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.”
What Are Robo-Advisors?
Robo-advisors are advanced algorithms that review your financial and demographic profile, such as your age, income, existing assets, retirement and other financial goals, and risk tolerance. They then propose an asset allocation appropriate to you, which you can approve or tweak.
Rather than picking individual stocks, robo-advisors diversify your investments across a range of exchange-traded funds (ETFs). These passively managed funds tend to have low fees (expense ratios), so you don’t lose money to mutual fund managers. That gives you broad exposure to stocks in many countries, sectors, and market caps.
Once you’re happy with the proposed investment 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.
The automated, hands-off approach means you rarely have to spare a thought to your investment strategies or worry about an underdiversified portfolio.
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 advisor 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.
Technically, Betterment offers a third “free plan,” but it doesn’t include robo-advising features. It only includes checking and saving account features.
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.
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 $5.
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 its 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. Wealthfront automatically monitors your accounts for excess cash and transfers balances you don’t need to your choice of account.
Unfortunately, Wealthfront falls short on the human component. It doesn’t offer a hybrid option or human advising, even for their higher-balance investors.
But its Self-Driving Money™ partly makes up for this drawback by effortlessly allocating funds incoming to users’ cash accounts toward near-term bills, emergency reserve and other savings goals, and long-term investments as per the personalized financial rules they set for the platform.
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 balance to open an account.
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, $3, or $5, 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. However, its Acorns Early program does let you invest in UGMA and UTMA accounts for your child’s education costs.
Acorns does automated saving and investing extremely well. Just don’t expect flexibility or personalization.
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 an account minimum of $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.
Best Fit For: Non-accredited investors who want to invest like a hedge fund
Want to invest like the wealthy without having to actually be wealthy?
Titan monitors how Wall Street hedge funds are currently investing and mimics it for your investments. They’re not a fund themselves but operate like a robo-advisor: You own the stocks in your own account.
It makes for a more aggressive, less diversified investing approach than most robo-advisors. They pick just 20 individual stocks rather than broad-market index funds and sometimes short these stocks.
They also charge more for their aggressive advising service than most robo-advisors. Titan charges 1% of all assets under management — low compared to hedge funds, but high for a robo-advisor. I don’t love that their website doesn’t make their fee structure easier to find.
I do like that Titan only requires $100 as a minimum investment, or $500 for retirement accounts. They offer several tax-advantaged accounts, including traditional, Roth, SEP, and SIMPLE IRAs, and accept rollovers from 401(k) or 403(b) accounts
The bottom line: Titan offers a unique and more aggressive take on robo-advising, aiming to beat the stock market rather than mirror it. Consider them in addition to a more traditional robo-advisor, but don’t put all your eggs in their basket.
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 bills. 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.
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.