As the number of online advisors increases, so called robo-advisors are becoming more mainstream in this world. These types of advisors are great for those looking for financial advice at a low cost. See other investment promotions here.
As opposed to a human analyzing socially responsible investment portfolios, giving financial advice, and offering digital financial planning tools, robo-advisors are online tools programmed with algorithms to build the right portfolio for your profile.
What Is A Robo-Advisor?
A robo-advisor is an online, automated portfolio management service. Companies use a set of specific computer algorithms for appropriate investments based on your risk tolerance and time horizon. Then, an accurate investment portfolio is automatically set to fit your finance needs and realistic wishes.
It’s the middle option between doing it yourself and hiring a human financial advisor. Robo-advisors are perfect for those who prefer to be mostly hands-off with their investments. Essentially, you’ll be paying a fraction of the cost of a human financial advisor. With lower-cost management and features, such as automatic portfolio rebalancing and tax-loss harvesting, investors can enjoy higher net returns.
Once your funds are invested, the robo-advisor makes changes to your investments when it sees fit and aligns your portfolio back to a target allocation for you. Many will purchase exchange-traded funds on your behalf. Just tell your robo-advisor your financial goals and how much risk you’re willing to take. Then, sit back and let your money go to work with minimal effort on your part.
Why Use Robo-Advisors?
Robo-advisors aren’t free, but they costs much less than hiring a human financial advisor. They’ll also perform difficult tasks like tax optimization and portfolio rebalancing automatically. This means you can receive higher net returns.
If you want minimal involvement in your investments and you like the idea of someone else doing all the work for you, a robo-advisor may be just what you need. It’s a good option if you don’t have enough to hire a human financial advisor and your financial profile is simple enough to not need the skill of a human financial advisor.
Factors To Consider
Before looking at the best robo-advisors in the market, here are some factors to consider when choosing the right automated investing service for you.
- Management fee. This fee is generally a percentage of your assets with your robo-advisor paid annually. Say your annual return is 8% and your management fee is 0.25%. For that year, your gross return will be 7.75%. This fee is usually deducted from your account balance.
- Expense ratio. This fee goes toward the investments your robo-advisor uses to cover their costs. Examples include mutual funds, index funds and exchange-traded funds (ETFs).
- Account types. Investments generally fall under two categories: retirement accounts and non-retirement accounts.
- Retirement accounts, like IRAs and 401(k)s, have tax advantages for your contributions. However, there are contribution limits and stiff distribution rules.
- Nonretirement accounts, or taxable accounts, don’t have contribution limits or distribution rules.
- Investments. Most fall under two categories: index funds and ETFs.
- Index funds are a type of mutual fund with a portfolio built to match or track the parts of a market index, such as the S&P 500. These index mutual funds provide broad market exposure and low operating expenses.
- ETFs, or exchange-traded funds, track an index, bonds, a commodity or a group of assets like an index fund. ETFs trade like a common stock on a stock exchange and have price changes throughout the day as they are bought and sold. They’re attractive due to their lower fee compared to mutual fund shares and higher daily liquidity.
- Tax-loss harvesting. Sell your investment assets at a loss in order to reduce your tax liability at the end of the year. It’s a complicated strategy, but some robo-advisors can handle it for you.
- Rebalancing. Get your investment portfolio back in order periodically. If you don’t, you encounter added risks as your portfolio becomes heavily weighted by one or several types of investments. Many robo-advisors check for opportunities to rebalance on a daily basis and adjust your portfolio when an allocation varies by a set amount.
- Access to human advisors. For each individual client, the level of access varies from personal advisors to a team of professionals available via email or online chat.
- Assets under management (AUM). More AUM means a more stable company. This also means you can trust it more.
- Socially responsible investing (SRI). This is also known as impact investing or values-based investing. It’s a way for you to align your investment with your values. Companies that don’t promote social good are excluded from SRI funds and portfolios.
Without further ado, here is a list of all the best robo-advisors and their respective reviews.
