Robo-advisers have taken the investment market by storm, but how good a job do they really do? I plugged a hypothetical moderately risk-averse 75-year old retiree with $50,000 of annual income and a $500,000 taxable account into all of the popular robo-adviser models and got some very different answers. However, one thing was surprisingly consistent amongst the biggest robos: the preference for tax-free municipal bond ETFs for taxable bond allocations.
Following is the result from the Wealthfront website run on September 14, 2016. I was happy to see an overweight to equity-type ETFs compared to what I saw from other robos (see my forthcoming SA article for more on this), but I was most surprised by the allocation to the iShares MUB municipal bond ETF for an investor in the 15% tax bracket.
