FutureAdvisor

FutureAdvisor, offered by BlackRock, Inc., is a direct-to-retail investment advisory service designed to assist individual investors in managing their investments. According to the vendor, this platform caters to a wide range of professionals and industries, including financial advisors, wealth management firms, retirement planning services, and investment management companies. Whether you are an individual investor seeking guidance or a financial professional looking for a comprehensive solution, FutureAdvisor offers a suite of features tailored to meet your investment needs.

Key Features

Diversification: FutureAdvisor follows a 'buy and rebalance' strategy that invests in a diversified set of asset classes through low-fee funds. This approach, according to the vendor, aims to reduce company risk and avoid over-concentration in certain market risks.

Risk management: FutureAdvisor incorporates investment glidepaths to decrease the portfolio's allocation to equities and increase the allocation to bonds over time as the goal's time horizon approaches. The vendor claims that this personalized approach helps reduce risk as the investment horizon shortens.

Tax awareness: FutureAdvisor considers the tax consequences of investment decisions and allocates holdings in a tax-efficient manner. The vendor states that it utilizes tax-loss harvesting techniques to defer taxes by selling positions at a loss to offset taxable gains elsewhere in the portfolio.

Asset Allocation: FutureAdvisor provides portfolio recommendations based on the investor's information, including asset classes, risk-reward trade-off, and investment time horizon. According to the vendor, asset classes simplify the investment universe, allowing for a more manageable set of investment options.

Investment Algorithm: FutureAdvisor's methodology consists of an asset allocation strategy and a portfolio management algorithm. The asset allocation strategy determines the optimal target asset allocation, while the portfolio management algorithm analyzes the portfolio daily to invest new cash deposits, rebalance the portfolio, or harvest losses for tax reduction.

Portfolio Rebalancing: FutureAdvisor's algorithm periodically rebalances portfolios to keep them on target. It takes into account transaction fees, capital gains taxes, and other costs to determine if trading is beneficial. The vendor claims that this ensures the portfolio remains aligned with the investor's goals.

Tax-Loss Harvesting: FutureAdvisor's tax-loss harvesting technique helps save money by deferring taxes. According to the vendor, the algorithm sells positions at a loss to offset taxable gains elsewhere in the portfolio. The vendor also states that it prevents wash sales and does not require a minimum balance.

Transaction Cost Considerations: FutureAdvisor's algorithm considers transaction and trading costs to prevent trading that provides minimal benefit. The vendor suggests that this helps optimize the portfolio's performance by minimizing unnecessary expenses.

Tax-Efficient Asset Placement: FutureAdvisor utilizes tax-efficient asset placement strategies by placing high-tax assets into tax-advantaged accounts. According to the vendor, this helps maximize after-tax returns and minimize tax liabilities.

Cash Withdrawal Strategy: According to the vendor, when cash needs to be withdrawn, FutureAdvisor's algorithm sells appropriate holdings while keeping the remaining assets well-diversified. This ensures that the portfolio remains balanced and aligned with the investor's goals.