Historically, one enormous advantage the wealthy had over the rest of us was access to expert investing advice. They didn’t need to be experts on stocks or market movements or investing — they could pay someone to “just take care of it.”
Today, everyone has access to expert investing advice. Just not necessarily from a human investing advisor.
Robo-advisors are advanced algorithms that review your financial and demographic profile, such as your age, income, existing assets, retirement goals, and risk tolerance. They then propose an asset allocation appropriate to you, which you can approve or tweak. Once you’re happy with the portfolio, the robo-advisor does the rest, from helping you set up automated recurring contributions and investments to rebalancing your portfolio regularly to adjusting your asset allocation automatically as you get closer to retirement.
How Do Robo-Advisors Differ From Human Advisors?
Human advisors holistically discuss your long-term financial goals, your risk tolerance, and your demographic details (like age and income) with you. They propose an individualized investing plan and then take over the management of your investments.
At a price, of course. Most charge between 1% and 2% of your assets under management (AUM) every single year. And because they charge a percentage, they only work with clients who have a significant amount to invest, usually in the $50,000 to $250,000 range at a minimum.
Robo-advisor services excel at helping investors choose assets to invest in and automate everything, from regular contributions to the purchases themselves to automatic rebalancing. And they do it with low fees — in many cases, for free.
Most don’t require a high minimum to invest, either. Some, like SoFi Invest, require only a single dollar. That makes them available to anyone, regardless of income or wealth.
That said, while they do an excellent job of proposing broad ETF investments and automating their management, they can’t do everything a human advisor can do. They can’t talk you off the ledge when you start panicking and want to sell all your stocks in the middle of a bear market slump. They can’t talk you through how to structure your investments for optimum estate planning. And they can’t discuss your finances with you on a holistic level, pointing out that you overspend on restaurant meals and urging you to boost your savings rate.
How to Choose a Robo-Advisor
There’s no one perfect robo-advisor for everyone. Different services cater to different types of investors, so you need to decide on your priorities.
Some robo-advisors charge no management fees and offer only limited flexibility. Others offer all the bells and whistles you could ask for — and charge accordingly. They also tend to require a high minimum investment, sometimes in the six figures.
As a general rule, the more flexibility and human interaction a robo-advisor offers, the more they charge. Most offer a completely automated option at a lower price point and a human hybrid investing service for a higher cost. Investors just starting probably don’t need much flexibility. The more wealth you have to invest, the greater your needs and the more flexibility you likely want.
One area of distinction among robo-advisors lies in the types of accounts they service. Rather than just a taxable brokerage account and IRA account, some robo-advisors service 529 plans, trusts, and 401(k) advising.
Higher-end robo-advisors also offer tax-loss harvesting, allowing investors to adjust their portfolios to reduce their tax bill. That’s a vital feature for higher earners.
Some robo-advisors also offer a socially conscious investing option, which is significant to many investors.
Ultimately, your ideal robo-advisor comes down to your priorities and how much you have to invest.
The Best Robo-Advisors
Different robo-advisors design their options for different types of investors. Some are ideal for lower-net-worth investors, while others cater to wealthier individuals and offer more human oversight and premium features.
First and foremost, keep your own needs in mind, as there’s no perfect robo-advisor for everyone. And remember, as you build wealth, you can move your portfolio to more flexible and advanced advisory services.
Best Fit For: Investors looking for a well-rounded robo-advisor; socially conscious investors
Robo-advisor Betterment continues to dominate the market, and for good reason. It remains among the best providers across the board.
For added flexibility, Betterment offers two options: digital and premium. Betterment’s digital offering is entirely automated, while the premium is a hybrid option with access to human investment advisors.
And Betterment’s priced the plans accordingly. Digital charges 0.25% of AUM, while premium charges a still-reasonable 0.40%. However, to qualify for the premium plan, you must invest at least $100,000 — a big leap from the $0 minimum requirement for a digital plan.
At the premium level, investors can also tweak their asset allocation as they see fit.
