The Bottom Line: Finhabits is out to help people get into the smart habit of investing and saving for their retirement, by making it simple and efficient. Their technology, based on cutting-edge infrastructure, gives you easy access to superior, low-cost investing and retirement savings options.
If you are one of the many Americans looking to invest but unsure of where to start, then we recommend you consider a direct-to-consumer digital wealth advisor.
Often known as robo-advisors, these companies use technology to create and manage your investment portfolio – all for a low monthly fee.
Investing habits can be difficult to start, especially if you haven’t invested before.
Finhabits is one digital wealth advisor that will help you start saving for your next big purchase: a car, house, or your next vacation.
The company was created to help beginning investors create a savings plan, and to prepare for the future.
Through the power of time and compound interest, you can steadily build wealth.
With Finhabits, you can invest as little as $5 per week, which the company will automatically invest for you in a broad basket of low-risk investments.
You’ll have the option to select your portfolio’s risk level: conservative, balanced, or aggressive.
Finhabits was also created with the self-employed in mind, and those who don’t have access to an employer-sponsored retirement account.
The company has a passion for those who don’t traditionally have access to wealth management opportunities and operates as a certified B corporation – a company committed to balancing purpose and profit.
Read on for our review.
Minimum Investment: $0
Fees: $1 per month for accounts under $2,500 & 0.5% per year for accounts above $2,500 + ETF fees
Promotion: 1st month free
What is Finhabits?
Finhabits is an SEC-registered digital investment advisor aimed at helping anyone save for the future. The company is technically a robo-advisor that works only with select exchange-traded funds (ETFs).
Designed with those traditionally lacking access to investment advice, Finhabits set out to make building wealth available to all at low monthly rates.
As a certified B corporation, Finhabits is on a mission to make investing easy, accessible, and available.
Finhabits specifically targets Spanish speakers and the Latino communities in the U.S. who have historically struggled to gain access to wealth-building opportunities.
The company designs portfolios composed of popular ETFs that meet specific investing needs, like saving for a home or for retirement.
The company offers personal investment accounts and individual retirement accounts (IRAs).
Finhabits is more than just an investment platform. It is geared towards those new to investing, who may need help building the habits needed to create long-term wealth.
As the name suggests, the company will also help you to learn the investing mindset.
They do this by sending you reminders to invest money each week, with the goal of cultivating a wealth-building mentality – that small deposits can add up to big gains over time and with interest.
Founded in 2015, Finhabits is the brainchild of MIT grad Carlos Armando Garcia.
There he also designed and operated the hedge fund Madison Quant Labs.
After Fundspire, Carlos became concerned about the growing retirement crisis in America. 58% of Americans report they have less than $1,000 in savings, a serious problem for those looking to retire in the coming years.
These statistics are even worse for minority groups in the U.S. Carlos set out to help anyone build wealth with an accessible, easy-to-use digital platform, especially those without access to employer-sponsored retirement accounts.
Based in New York City, the company is values-driven, committed to accessibility and fairness. As a B Corp, the company is focused on a balance of profit and purpose.
This is an important distinction, as very few digital wealth advisors are as committed to both mission and profit. They also work with credit unions that serve Latino communities in and around New York City.
Two Account Types. Select from personal investment accounts or Individual Retirement Accounts (IRAs).
Low Weekly Minimums. Schedule recurring weekly investments, with a minimum of $5.
Guided Investment Planning. A retirement account created for you reflecting your priorities.
Reasonable Account Fees. $1 per month for accounts with a balance under $2,500 and 0.5% for accounts above $2,500.
Invested in Low-fee ETFs. Your portfolio is made up of popular low-cost exchange-traded funds (ETFs) with an average fee of 0.11%.
Manage Your Account On-the-go. Track your account progress online, or through iOS and Android apps.
Get Started Quickly. Open an account in less than 10 minutes and with no opening fees.
Automatic Portfolio Management. Any extra cash, interest, or dividends are automatic
Great for Spanish Speakers. Spanish and English languages on the platform and apps.
How Does Finhabits Work?
Finhabits is a low-cost digital wealth platform that helps anyone get into investing.
The company creates and automatically manages your investment portfolio based on your goals and risk tolerance.
Finhabits will create and automatically manage your investment portfolio, which is composed of Blackrock and Vanguard ETF funds.
As you add funds, the Finhabits digital wizardry will readjust your portfolio, buying and selling ETFs to ensure you stay on track for your goals.
Finhabits Fees, Minimums & Contributions
Finhabits is a low-cost robo-advisor for those looking to start investing. Below are the investment and account fees.
