Ally Invest Socially Responsible Portfolio (Review)
Ally Invest offers a good sustainable investing option in addition to self-directed trading and online banking. It’s a no-brainer for current Ally customers. We think it’s also a great option if you need to keep some money in cash (which lets you avoid any account management fees).
SustainFi Updated July 18, 2021
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Rating: Excellent (4.2 / 5)
- A comprehensive financial services offering (checking and savings accounts, credit cards, online brokerage with technical analysis tools)
- High allocation to cheap environmental, social, and governance (ESG) funds in the Socially Responsible Portfolio
- Easy signup process
- Ally Invest puts 30% of your portfolio into cash by default (you can change that). That is too high for nearly all investors
- No access to human advisors
- No tax-loss harvesting
- No fossil free options
|SustainFi Rating:||4.2 / 5|
|Management fee||• 0.30%
• 0% if 30% of the portfolio is in cash
|ESG options||Socially Responsible Managed Portfolio|
|Investment expense ratio (ESG portfolios)||0.15% for the Socially Responsible Growth Portfolio|
|Accounts supported||• Individual and joint investment accounts
• Traditional and Roth IRAs
|Best for||One-stop shop for robo-advisor, trading, and banking|
What is Ally Invest?
Ally Financial is a financial services company offering bank accounts, loans, and an online brokerage. They provide both self-directed investing through the brokerage (formerly TradeKing) and a robo-advisor, Ally Invest Managed Portfolios.
Signup process. The online signup process is easy. Ally Invest asks you about your financial goals (such as retirement, major purchase, generate income, or building wealth), your time horizon, how much you want to invest, and your risk tolerance.
Portfolio options. Ally Invest has three managed portfolio options: Core, Socially Responsible, and Tax Optimized. The Socially Responsible Portfolio invests in low-cost iShares exchange-traded funds (ETFs) for the stock component. The bond allocation comes from traditional, non-ESG funds from asset managers iShares and Vanguard.
Account minimum. You need only $100 to start investing.
Management fee. Ally Invest doesn’t charge a management fee if you leave 30% of your portfolio in cash, which is the default option. However, a 30% cash allocation is very high for most investors. We suggest removing the cash component, in which case, only 2% of your assets will be held in cash and Ally will charge a 0.30% management fee. This is slightly higher than the 0.25% fee Betterment charges but still very low compared to human financial advisors, who frequently charge 1% of your assets annually.
Fund expense ratios. The environmental, social, and governance (ESG) funds used in the socially responsible portfolio are relatively cheap, costing between 0.15% and 0.25% ($15 to $25 annually on a $10,000 investment). The total cost of the Growth Portfolio (78% in equities, 20% in bonds, 2% in cash) is 0.15%.
Account types. Ally Invest supports individual and joint taxable investment accounts as well as traditional and Roth IRAs. You have the option to roll over your IRA.
Integration with Ally. Existing Ally users can use the robo-advisor and see all of their accounts (bank, trading, robo-advisor) in one place, which is convenient.
Human advisors. Ally Invest doesn’t provide access to human financial advisors, even a la carte. If you are looking for human advisors, we suggest Personal Capital. You can also just get a financial planner.
Automatic rebalancing. Ally Invest will automatically adjust your holdings if the portfolio strays from the allocation that best suits your goals. Nearly all robo-advisors offer this feature.
Tax-loss harvesting. Ally Invest doesn’t offer tax-loss harvesting, a tax minimization strategy that involves selling loss-making investments to reduce your tax bill. Ally Invest does offer a tax-efficient portfolio option (the Tax Optimized Portfolio), but that option is not socially responsible.
Compare robo-advisors with sustainable options
Ally Invest Socially Responsible Managed Portfolio
The default allocation to cash is too high, but you can change it. Ally Invest Managed Portfolios initially recommends a free portfolio that puts 30% of your assets in cash. The cash in the account earns interest, and you don’t pay any management fee, but the allocation to cash is too high if you are looking to build wealth and not an emergency fund. You need to select the option to invest your entire portfolio in the market. You will then have to pay a 0.30% management fee, but we still think it’s a much better option for most investors.
You can adjust the risk level of the portfolio. Ally Invest offers several risk profiles, from moderate to aggressive. For example, the Growth Portfolio recommends investing 78% of assets in equities.