Betterment does offer a socially responsible investing option for conscientious investors. Its automatic rebalancing is more aggressive than most, rebalancing daily or if your balances shift more than 3% from their targets.
In that rebalancing, Betterment can buy fractional shares for your accounts so your money doesn’t sit around in cash waiting until you have enough to buy another full share.
It offers 401(k) advising and trusts, but not 529 plans. To serve higher-income investors, it also offers tax-loss harvesting.
2. SoFi Invest
Best Fit For: Cost-conscious entry-level investors
One of the newer kids on the robo-advising block, SoFi stands out because it offers completely free advising. That’s right: 0% annual management fee and $0 in transaction commissions.
Making its free service all the more incredible is that it offers human advising on top of it, which it includes with their free account. And it’s open to anyone with a minimum investment of only $1.
SoFi also offers more investment options than many robo-advisors. Its automated rebalancing works well. Every time you contribute money, it invests it where needed to balance your portfolio. Your asset allocation shifting by more than 5% out of alignment also triggers rebalancing.
Where SoFi falls short is their lack of certain account options. It doesn’t offer 401(k) advising or account options beyond brokerage and IRA accounts. It also doesn’t yet offer tax-loss harvesting, making it a less attractive option for wealthier investors taxed at higher rates.
Best Fit For: Investors who want to automate their work-based retirement accounts
Blooom works a little differently than your average robo-advisor.
Instead of directly holding your investments for you, Blooom connects to your existing brokerage or retirement account and reviews your asset allocation. They then make trades within your account automatically on your behalf.
Why pay Blooom to manage your investments and rebalance your portfolio rather than simply opening an account with a traditional robo-advisor? Because unlike most robo-advisors, Blooom charges a flat fee rather than a percentage-based advisory fee.
And those flat fees remain affordable. The lowest option is under $100 per year, and even their most expensive option is cheaper than the alternatives — especially since it gives you access to human financial planners.
Best Fit For: Investors who want complete automation and don’t need to speak with a human advisor
Another major player in the industry, Wealthfront offers excellent financial planning tools to help investors plan for significant life events like buying a home, getting married, or retirement.
Its management fee is low at 0.25%, and its minimum investment is a reasonable $500. To encourage new accounts, it waives the management fee for portfolios up to $5,000.
Like most robo-advisors, Wealthfront offers automatic rebalancing, but what really shines is its direct indexing feature, which helps with tax-loss harvesting. For accounts with over $100,000, it buys individual stocks on your account rather than just index funds, allowing for precision sales for tax-loss harvesting.
Adding to the flexibility, Wealthfront allows trusts and 529 plans in addition to brokerage accounts and IRAs, plus 401(k) advising.
Unfortunately, Wealthfront falls short on the human component. It doesn’t offer a hybrid option or human advising, even for their higher-balance investors.
Read our Wealthfront review for more information.
5. Schwab Intelligent Portfolios
Best Fit For: Investors looking for a well-rounded robo-advising service for free or human advising for a flat fee
Better known as a low-cost brokerage firm, Charles Schwab recently entered the robo-advisor space with a novel and competitive approach.
It threw out the traditional model of charging a percentage of AUM. Instead, it offers two options: Schwab Intelligent Portfolios and Schwab Intelligent Portfolios Premium. The standard option is fully automated and charges no management fee or commissions, although it does require a $5,000 minimum investment.
It includes the standard robo-advisor features, such as automated rebalancing. Surprisingly, Schwab also includes some more advanced features, like tax-loss harvesting, in this free account, but only for investors with over $50,000 under management.
For their premium option, Schwab charges a one-time onboarding fee of $300 plus a flat monthly fee of $30. It requires a minimum investment of $25,000. In exchange, investors get unlimited access to a team of human investment advisors with no percentage charged on AUM. Any time you want to speak with a financial planner, you can schedule an appointment.
Schwab does allow trusts but not 529 plans, and it doesn’t offer outside 401(k) advising as part of its robo-advising service. All in all, its flat-fee approach is a breath of fresh air, and it offers many advanced features without high percentage-based fees.
