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Financial investing isn’t just for the wealthy anymore, thanks to — you guessed it — technology. Having a robo advisor is the wave of the future, say investment experts, and they’ll transform the way younger generations (even some Baby Boomers) conduct their financial planning.
In tech-terms, robo advisors are relatively new, but they’ve taken hold and are here to stay. Check out our robo advisor reviews, including features, pros and cons, low annual fees, and more. Keep these sites on your smart financial radar.
Article Overview
- What Is A Robo Advisor?
- Benefits Of Robo Investing
- Our Top Picks
- Terminology
- The Rise Of Robo Advisors (Video)
- More Ways To Grow Your Wealth
Jeff Butler is our financial guru, holding an undergraduate degree in Finance from Malone University. He has a diverse background in small business ownership, accounting, and property management. With his expertise in personal finance, Jeff consults on and reviews our investing and financial content, including this article.
What Is A Robo Advisor?
Robo advisors are online platforms that provide algorithm-driven, automated financial planning services with little to no human supervision. Most robo advisors collect information from an onboarding questionnaire, where clients share their financial situation and future goals. This computer-driven method allows for lower fees than a traditional financial advisor.
These platforms then use the data to offer advice and automatically invest your contributions to assets based on your particular situation and build an investment portfolio for you. Most offer several services, from automatic rebalancing to tax optimization.
While these sites are designed to replace traditional financial planners, many offer access to a human when you have questions — although, you may have to pay an additional fee or have a minimum amount invested.
What Are The Benefits Of Robo Investing?
What’s the point of automated investing when you can just talk to a financial advisor? The benefits can be a huge plus if you don’t have a ton of money to invest and don’t have complex needs. Robo advisors advantages:
- A low-cost alternative to traditional advisors. You can often get the same services at a fraction of the annual flat fee charged by human, financial planners.
- Typically take significantly less capital to start investing. The minimum balance required to open a traditional account is often $5,000, and sometimes much more. Many financial advisors will only take on clients with tens of thousands of dollars in assets to invest. Most robo advisors have small or no account minimum requirements.
- More accessible — they’re available online 24/7.
- Efficient — if you want to make changes to your portfolio, you don’t have to wait on someone else. With robo advisors, you can achieve this with a few clicks online.
Best Robo Advisors
All of the robo advisors we review here are registered with the U.S. Securities and Exchange Commission (SEC). If you need a primer on a few of the terms that we include in our reviews, jump to our investment terminology section.
We chose our top picks based on several factors: the variety of investment accounts, low-risk investment strategy, automated services offered, annual fees, minimum account requirements, company reputation, customer support, and more.
Winner: Betterment Review
Betterment is the oldest and largest true robo advisor with more than 330,000 customers and $13 billion in assets. With a low 0.25% annual fee and no minimum balance required, Betterment is an excellent option for beginners and seasoned investors alike.
For each of your financial goals, Betterment recommends a specific stock-to-bond allocation designed to reflect the total world market to maximize expected returns while minimizing risk. You can also select from three other portfolio strategies to match your investing views:
- Betterment SRI, a socially responsible portfolio strategy
- Goldman Sachs Smart Beta, a factor-based portfolio strategy
- BlackRock Target Income portfolios, five different bond portfolios targeting cash income
Betterment also runs a portfolio analysis across all your accounts, even those held at other companies, to help you assess your overall financial strength and goals.
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Price
Digital Plan
- 0.25% annual management fee
- $0 minimum balance
- Customer support via phone, email, and app
Premium Plan
- .40% annual fee
- $100,000 minimum balance
- Phone access with CFP professionals
- View all prices
Runner-Up: Wealthfront Review
Wealthfront is the second biggest player in the robo advisor industry, just behind Betterment. They manage $10 billion in assets. Their primary goals are to minimize risk, taxes, and fees. Wealthfront uses an investment model called Path, which was developed by a team of Ph. D.s, to help you reach your goals.