Best Robo-Advisors
Betterment
| Management Fees
0.25% for Digital Plan |
Minimum Investment
$0 |
Promotion
One year free |
Betterment offers a good place to start for beginner investors as well as more experienced investors. It offers a powerful blend of goal-based tools, affordable management fees and no minimum account requirement.
Betterment costs 0.25% annually. If you need assistance from a human advisor, Betterment can provide you one at the cost of higher management fees.
Pros:
- Best for taxable accounts
- No account minimum
- Fractional shares limit un-invested cash
- Solid goal-based tools
Cons:
- Asset allocation excludes REITs or commodities
- No direct indexing
Wealthfront
| Management Fees
0.25% |
Minimum Investment
$500 |
Promotion
$5k managed free & more with referrals |
Wealthfront is a robo-advisor promoting low fees and automated investing. It specializes on its Modern Portfolio Theory to build portfolios from low-cost ETFs. It offers direct indexing for accounts over $100,000, mimicking ETFs with direct investments to stocks to obtain the most tax-loss harvesting benefits.
Wealthfront is best when you have a taxable account. The service is free for accounts under $5K through the BankCheckingSavings promotion or if you’re referred by a current Wealthfront client.
Pros:
- Best for beginners
- Lower fees
- Easy learning curve
- Daily tax-loss harvesting
- Automatic rebalancing
- Direct indexing on accounts over $100,000
Cons:
- No fractional shares
- No large-balance discounts
Personal Capital
| Management Fees
0.89% |
Minimum Investment
$100,000 |
Promotion
$20 referral bonus |
Personal Capital is an easy-to-use personal financial software that syncs all your accounts into one convenient location. It uses a hybrid robo-advisor experience with free access to a powerful personal finance management platform.
Personal Capital creates summaries of your spending, net worth, and your investment portfolio. Though, pricing for this management service is a bit more expensive than most other robo-advisors on the market due to the added human touch.
Pros:
- Best for those with high assets
- Wealth management service
- Smart indexing
- Dedicated financial advisors
- Great investment tools
Cons:
- High management fee
- High account minimum
Fundrise
| Management Fees
0.85% |
Minimum Investment
$500 |
Promotion
90 days free referral bonus |
Fundrise is an online real estate company, letting average investors buy into private commercial and residential properties by pooling assets via their investment platform. Get access to real estate deals without loading up the whole boat.
However, these distributions are taxed as ordinary income so make sure you take that into account.
Pros:
- Best for real estate investment
- Low minimum investment
- 90-day money-back guarantee
- Diversified portfolio
- User-friendly platform
Cons:
- Fees aren’t transparent
- Must commit to investment
- Tax consequences
Wealthsimple
| Management Fees
0.50% |
Minimum Investment
$0 |
Promotion
$10k managed free for 12 months per referral |
Weathsimple is best for beginners who aren’t familiar with investing. It features no minimum balance requirement, human assistance, and a user-friendly design.
There are many SRI portfolios to choose from if you favor values-based investing. For those working with taxable accounts, Wealthsimple provides free tax-loss harvesting.
Pros:
- Best for socially responsible investment
- Free access to human advisors
- Free portfolio analysis
- SRI options
- Free tax-loss harvesting
- No account minimum
Cons:
- Higher account management fees
- Limited personal finance tools
WiseBanyan
| Management Fees
0% for Basic Plan |
Minimum Investment
$0 |
Promotion
None |
WiseBanyan is a robo-advisor service with no hidden charges. The basic service includes automatic portfolio rebalancing and low minimum deposit.
However, if you want to open an IRA, you must pay a premium.
Pros:
- Free services
- No minimum balance
- Excellent technology
Cons:
- Limited account selection
- Paid tax-loss harvesting
Motif
| Management Fees
0% for Basic Plan |
Minimum Investment
$0 |
Promotion
$10k managed free for 12 months per referral |
Motif is a unique, theme-based and cost-efficient option to a diverse portfolio.
You invest in 20 to 30 stocks or ETFs that share similar characteristics, called “motifs.” You can filter motifs by looking at daily change, one year return, and even popularity.
