

Before deciding whether Liftoff is worth it, let's take a look at the platform. Investors need a minimum of $5,000 and can expect to pay 0.40% of assets under management (AUM) for the service. Brown and Ritholtz are well respected and their reputations give this robo a degree of gravitas. According to the Liftoff website: We are held to a fiduciary standard as a registered investment advisory firm (RIA), and we work on a fee-only, client-first basis. (For more, see: More Firms Set to Join Robo-Advisor Ranks in 2016.)

The sign up works the same way as most robo-advisors. You answer a few questions, designed to get at your risk tolerance and investing goals and then are presented with a diversified portfolio of low fee, exchange-traded funds (ETFs) that fit in with your risk tolerance.

Conservative Investor Allocation

In order to get any information, you must set up an account. Although the set-up is easy enough with just a few questions and an email confirmation, it was frustrating to be deprived of exploratory information without creating an account. (For more, see: Robo-Advisors and a Human Touch: Better Together?)

To look under the hood of Liftoff to decide whether it's worth it or not, I set up an account. After answering the list of questions as if I were a conservative, risk averse investor, the program assigned me a risk score of 1, the lowest level. Next, the interface asked why I was investing: 1) To invest; 2) For retirement; or 3) A specific financial goal. Next came three money questions: 1) What is my initial investment amount; 2) How much extra will I invest monthly; and 3) When will I need the funds. The third question was optional. After that came a 10-year chart illustrating a range of how much my funds might grow at the projected 8.6% rate of return. The recommended conservative portfolio would be invested in this allocation:

Liftoff Conservative Portfolio Asset Allocation

Percent Invested

Symbol

Exchange Traded Fund

25%

VIG

Vanguard Dividend Appreciation

10%

IJH

iShares S&P Midcap 400

15%

VEA

Vanguard FTSE Developed Markets

10%

VWO

Vanguard Emerging Markets

30%

BND

Vanguard Total Bond Market

10%

RWR

SPDR Dow Jones REIT ETF

Is Liftoff Worth It?

Liftoff has a lot in common with other robo-advisors who ask some risk questions and then populate a portfolio with exchange-traded funds in line with the client's reported risk tolerance. There are a few negatives to the Liftoff platform. The conservative demo profile came out with an aggregate asset allocation of 50% stock assets and 30% bonds with 10% real estate. This asset allocation may tilt to a less conservative portfolio, although in defense of Liftoff many of the robo-advisors lean to a more aggressive bent in their asset allocations. (For more, see: Betterment vs. Wealthfront: A Fee & Fund Comparison.)

A 60% allocation to stocks (some advisors include REITs in the stock asset class) is rather aggressive for an extremely risk-averse investor. The projected 8.6% future rate of return is excessive. Between 1928 and 2015 stocks returned 9.5% and bonds averaged 4.96%. Many experts are projecting lower returns going forward. So, even if we averaged a 60% stock and 40% bond portfolio using historical averages, the projected return would be closer to 7.7% (5.7% + 2%) not 8.6%.

Both Wealthfront with a 0.25% AUM fee and Betterment with fees between 0.35% and 0.15% beat Liftoff with lower fees and lower minimum investment values. Additionally, those robos don't require account set up to obtain basic information about their platforms.

The Bottom Line

If you want to invest with Ritholtz and Brown at a lower fee than charged at Ritholtz Wealth Management, then you may want to investigate Liftoff. Otherwise, there are lower fee alternatives with comparable offerings. (For more, see: A Guide to Choosing the Best Robo Advisor.)

Barbara A. Friedberg owns shares in VWO.

last five articles

#1549 How The 2014 Obama Budget Could Affect Your Finances

Author: Michael Jackson

At 244 pages, not counting supporting documentation, the 2014 Federal budget isn't exactly light reading (by the way, those supporting documents add 2,176 pages). For that reason, let's forgive the predominance of citizens who have never read the document. But, make no mistake - it's full of sugg... see more

#1294 Small Business Government Loans Fund Success

Author: Daniel Taylor

If you're starting a new small business, or need some capital to expand and make improvements on your current business, you'll probably start by seeking funds from banks and other commercial lending institutions, such as credit unions. In addition to these s, the U.S. government has a variety of ... see more

#89 Pay Less For Medicine By Not Using Health Insurance

Author: Ethan Harris

You might be paying more for your prescriptions at the pharmacy if you use your health insurance than if you pay cash out of pocket.How can that be?Say your doctor prescribes a generic drug and, using your health plan, your copay for generics is $10 per 30-day suppl... see more

#539 Fox Business Network's Gerri Willis: What Gen Y Learned From The Great Recession

Author: Daniel Davis

Talk about a teaching moment. The financial crisis that just notched its five-year anniversary was the ultimate classroom for investors and savers. And, according to a new survey by Fidelity Investments, Gen Yers - those born between 1981 and 1988, - were taking better notes than just about anybo... see more

#1238 Variable Annuities: A Good Retirement Investment?

Author: Michael Harris

One of the biggest worries for older investors is the prospect of outliving their assets. With many people in the developed world now living 20 or more years past retirement, those fears are often justified.Annuities have long been a popular strategy for managing this so-called longevity r... see more