SoFi Invest Review (Formerly SoFi Wealth)
SoFi Invest is a great low-cost option for millennials and new investors who are getting serious about investing for the first time. If you’re looking for more advanced account offerings or certain types of accounts, however, you may need to look elsewhere.
Social Finance, known as SoFi, started in 2011 when several graduate students at Stanford Graduate School of Business decided to create a better way for students to pay off their student loans. SoFi shot to the top of the student loan refinancing market and has since expanded its offerings from student loan refinancing to mortgages, personal loans, and even wealth management, with both active and passive investments automated through a robo-advisor.
SoFi Invest (formerly called Sofi Wealth Management) is one of the best robo-advisor services on the market. SoFi offers investment programs geared toward millennial investors who may be starting out with beginner level investment knowledge and smaller balances. However, those with larger balances who prefer a hands-off approach to their investment portfolio may also benefit from SoFi Invest.
In this review:
Getting to Know SoFi Invest
SoFi has several investment products meant to span the issues a beginner investor would be interested in, while also trying to make those products easy to maintain. Currently, SoFi offers:
- Roth IRAs
- Traditional IRAs
- SEP IRAs
- Rollover IRA accounts
- Individual and joint taxable accounts
These options mean just about anyone can find an investment product they need from SoFi, whether you’re socking away money for retirement, planning to buy a house, or just chipping away at that dream vacation fund.
There are two major sides to SoFi Invest, one for investors who want to be active in their day-to-day trading, and one for hands-off investors.
SoFi Active Investing
|All Trade Price||$0|
For those who want to learn by doing, SoFi Invest offers an active investing platform that allows you to manage your investment portfolio yourself. Some of the program’s more robust features include:
- A strong community of fellow SoFi investors, where you can meet up at events, network, and share advice
- Real-time investment market news
- Curated content from SoFi’s human advisors
- Tools that can help you keep up on the stocks and companies you need to know about
- An app that lets you do it all from your phone
You can also create a personal watchlist so that you’re always getting the news and information you need to make smart decisions with your money.
There are no commissions or broker fees for any trades with SoFi and no account minimum necessary to keep the account open. As a member of SoFi Invest, you’ll also receive rate discounts on other products, such as SoFi Personal Loans, as well as invitations to attend special events with other members.
SoFi Automated Investing
|Asset Management Fee||$0|
Not everyone has the time, desire, or expertise needed to manage their stock portfolios, so SoFi also offers automated investing through their robo-advisor platform. Their tools allow you to choose your personal financial goals, such as retirement or a house down payment, and the algorithm goes to work for you, choosing the asset allocation your money needs to earn the most within your desired timeframe.
SoFi Automated Investing…
- Helps with setting the goals you want to reach and the investment strategy needed to get there.
- Automatically rebalances your account on a quarterly basis, so your money will never stray far from the asset allocation you need.
- Diversifies the stocks that your money will be invested in across many different industries and asset classes, so you’ll be protected from volatile market swings according to your risk tolerance.
As with the active investing option, there are no fees for any trades with SoFi Automated Investing, and no minimum balance for your account. You can get started with as little as $100, and withdraw money at any time, although members who commit to a $20 automatic monthly deposit get some added perks, such as career coaching from SoFi’s advisors and invites to exclusive SoFi events.
The Benefits of Using SoFi Invest
There are many benefits to the SoFi investing program. Arguably the most important perk, the total lack of fees means your money will stay where it belongs — in your account. SoFi is among the first investment firms to offer zero-fee index ETFs (exchange-traded funds). By comparison, most low-cost, robo-advisor competitors, such as Betterment Digital charge annual management fees of about 0.25%. Keep in mind, though, that if you purchase a fund with an underlying expense ratio charged by the fund’s issuing company, you’ll still have to pay that fee.
Since there’s no minimum balance and you can start with only $20 a month, it means almost anybody can take advantage of SoFi Invest regardless of their financial situation.
Regardless of whether you choose the automated or active investing option, you’ll still have access to SoFi’s financial advisors, who are all available at no extra charge. All SoFi advisors are certified financial planners who are also licensed for investments. That means they’re bound by law to give you the financial advice that’s in your best interest instead of just what will make the company money. And since there are no trading commissions for them to profit from, they have no incentive to give you anything but the best advice.
Additionally, the SoFi app is intuitive, easy to use, and can help you keep track of your investments no matter where you are or what option you signed up for. Through their goalsetting tools you can plan a path to your financial objectives, see exactly where you are in the process, and identify what you need to do to go the rest of the way.
Customer service is available to all members regardless of the size of their account balance. Beginner investors, especially, will find many ways in which SoFi makes it easy to get started and gain confidence in their investment decisions.
The Downsides of Using SoFi Invest
As amazing as SoFi Invest’s tools and benefits are, it’s still missing some major things that could matter to a more experienced investor.
No Tax-Loss Harvesting (Yet)
Currently, SoFi doesn’t conduct tax-loss harvesting. Tax-loss harvesting is the periodic sale of losing funds to offset your capital gains. Doing this can help defer your taxes and earn more over the long term.
For many investors, the lack of tax-loss harvesting is an automatic deal-breaker; the more you make on your investments, the more taxes you’ll pay unless you can find a way to minimize the tax liability. Many other firms, such as Betterment, include tax-loss harvesting as an automatic option for all investors.
The good news: SoFi Invest plans to launch tax-loss harvesting in late 2019, so you may be able to offset your gains for the current year.
Limited Investment Options
Since SoFi’s focus is millennial investors with less experience and a lower net worth, it also doesn’t offer as many options as other firms. Stock accounts and individual retirement accounts (IRAs) are great for the investor who is just starting out, but if you’re more advanced and looking to create a trust, 529 college saving plan, or even a 401(k) retirement account, you’re out of luck — SoFi doesn’t offer any of them, at least for now.
No Track Record of Success
Although SoFi has been around since 2011 with a solid track record in the student loan refinancing business, its investment side has only been around since 2017, making it far less proven than some competitors — even in an industry as new as robo-advisors. For some investors, that lack of history could be uncomfortable and could push them to seek an investment platform firm with a bit more track record behind it.
They’re On the FTC’s Bad Side
Lastly, SoFi was in the news in October 2018, and not in a good way. The Federal Trade Commission filed a complaint about their marketing efforts, claiming that SoFi inflated its student loan savings by excluding certain groups of customers from their numbers. The company was also accused of misrepresenting loan terms to customers, burying fine print that ended up costing their borrowers thousands over the life of the loan.
SoFi eventually settled the FTC charges in February 2019, promising to stop making false claims about their student loan refinancing products, but many investors were reluctant to do business with the company after the story broke. SoFi, however, not only remains a power player in the financial arena but is actively trying to move past the misstep.
Bottom Line: Is SoFi Invest Right for You?
If you’re new to investing and want to start out slowly or learn as you go, SoFi is a great place to start, especially if you don’t have a lot of money to begin with. If you’re already well-versed in investments and want to take your portfolio to the next level, however, you may want to hang on to your money.