Pros:
- Best for mixed portfolio
- Pre-built portfolios
- Customizable motifs
- SRI options
Cons:
- Other fees like $4.95 per share and $9.95 per motif
- No dividend reinvestment
- Minimal trading tools
Schwab Intelligent Portfolios
| Management Fees
0% |
Minimum Investment
$5,000 |
Promotion
$100 sign-up bonus |
Schwab Intelligent Portfolios is a fee-free robo-investing service from Charles Schwab.
With plenty of financial services, you have the options of tax-loss harvesting, automatic rebalancing and other tools through Intelligent Portfolios. You can also take advantage of all the other benefits Charles Schwab has to offer.
Pros:
- Best from a major brokerage firm
- Low cost
- Diversified portfolios
- Access to financial advisors
- Dutomatic rebalancing
- Tax efficient
Cons:
- High minimum investment
- High cash allocation
- Tax-loss harvesting not available for investments lower than $50,000
Schwab Intelligent Portfolios Full Review
Vanguard Personal Advisor Services
| Management Fees
0.30% |
Minimum Investment
$50,000 |
Promotion
None |
Vanguard Personal Advisor Services is backed by the trusted Vanguard brand.
You can access human financial advisors via phone. However, the minimum investment requires a whopping $50,000, which usually does not apply to beginner investors.
Pros:
- Best backed by human financial advisors
- Great for advanced users
- Personal advice
- Complex financial planning
- Access to Vanguard Funds
- Savings on taxes
Cons:
- High account minimum
- No tax-loss harvesting
- Possible transaction fees
Vanguard Personal Advisor Services Full Review
Blooom
| Management Fees
$10 per month |
Minimum Investment
$0 |
Promotion
None |
Blooom helps manage the complicated task of picking the right funds for your situation from within your 401(k) plan easy with online access.
It’s easy to use and can work with almost any account that has online access. However, this robo-advisor service only works with 401(k) and 403(b) plans.
Pros:
- Best for 401(k) management
- No account minimum
- Free analysis
- Investment expense audit
- Financial advisors
- Low cost
Cons:
- Limited investor assessment
- Aggressive allocations
FutureAdvisor
| Management Fees
0.50% |
Minimum Investment
$10,000 |
Promotion
6 months free for Mint users |
FutureAdvisor lets you test their service for free if you’re not sure if you’ll like robo-advisors.
It’s also one of the few that can manage your 529 college savings plan.
Pros:
- Best robo-advisor to manage your 529
- Free tools
- Financial advice
- Financial advisor support
Cons:
- High account minimum
- High management fee
- Maximum age restriction
Fidelity Go
| Management Fees
0.35% for Retirement Accounts Up to 0.40% for Taxable Accounts |
Minimum Investment
$10,000 |
Promotion
None |
Fidelity Go features another investment powerhouse entering the robo-advisor market. The pricing is transparent. Plus, if you have an existing account with Fidelity, it could turn into a one-stop investment shop.
However, Fidelity Go lacks some of the features that other robo-advisors have to offer.
Pros:
- Best for Fidelity clients
- Seamless multi-account viewing
- Investment research for Fidelity customers
- Low “all-in” annual costs for retirement accounts and taxable accounts
Cons:
- No tax-loss harvesting
- Only basic goal tracking offered
SigFig
| Management Fees
0.25% above $10k Diversified Income Portfolio fee: 0.50% |
Minimum Investment
$2,000 $100k for Diversified Income Portfolio |
Promotion
First $10,000 managed free |
SigFig features a modest minimum investment of $2,000 and no management fees up to a $10,000 investment.
This robo-advisor fits the bill for investors looking to dip their feet into automated investing.
Pros:
- Free-to-use portfolio tracking feature
- Complementary portfolio reviews from financial advisors
- No management fee under $10,000
Cons:
- High Diversified Income Portfolio fee at 0.50%
- Limited investment platform options (only Fidelity, Charles Schwab or TD Ameritrade are available)
