The platform score is a computed score from 0 to 100 for investment platforms. The goal of the platform score is to highlight platforms that demonstrate continued support for helping people invest for retirement.
Since this is specifically for retirement, the metrics we use to score platforms favor those who encourage long-term, diversified, low-fee, tax-optimized investing – the same criteria we focus on in The Minimal Investor Course. Platforms that encourage day trading will rank lower. Platforms that allow day trading AND retirement investing will be at the top.
Here’s a breakdown of how we score each investment platform. Some of these scores are subjective. That means that Minafi decides the score. Others are objective, which means they’re driven by an algorithm based on facts and can’t be changed. The total score is a combination of some subjective scores and some objective scores.
|Minafi Rating (subjective)||20%|
|Usability Score (subjective)||10%|
|Fee Score (objective)||20%|
|Age Score (objective)||5%|
|Trust Score (subjective)||20%|
|Retirement Score (objective)||10%|
|JD Power Rating (if available) (objective)||20%|
Minafi Rating – We’ll rank each platform on a scale of 1-10, with 0.5 increments. We’ll multiply that score by 2 to generate the percentage out of a possible 20. This is an overall takeaway of this platform with all things considered. A platform may have very high fees and a high rating if they prove them out. Likewise, a low-cost platform might have a low rating if it’s unusable.
Usability Score – How easy is this site to use on a scale of 1-10. A site can be amazing with everything perfect, but you never want to log in you’re not going to want to invest there.
Fees – How much you spend on fees has a massive impact on your long-term investing prospects. Your fees are based on how much you would pay for a diversified portfolio on a $1,000 portfolio, a $100,000 portfolio, and a $1,000,000 portfolio, summed up each year compared to other platforms.
For example, at Vanguard, you would pay a $20 account fee for the $1,000 portfolio, but no account fee after that. You’d pay $0 on Vanguard mutual fund and ETF trades, but would have an average expense ratio of around 0.10%. That gives $21 + $100 + $1,000 = $1,121 in total fees.
We compare that number with other platforms to figure out their “percentile”. If they’re in the 100th percentile, then they have the lowest fees in their category and would get all 20%. If they have the highest fees, they’re in the 0th percentile and would get 0%.
For the expense ratio, we use a few guidelines:
- The average expense ratio of a 3-fund portfolio using this platforms US stock market fund, an international fund, and a general bond fund.
- An additional 0.5% expense each year if this platform encourages day trading (for tax purposes), or lacks retirement account options (again, for taxes).
One caveat here: You could pick individual stocks and have a much lower fee than we estimate. This would be possible if you buy and hold for decades in a platform designed for day trading.
The portfolio used for fee purposes looks like this:
- Under $200,000 invested
- A target-date fund that’s 30 years away.
- Over $200,000 invested
- 50% US Stock Market Index Fund
- 30% International Index Fund
- 20% Total Bond Fund
For each, I’ll choose the lowest cost index fund that’s either: recommended by the platform, or that I can purchase through their exchange.
If a platform doesn’t have its own funds (Robinhood, Webull, etc), then we’ll use a constant expense ratio of 0.25%. Yes, it’s possible to get lower fees if you put all your money into a fund like $VTI. Many people getting started will try lots of things before eventually settling on a long-term portfolio. This expense represents that uncertainty & education when a platform doesn’t help get you there.
For example, here’s a look at the funds used for Vanguard and Fidelity.
|Target-Date Fund||$VFIFX (0.15%)||$FFFHX (0.75%)|
|US Fund||$VTSAX (0.04%)||$FZROX (0%)|
|International Fund||$VTIAX (0.11%)||$FZILX (0%)|
|Bond Fund||$VBTLX (0.05%)||$FXNAX (0.025%)|
|Under $200k fees||0.15%||0.75%|
|Over $200k fees||0.063%||0.025%|
Based on these fees, we create a matrix of how much it would cost to invest on these platforms at different investment levels ($1k, $100k, $1m) and 3 different time horizons (1y, 10y 30y) with a consistent 7% a year growth.
Given that, we can see how this platforms fees compare at different prices points and different time horizons. Take a look at these two examples:
Given this matrix, you can see the estimated fees and expenses for investing $1,000 for 1 year would be $4. On the opposite end, investing $1,000,000 for 30 years would result in $247,687 in fees and expenses.
Unlike the first matrix, this one has much higher fees on the low end, but lower fees once you have more invested. Depending on your time horizon and how much you have invested, this can help you figure out which would cost you the least money.
Company Age – Would you rather give all of your money to a company that was started yesterday or one that was started in 1982? This percentage compares the type of platform (self-guided, Robo advisor, advisor) with others of the same type for their age. The oldest company gets all 10 points, while the newest company would get 0 points. Companies in the middle get a percentage based on their order.
Trust Score – Minafi’s score on a scale of 0 (most shady) to 10 (least shady) for this platform. This takes into account what each platform pushes for its users to invest in, the fees charged for these recommendations, and an overall take on how much this platform is optimized to take your money.
Retirement Score – Minafi’s score on a scale of 0 to 10 for how focused this platform is on helping you invest for retirement. This takes into account what types of retirement accounts they offer, what investments they encourage purchasing, whether they recommend day trading or other activities that might result in higher taxes.
Trust score also takes into account decisions made by the company over time that impact investors on its platform. Does this platform have a history of shady decisions that limit choices? Have they adjusted prices upward? Do they encourage you to make more trades so they can make money? All of these contribute to a platforms trust score.
What is a Good Rating?
Minafi ratings are constantly changing as we learn more about each platform. It’s possible to use the lowest-rated platform and invest in the same things as the highest-rated platform.
Ratings aren’t proportional. Comparing a platform with a score of 80% with another with a score of 40% doesn’t mean one platform is twice as good as the other.
Instead, look at most platforms in the same +/- 10% as having similar characteristics. For example, M1 Finance and Betterment have similar scores, but very different offerings.
These scores are purely for educational purposes and does not imply an endorsement for any platform.