Ally Invest Managed Portfolios Review

Matt is a Certified Financial Planner® and investment advisor based in Columbia, South Carolina. He writes personal finance and investment advice, and in 2017 he received the SABEW Best in Business Award.

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Robo-advisors are a relatively new way to invest, and it isn't hard to see why they've already become extremely popular. They take all of the guesswork out of creating a suitable investment portfolio, and at a fraction of the cost of hiring a financial planner to do it for you.

Many financial companies are getting into the robo-advisor business, and Ally Financial is one of the newer entrants. In this review, we'll take a deep dive into Ally Invest Managed Portfolios, the company's robo-advisor service. We'll look at the pros and cons, cost structure, and discuss what types of clients might be good candidates to invest through the platform.

Ratings Methodology
Why Apply

With competitive pricing, low minimums, and features such as automatic rebalancing, Ally Invest Managed Portfolios is a great choice for anyone without a lot of cash to spend.

Fees:

$0 per trade, management fee 0.30%, expense ratio 0.05%-0.20%

Account Minimum:

$100

Top perks

Competitive management fees: Ally Invest Managed Portfolios has two different options. The cash-enhanced­ account has no management fee whatsoever and keeps 30% of the portfolio in a high-yield savings account and the other 70% in a customized investment portfolio. The underlying investment funds in your portfolio will have small fees (known as expense ratios), but that's it. On the other hand, the market focused portfolio option invests nearly all of the account's value, but charges a 0.30% annualized advisory fee. This isn't the lowest fee in the industry, but it's certainly competitive with other robo-advisors.

Low minimum investment: Ally Invest Managed Portfolios requires a $100 minimum investment to get started. Some competitors require a $500 minimum investment or more.

Automatic rebalancing: All robo-advisors that we know of rebalance portfolios over time, but some only do it at certain time intervals, such as annually or quarterly. Ally Invest rebalances portfolios as needed, in response to market fluctuations.

24/7 customer support: Many robo-advisors have dedicated customer service hours, and others only provide support through chat or email. Ally Invest has a customer support line that allows you to speak with a person 24 hours a day, seven days a week.

Strong return on cash: Ally's cash-enhanced option keeps 30% of the portfolio, but at a higher yield than you're likely to get by keeping cash with most other brokers. (Note: As of Feb. 14, 2020, the cash portion earns interest at a 1.60% APY, but it is variable.)

Portfolio types: In addition to customizing an investment portfolio for you, Ally Invest allows you to choose from one of four portfolio options to best meet your needs. These types are core (highly diversified), income (designed for people at or near retirement age), tax-optimized, and socially responsible.

Ally integration: If you have a savings account, checking account, loan, or even another brokerage account with Ally, your Managed Portfolio account can be integrated under the same login.

What could be improved

More account types: Ally Invest Managed Portfolios can be opened as standard brokerage accounts (individual or joint), IRAs (traditional, Roth, or rollover), or as custodial accounts (UGMA/UTMA). The platform doesn't currently support accounts such as SIMPLE IRAs, SEP-IRAs, solo 401(k)s, Coverdells, 529 savings plans, or trusts, just to name a few.

Human advice: There are some competitors that offer access to human financial planners, which can help with advice on things like retirement strategies, saving for college, and buying a house. Ally doesn't offer this option -- all of its financial advice is automated.

Tax-loss harvesting: Several robo-advisors offer automatic tax-loss harvesting, which is a strategy that can save investors lots of money on their tax bills. To be fair, Ally offers a tax-efficient portfolio option, but it's not quite as powerful as an active tax-loss harvesting strategy. If you are opening a large taxable account, or are otherwise in a high tax bracket, you may want to look at a competitor that offers this.

How Ally Invest Managed Portfolios works

Like most robo-advisors, Ally Invest Managed Portfolios starts the process by asking prospective clients to fill out a questionnaire. (Note: You don't need to commit to opening an account to fill out the questionnaire and see your investment recommendations.)

You'll answer a series of questions about your investment objectives, time horizon, your assets, risk tolerance, and more. From there, you'll pick the type of portfolio (core, income, tax-optimized, socially responsible) that best fits your objectives, and Ally will suggest an ideal asset allocation strategy for you.

Note that the default option is the cash-enhanced portfolio, which permanently keeps 30% of your portfolio in cash. This has no management fees, which is a big differentiator, but it does create a far more conservative investment strategy than many investors want or need -- especially younger investors with long time horizons to ride out the ups and downs of the stock market.

Services offered

In addition to creating customizable investment portfolios for clients, Ally Invest Managed Portfolios offers some unique services. Automatic rebalancing whenever an account needs it is one example. And the concept of a 30% cash buffer (which is also included in portfolio rebalancing) is an Ally differentiator, intended to help investors better absorb the ups and downs of the stock market.

Pricing and fees

The two main types of fees you might pay when investing through a robo-advisor are management fees and fund expense ratios.

When it comes to management fees, Ally Invest has two options:

  • Cash-enhanced account: This option keeps 30% of a client's money in cash (which earns interest), but charges no management fee.
  • Market-focused portfolio: This option invests nearly all of a client's money but charges a 0.30% management fee.

In addition, Ally invests client funds in exchange-traded funds, or ETFs. These funds are not managed by Ally, and all have their own fees (known as expense ratios). Ally doesn't publish the underlying expense ratios of its funds, but annualized fees in the 0.05%-0.20% range are typical of the funds used by most robo-advisors.

Customer service and support

There are two types of support that clients of a robo-advisor could need -- investment advice from a human being and help with technical issues. So let's take a look at how Ally Invest Managed Portfolios stacks up.

Unfortunately, Ally Invest doesn't offer live financial advice to its robo-advisory clients. All of the financial advice offered by the platform is of the automated variety.

On the other hand, account support is an area where Ally Invest shines. Unlike many rivals, which offer phone support only during limited hours (or not at all in some cases), Ally Invest has a phone support number that is staffed by real, live people, 24/7.

Alternatives to consider

There's no one perfect robo-advisor for everyone, and there are alternatives that could be better for certain investors. One good example that you may want to consider instead of Ally Invest is Wealthfront. One of the earliest robo-advisors, Wealthfront offers tax-loss harvesting and a 0.25% management fee, which is lower than Ally Invest charges for its market-focused portfolio option. On the other hand, Wealthfront has a significantly higher $500 account minimum, and Ally's cost structure is better if you prefer the cash-enhanced portfolio option.

Feature Ally Invest Wealthfront
Advisory fees 0%-0.30% 0.25%
Automatic rebalancing Yes Yes
Tax-loss harvesting No Yes
Access to financial advisors No No
Account minimum $100 $500

Ally Invest Managed Portfolios is right for you if:

  • You prefer a conservative investment strategy. Ally's no-fee portfolio option that maintains a large interest-bearing cash buffer is a major differentiator.
  • You want to open a standard brokerage account, traditional or Roth IRA, or a custodial account.
  • You have at least $100 to invest.
  • You aren't concerned with obtaining financial planning advice from a human advisor.
  • You want the ability to receive account support from a person at any time you need it.

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