Liftoff: Is This Robo-Advisor Right for You?

Liftoff entered the robo-advisor arena in 2015. It is the baby of Barry Ritholtz and Josh Brown, partners at Ritholtz Wealth Management. The two wealth managers wanted to give lower-net-worth clients an opportunity to benefit from their financial expertise at an affordable fee. The Liftoff platform is based on Upside technology. Upside, now owned 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 in the industry 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.”

The sign up works the same way as at 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.

In order to get any information, you must establish 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 doing so. 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 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 60% stocks and 30% bonds with 10% real estate. A 60% allocation to stocks (some advisors include REITs in the stock asset class) is rather aggressive for an extremely risk-averse investor, although in defense of Liftoff, many of the robo-advisors lean to an even more aggressive bent in their asset allocations.

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. See Betterment vs. Wealthfront: A Fee & Fund Comparison.)

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. See A Guide to Choosing the Best Robo Advisor.

Barbara A. Friedberg owns shares in VWO.