The benefit from TLH caps out at a $3,000 deduction annually (and the loss rolls over to future tax years). For someone in the 35% bracket (fairly high) that's a $1050 annual value. Not huge. Meanwhile, the fees do not have a cap.
$1050 in annual value equates to $420,000 in assets under management with a 0.25% fee rate. So even in a high tax bracket (the best case for TLH), you're losing money with the robo adviser at that level of assets.
(In the 22% tax bracket, that's $660 in annual benefit or a break-even point of only $264,000 in assets before you're losing money. Both of these figures generously assume the robo-adviser can hit that $3,000 of losses every year consistently.)
I think the robo advisors like to advertise the case where clients have about $100,000 under management because it's one of the few points on the curve where their TLH is a value-add after fees.
Of course that assumes users with small account sizes actually have enough losses to harvest, but that seems likely when there is a market downturn like last week.
> Of course that assumes users with small account sizes actually have enough losses to harvest, but that seems likely when there is a market downturn like last week.
Exactly -- small account sizes have fewer losses to harvest. Maybe they see a slight benefit over totally passive investment net of fees, but the magnitude will be small.
And you can easily tax loss harvest without the robo-adviser anyway.