To say that women are becoming more involved in the financial world is an understatement. While income inequality is still an issue, females are earning higher salaries and taking more agency with their finances than ever. So why aren’t they investing?
Research shows that men are five times more likely than women to prioritize investing. The reasons range from a lack of confidence to a distaste for the male-dominated world of financial planning, but one thing is certain - the needs of female investors aren’t being met.
That’s where Ellevest is looking to make a difference. They claim to offer investment advice customized for women, taking into account female-specific issues and attempting to make the whole experience more comfortable for their clientele.
But is Ellevest filling a service gap or taking advantage of timid or inexperienced investors? Read on to find out what the experts think. And see how Ellevest compares to the cheapest robo-advisors.
- Robo-advisor and service geared towards women
- 0.25% AUM fee structure is on par with others
- Multiple levels of service, including private wealth management
What Ellevest Does & How It's Different
Ellevest is a robo advisor tailored to female financial needs. It recognizes the unique financial difficulties that women experience, including slower salary growth and increased longevity. They also claim to understand and address why women are more hesitant to invest their earnings - a main reason they fall behind in retirement planning.
In seeking to narrow that gender investment gap, Ellevest is dealing with the murky but important emotional aspect of investing. According to some experts, that could mean all the difference.
“The emotional side of investing is more influential than just about anything else,” said CFP Meg Bartelt of Flow Financial Planning. “So, anything that makes women more comfortable with investing and directs them to a tried-and-true investment strategy is a good thing.”
How It Works
Ellevest, like other robo advisors, determines which investments to choose by asking the user questions about her goals, retirement timeline and financial history. It includes how much you’ll likely receive from social security and what kinds of accounts you currently have.
Ellevest recently updated their pricing on December 19, 2017 to the following:
Ellevest Digital: 0.25% of assets annually. This includes setting up and maintaining portfolios, tax minimization strategies, and unlimited text and email support. There is no account minimum for this level of pricing. This level or pricing is also on-par with Betterment.
Ellevest Premium: 0.50% of assets annually. Along with everything offered in the Digital plan, you get access to a CFP that will create a personalized plan for you individually. You also get access to a career coach as well. This plan has a $50,000 minimum.
While more expensive than Betterment Premium (which currently charges 0.40%), you do have a lower minimum versus Betterment's $100,000. You also get career guidance, which might be helpful in some circumstances.
Ellevest Private Wealth Management: Ellevest offers private wealth management to clients that have over $1,000,000 in assets with them.
All in all, we're glad to see Ellevest lowering the prices, especially on their Ellevest digital plan. There was an impression initially that Ellevest was charging a pink tax to their female audience, and that was a big drawback. This updated pricing will hopefully win back some of their skeptics.
However, given the changes in the robo-advisor and online investing marketplace, we don't think Ellevest has done enough to compete. We still believe that most people looking for a robo-advisor will find more value in Betterment. Furthermore, as one of the smallest players in the market, you have to always be concerned about whether the company will exist in 1-2 years. While your assets are always protected, if they don't succeed, it could be annoying to move your assets over to a new firm.
As of December 2018, they have $91 million assets under management (AUM). Compare that to Betterment, which has $10 billion AUM and Wealthfront, which has $8 billion AUM.
For those that want some automation, but want a little more control, M1 Finance recently announced FREE pricing - and that's hard to compete with. You can create a portfolio and have it do everything that Ellevest Digital does - for free. The only difference is you have to set it up yourself, and you don't get access to text or email support.
However, 0.25% of $50,000 is $125 in fees per year - so you have to ask yourself if that's worth the value in services you receive.
If you're curious, check out Ellevest here.
What Experts Recommend
Ellevest remains divisive among financial planners, many of whom think there are better products already on the market.
“I think it's an interesting concept, but I'm just not convinced that investing for women is that different than it is for men,” said CFP Sophia Bera of Gen Y Planning. “I'm more excited by Betterment and the new Premium and Betterment Advisor Network pricing that they just rolled out.”
Other planners say talking to a real human being would be more comforting to women concerned about retirement.
“Women do have a different set of needs and concerns, from unequal pay to a much higher need for long-term care in retirement, but how does an asset allocation model solve that?” said CFP Mark Struthers of Sona Financial. “I don't think it can - only a real fiduciary planner can do that.”
Anyone interested in a financial planner can find one through the National Association of Personal Financial Advisors or the Certified Financial Planners organization.
What do you think? If you're a woman would you give Ellevest a try?
Ellevest is a new roboadvisor built specifically for women, but with on-par costs to other similar services, is it worth it?