Finhabits Review: An Investing App for Latinos

Finhabits is a bilingual money app designed for Latinos’ financial success. Learn if it’s the best investing app to meet your goals.

SustainFi   Updated November 29th, 2021

Rating: Good (3.5 / 5)

Summary

  • Minimum balance: $20
  • Monthly fee: $3/month on each $7,500

Pros

  • Low minimum investment
  • Easy to use for beginners
  • Available in Spanish
  • A certified B Corp with a social mission
  • Good mobile app rating (4.6 in the App Store)

Cons

  • Fees are high as a percentage of assets
  • Investment selection is too conservative for most investors
  • No environmental, social, and governance (ESG) options
  • No human advisor option
  • No tax-loss harvesting

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Summary

SustainFi Rating:3.5 / 5
Account minimum$20
Management fee$3/month for each $7,500
Investment expense ratio 0.12% on average
Accounts supported• Individual taxable investment accounts
• Traditional and Roth IRAs
• 401k rollovers
Human advisorsNo
Tax-loss harvestingNo
Automatic rebalancingYes
FeaturesAvailable in Spanish
Best for• Beginners
• Investors who want content in Spanish

What is Finhabits?

Finhabits is a platform for Latinos to invest, save for retirement, and buy health insurance, offered in English and Spanish. It was founded by Carlos Garcia, who was frustrated because he thought that the Latino community wasn’t investing and saving enough.

Aimed at beginner investors, the Finhabits app is a robo-advisor that will invest the money in your taxable investment or tax-advantaged retirement account in low-cost exchange-traded funds. Finhabits also lets you pick a health insurance plan and provides a library of educational materials (in Spanish only).

Founded in 2015 and based in New York City, Finhabits manages over $65 million in assets. According to Crunchbase, it raised $8 million from investors.

Finhabits is a certified B Corp, promising to balance purpose and profit. Although at this time it doesn’t let you invest in environmental, social, and governance (ESG) funds, Finhabits has a clear social mission of helping the 60 million Latinos in the U.S.

Finhabits account types

Finhabits supports the following account types:

  • Individual taxable investment accounts
  • Individual retirement accounts (traditional and Roth IRAs)
  • 401(k) Rollovers or IRA Transfers

Finhabits account minimum

You can start investing with just $20. Finhabits asks you to make automatic contributions of $20 each week, so you can grow your savings.

Finhabits fees

Finhabits charges $3 per month for each $7,500 in your account for managing your investments. Other custodial fees may apply. $3 each month may not seem like a lot but $36 a year on $7,500 is 0.48%, which is higher than what most robo-advisors charge. Betterment and Wealthfront only charge 0.25% of your assets, and M1 Finance is free.

And if you have less than $7,500 invested, the fees are even higher as a percentage. So if you invest only $1,000, you pay a staggering 3.6% each year. In comparison, most human financial advisors charge 1% (though they won’t work with low account balances.)

On top of the Finhabits management fee, you need to pay the expenses of the funds where Finhabits invests your money. According to Finhabits, the average fund expense ratio is 0.12% per year ($12 on a $10,000 investment.) This is very reasonable. The money goes to the fund manager, not to Finhabits.

Compare robo-advisors with sustainable options

Broad, Climate, and Social Impact Portfolios

Acorns ESG (Sustainable) Portfolio

Responsible Investing Pies

Socially Responsible Personal Strategy

Fees

0.25%

Fees

$3-$5/month

Fees

$0 ($125 for M1 Plus)

Fees

0.49%-0.89%

Minimum

$10

Minimum

$5

Minimum

$100

Minimum

$100,000

How Finhabits invests your money

Finhabits will put your money into low-cost ETFs from asset managers like Vanguard and BlackRock. The app recommends three types of portfolios with different risk levels, from Conservative to Aggressive.

  • Conservative portfolios, which invest more in bonds and less in stocks, had a historical annual return of 2-3%. These portfolios are risk-averse and a better choice for short-term goals like paying for a vacation.
  • Aggressive portfolios had a historical return of 6-8%. These portfolios are more suitable for long-term goals like retirement or a college fund. If you don’t need the money soon, you can withstand more volatility, and if the market drops, there is time for your portfolio to recover.
  • Moderate portfolios are somewhere between aggressive and conservative portfolios.

Expected portfolio returns rely on historical data, and future performance is not guaranteed and may vary. No robo-advisor can guarantee a specific return.

However, we have found that the Aggressive portfolio actually appears very conservative. The aggressive option invests 40% of your money in bonds and would be considered risk-averse by most other robo-advisors. It is probably not a good choice for anyone under 40.

Here is the snapshot of how the Aggressive portfolio is invested:

Although Finhabits has a social mission, they keep things simple and don’t currently offer an option to invest in socially responsible or environmental, social, and governance (ESG) funds.

Instead, Finhabits offers the following low-cost funds from major ETF providers like Vanguard and BlackRock:

Finhabits will automatically rebalance your portfolio (if one type of investment outperforms and the mix strays too far from your goals.) They will also reinvest the dividends your investments receive.

How to sign up

To sign up, which you can do via the app or on your computer, you need an email address, mobile phone number, a Social Security number, a residential address, and a U.S. bank account.

Then you select your goals, such as building an emergency fund, saving for retirement, or growing your wealth. Your answers here determine how risky your portfolio is going to be. (Higher risk should result in a higher return.)

Finally, you will need to link your bank account to deposit funds in your Finhabits account.

Is Finhabits safe?

Finhabits is registered with the Securities and Exchange Commission (SEC), a government agency that oversees the activities of financial professionals.

In addition, Finhabits has partnered with Apex Clearing Corporation, which acts as the custodian of your account. As a result, your account is protected by the Securities Investor Protection Corporation (SIPC) for up to $500,000, including $250,000 for cash claims. This doesn’t protect your investments from going down in value – you can still lose money if the market drops. But you are protected if Finhabits goes out of business.

💰 Takeaway

  • Finhabits is best if you are a beginner and like the simplicity of the app and the educational materials in Spanish. However, fees, which are much higher than what other robo-advisors charge, can add up. Besides, Finhabits doesn’t offer any sustainable investing options
  • If you are looking for sustainable/ESG investments, check out Acorns
  • If you want personal advisor access, consider Personal Capital
  • If you know what you are doing and want to build your own portfolio, M1 Finance could be a good option

Finhabits alternatives

Here’s how Finhabits stacks up against two other robo-advisors, Acorns (which also targets beginners) and M1 Finance, which targets self-directed investors:

Minimum investment

 $20

Minimum investment

 $100

Minimum investment

$5

Management fee

$3 / month for each $7,500

Management fee

None

Management fee

$3-5 / month

ESG option

None

ESG option

Responsible Investing "Pies"

ESG option

ESG (Sustainable) Portfolio

Individual stocks

No

Individual stocks

Yes

Individual stocks

No

Margin loans

No

Margin loans

Yes

Margin loans

No

NOT INVESTMENT ADVICE. The content is for informational purposes only; you should not construe any such information as investment advice.

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