- $1 per month account fee for those with under $2,500 invested
- 0.5% per month account fee for those with over $2,500 invested
- ETF fees from 0.07% to 0.30% (0.12% average ETF fee)
Besides these fees, Finhabits may charge additional variable fees for other items.
- Wrap-up fees: trading, clearing, technology services
- Miscellaneous fees, such as mailed physical statements
Finhabits is very generous with minimums. Funds are also usually invested the day after deposit. Below are their requirements:
- $0 minimum to open an account
- $5 weekly minimum to fund an account
Traditional and Roth IRAs both have a contribution limit set by the government. The limit is $6,000 per year for those under age 50 and $7,000 for those over age 50.
ETFs, Portfolio Allocations and Returns
When you sign up to invest with Finhabits, you’re putting your money into a system that will create a portfolio and invest for you.
The goal of this portfolio is to generate low-risk returns by investing in exchange-traded funds (ETFs). An ETF holds a diversified group of investments that help to spread out risk.
Finhabits invests in ETFs run by Blackrock and Vanguard. Below are the specific types of ETFs in your portfolio.
- US Stock Market
- International Stock Markets
- Government Bonds
- Tax-Exempt / Inflation-Protected Bonds
- Corporate Bonds
While Finhabits is a robo-advisor, they only have three different portfolio allocation types.
While this may not be good for experienced investors, it makes investing straightforward for those just beginning the investing journey.
To help you get started, Finhabits offers three different investment goals. You can change these at any time.
- Build an emergency reserve
- Get ready for retirement
- Invest for a mid- to long-term goal
These three goals correspond to the three portfolio allocation types, which are conservative, balanced, and growth.
Below are the asset allocations and estimated returns.
The rate of return on this portfolio is estimated at 2%.
This portfolio type is good for those who want to invest money for a rainy day, and aren’t able to risk the funds on higher returns.
Low-risk will barely keep up with the 1.76% rate of inflation of money. This is a good way to build an emergency fund.
The rate of return on this portfolio is estimated at 3% to 6%.
Finhabits presents this portfolio as the best allocation for those looking to create a retirement account.
This portfolio invests in more international stocks at the expense of more conservative bonds, increasing this risk but also generating a larger return.
The rate of return on this portfolio is estimated at 4% to 8%.
This is the most aggressive asset allocation, which focuses on stocks and very few bonds.
Depending on your situation, this may be good for a long-term retirement account or other long-term oriented investing strategy.
Pros & Cons
Finhabits is out to help people get into the smart habit of investing and saving for their retirement, by making it simple and efficient.
How to Get Started
When you are ready to open an account, you’ll need the following information.
Remember, only U.S. residents can invest with Finhabits.
- Phone number
- Social security number or individual tax identification number (ITIN)
- Permanent U.S. residential address
- Valid U.S. bank account
After registering, you’ll create your account by going through the following four steps.
Select your investment goal
Select your portfolio type
Connect your bank account and to add funds
Set a weekly contribution limit
Importantly, you can change your investment goal, portfolio type, and weekly contribution limit as you go.
We recommend spending some time before registering though to make sure you have a plan for how you want to invest. This may be used to create a small emergency fund or saving for a down-payment on a house.
As you begin to invest, Finhabits will also help you to get into the investment mindset.
They use little ‘nudges’ along the way, which means each week your Finhabits account will send you reminders to invest funds. While not great for everyone, this will definitely help some to keep their investing goals in mind.
Should You Start Investing with Finhabits?
Unlike many of the big-name digital wealth advisors, Finhabits was built with a different focus and audience.
From the beginning, the company set out to help marginalized groups who didn’t traditionally have access to investment opportunities to get into the game.
They are the only robo-advisor with a commitment to Spanish speaking audiences, offering a bilingual experience on the platform.
The one major downside of Finhabits is that they charge $1 per month for accounts under $2,500. For those who can only afford to invest $5 per week, this is a whopping 5% per month on the amount invested.
Finhabits is on a mission to blend passion and profit, helping everyone get access to financial management services.
We like that they are a certified B corporation, a huge differentiator in the fintech wealth management space. They also have partnerships with Neighborhood Federal Credit Union, serving New York City’s mainly Latino communities.
The company is definitely a niche digital wealth management firm. If this is your first time in the investing world, Finhabits may have the right tools and ‘nudges’ to help you get into the investing mindset.
If you’ve looked at some of the other robo-advisors and felt they were offering too much or were too confusing, the simplicity and ease-of-use of Finhabits may be the right advisor for you.