Best Fit For: Female investors who value a woman-oriented approach over flexible options
Unapologetically pro-woman, Ellevest is designed specifically for female investors. And it does a good job serving them on most counts.
Like many robo-advisors, Ellevest previously offered two tiers of service: digital and premium, offering fully automated and hybrid advising, respectively. But they’ve since updated their pricing to a subscription model, where clients pay a monthly fee ranging between $1 and $9. At the $1 Essential level, you get access to the automated robo-advisor account, a spare-change automated savings account, and educational resources such as online courses and webinars. The $5 Plus level includes access to a robo-advisor IRA, and the $9 Executive level includes multigoal investment accounts. All accounts tailor investment planning based on women’s longer lifespans and other gender-specific needs.
Ellevest eliminated unlimited access to human financial advisors and career coaching services to help their premium clients earn (and consequently invest) more money. To accommodate the low monthly fees, they now charge by the hour, priced according to your membership level. On the plus side, they don’t require a minimum investment.
Ellevest does accept male clients — just don’t expect the gender-tailored experience it provides its female clients.
Unfortunately, Ellevest only allows the most basic account types, with no options for trusts, 529 plans, or 401(k) advising. And it fails to deliver tax-loss harvesting for its higher-earning clients.
Best Fit For: Investors looking to put their savings and investing on complete autopilot.
Breaking the mold for robo-advisors, Acorns combines automated savings with automated investing.
It starts with a checking account and debit card. When you spend money on your debit card, Acorns rounds the purchase up and invests the difference into your brokerage account or IRA. You can also set up recurring automated transfers and other rules for contributing money to your investment account.
Based on your profile, Acorns then invests the money for you as a robo-advisor. There’s no minimum investment and no percentage fee based on your AUM. Instead, Acorns charges a flat monthly fee of $1, $2, or $3, depending on the services you want. To make it even more attractive to young investors, it waives the monthly fee for college students.
It’s a great system, but it has its limitations. Don’t expect higher-end features like tax-loss harvesting or human advising. And it doesn’t offer diverse account types like trusts, 529 plans, or 401(k) advising.
Acorns does automated saving and investing extremely well. Just don’t ask it for flexibility or personalization.
8. Personal Capital
Best Fit For: Wealthier investors looking for a robo-human hybrid model
For wealthier investors, Personal Capital offers flexibility and plenty of human interaction — priced accordingly.
Personal Capital charges a 0.89% annual fee for investors with less than $1,000,000 invested. The more money you have invested with them, the lower the percentage fee, gradually declining to 0.49% for clients with over $10 million invested.
The minimum investment is also high at $100,000. Like Ellevest, Personal Capital knows exactly who its target client is and doesn’t bother trying to serve everyone.
But for these high fees and minimum investment, wealthier investors get more in return than the average robo-advisor offers. Personal Capital offers a wide range of account types, including 529 plans and trusts, and full 401(k) advising.
Personal Capital also excels at tax help, with loss harvesting aided by direct stock ownership.
For all that, Personal Capital’s crown jewel is their human advising. Investors with at least $200,000 under management get two dedicated investment advisors at their beck and call to help them plan their investments and broader wealth management. That means investors can build a personal relationship with their two dedicated advisors and reach at least one of them on any given business day.
Other robo-advisors fail to offer that level of personalized assistance, in part because they charge so much less.
Read our Personal Capital review for more information.
Whether you’re looking for complete automation or more personalized, human-based investing help, robo-advisors can serve you for a fraction of the price of traditional human-only investment advising.
That’s not to say they’re all cheap. The more customization and flexibility you want, the more you typically pay.
If you’re new to investing, start with a free or nearly free option like SoFi, Acorns, or Schwab Intelligent Invest. As you build your portfolio and start wanting more personalized investment advice, you can upgrade to more expensive tailored options.
The crucial step is simply getting started and investing as much money as you can as early as you can. Let the market and compounding do the rest, and your advisor can worry about what to invest in — even if that advisor is an algorithm.
Have you ever used a robo-advisor? Which one, and what was your experience like?