The allocation to inexpensive environmental, social, and governance (ESG) funds is high. All equity funds are ESG funds, so if your portfolio is 78% invested in equities like the Growth Portfolio, that 78% will be in ESG funds. The expense ratio is among the lowest we’ve seen (0.15% for the Socially Responsible Growth Portfolio).
Ally Invest mostly uses low-cost ESG funds from the iShares family:
- U.S. stocks: iShares ESG MSCI USA ETF (ESGU)
- Developed markets stocks: iShares ESG MSCI EAFE ETF (ESGD)
- Emerging markets stocks: iShares ESG MSCI EM ETF (ESGE)
- Small-cap U.S. stocks: iShares ESG MSCI USA Small-Cap ETF (ESML)
- U.S. bonds (non-ESG): iShares 7-10 Year Treasury Bond ETF (IEF), iShares Intermediate Credit Bond ETF (IGIB), Vanguard Mortgage-Backed Securities ETF (VMBS)
- International bonds (non-ESG): Vanguard Total International Bond ETF (BNDX)
The ETFs Ally Invest picks still invest in fossil fuels. Energy – including utilities – represents 6% of the Socially Responsible Growth Portfolio. However, the Socially Responsible Portfolio owns less energy than the conventional, Core, Portfolio.
This is what the Ally Invest dashboard looks like:
Ally Invest Socially Responsible Growth Portfolio Composition
|Asset Class||Fund||Expense Ratio||ESG Fund?||Allocation||% of Fund in Energy||MSCI Rating||Sustainalytics Rating|
|U.S. Stocks||iShares ESG Aware MSCI USA ETF (ESGU)||0.15%||Yes||42%||5.8%||6.7||4 / 5|
|Developed Markets Stocks||iShares ESG Aware MSCI EAFE ETF (ESGD)||0.20%||Yes||25%||7.2%||8.7||3 / 5|
|Emerging Markets Stocks||iShares ESG Aware MSCI EM ETF (ESGE)||0.25%||Yes||6%||5.6%||7.6||3 / 5|
|U.S. Small-cap Stocks||iShares ESG Aware MSCI USA Small-Cap ETF (ESML)||0.17%||Yes||5%||4.3%||6.1||4 / 5|
|U.S. Treasury Bonds||iShares 7-10 Year Treasury Bond ETF (EIF)||0.15%||No||6%||NA||6.1||NR|
|International Bonds||Vanguard Total International Bond ETF (BNDX)||0.08%||No||6%||NA||6.4||NR|
|U.S. Corporate Bonds||iShares 5-10 Year Investment Grade Corporate Bond ETF (IGIB)||0.06%||No||4%||NA||6.7||NR|
|Mortgage-backed Securities||Vanguard Mortgage-Backed Securities ETF (VMBS)||0.05%||No||4%||NA||NR||NR|
|Portfolio Total||0.15%||78% of Portfolio in ESG Funds||100%||6.1%||7.2||3.6 / 5|
Data as of 6/30/2021
Ally Invest Core vs. Socially Responsible Growth Portfolio comparison
Compared to the Ally Invest Core Portfolio, the Socially Responsible Portfolio invests less in energy and has improved ESG ratings from ESG rating agencies Sustainalytics and MSCI. On the other hand, the socially responsible option is more expensive than the Core Portfolio, costing 0.15% vs. 0.07% for the Growth option.
|Portfolio||Expense Ratio||% of Assets in ESG Funds||% of Assets in Energy||MSCI ESG Score||Sustainalytics ESG Rating
|Socially Responsible||0.15%||78%||6.1%||7.2||3.6 / 5|
|Core||0.07%||0%||7.0%||6.2||2.4 / 5|
Data as of 6/30/2021. Note: assumes 78% stocks / 22% bonds / 2% cash. Fossil fuel exposure and Sustainalytics ratings are for stock funds only.
- Ally Invest Managed Portfolios offer a low-cost ESG portfolio that invests a large percentage of assets in ESG funds
- It’s a good option, especially if you also use their bank and online brokerage
- If you’re a beginner, Acorns offers a similar sustainable portfolio but makes it easier to automate your savings
We compared robo-advisors with an ESG offering based on management fees, ESG portfolio expense ratios, the percentage of the ESG portfolio invested in ESG funds vs. traditional funds, ESG portfolio ratings (from Sustainalytics and MSCI), portfolio exposure to energy, transparency, features like tax-loss harvesting and automatic rebalancing, and access to human advisors.