With Path, you can set goals for retirement, college, home purchase, and other needs. Wealthfront also gives you overall personal financial advice by periodically analyzing all of your accounts (external savings, banking, mortgage accounts, and more).
Like many other robo advisors, Wealthfront invests in ETFs (which include U.S. stocks, foreign stocks, emerging markets, dividend stocks, real estate, and natural resources) as well as emerging markets bonds, Treasury inflation-protected securities, and U.S. government, corporate and municipal bonds.
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Price
- 0.25% annual management fee
- $500 minimum balance
Runner-Up: Wealthsimple Review
Wealthsimple, a Canada-based service, opened its doors to U.S. citizens in early 2017. They now manage 100,000 clients and more than $2 billion globally and have $165 million in backing from the Power Financial Group, a leading financial holding company.
Wealthsimple stands out for its no minimum balance, automatic rebalancing, dividend reinvesting, tax-loss harvesting, and free access to human financial advisors no matter how much you invest. They invest your funds in a diversified portfolio of ETFs that focus on low-cost index funds.
With Wealthsimple, you also have the option for socially responsible funds, including halal investing products, which comply with Islamic law. Compared to other companies, however, their annual fees are on the high side.
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Price
Wealthsimple Basic
- 0.50% annual management fee
- No minimum balance
- Free access to financial advisors
Wealthsimple Black
- 0.40% annual management fee
- $100K minimum balance
- Free access to financial advisors
- Increased tax efficiency
- VIP airport lounge access
- View all prices
Honorable Mention: Charles Schwab Review
Charles Schwab, one of the largest investment companies in the U.S., rolled out its Schwab Intelligent Portfolios product several years ago to meet the high demand for automated investing and now manages $23 billion in robo advising accounts.
With this robo advisor, you have the confidence of investing with a trusted, big-name company and 24/7 access to their professional financial advisors. While they charge no advisory or management fees, you must open an account with a $5,000 minimum balance. You also don’t get tax-loss harvesting until your portfolio hits $50K.
Schwab Intelligent Portfolios may not be the best for beginners given their minimum portfolio amount, but if you can start at $5,000, they’re an excellent option.
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Price
- No management fees
- $5,000 minimum balance
- Access to human advisors
Other Top Robo Advisors
Although the following companies didn’t make our top picks, each has something unique to offer investors, so be sure to read these reviews.
Ellevest Review
Ellevest is a unique robo advisor that markets to women (men are welcome, as well). They offer a unique algorithm that adjusts portfolios based on gender differences in pay, career breaks, lifespan, and other factors. The platform also invests in companies that empower and advance women.
Standout features include a customizable portfolio mix of ETFs, low fees, free analysis and tracking of existing 401(k) plan assets and other financial accounts, and free access to financial advisors. Ellevest, however, doesn’t include tax-loss harvesting and instead uses a different tax-minimizing strategy.
In addition to long-term investing, Ellevest also helps you achieve short-term financial goals, e.g., emergency fund cash management and saving for a home down payment.
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Price
Digital Plan
- 0.25% annual management fee
- $0 minimum balance
- Access to human financial advisors
Premium Plan
- 0.40% annual management fee
- $50K minimum balance
- 1:1 access to CFPs
- View all prices
SoFi Review
Online lender SoFi jumped aboard the robo advising bandwagon in 2017 with some pretty enticing features with SoFi Invest, especially for beginners and young investors.
We’re talking no management fees up to a $10K portfolio, a low $100 account minimum, free access to financial advisors, complimentary career and salary coaching, exclusive rates on SoFi loans, and more. If you have existing loans at SoFi, you’ll enjoy no fees no matter your portfolio size.
SoFi builds portfolios from a broad mix of ETFs that follow over 20 indexes and include U.S. stocks, international stocks, high yield bonds, real estate, short-term treasury bonds, and the stock markets of many countries and regions.
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Price
- 0% management fee for under $10K (and for current SoFi borrowers)
- 0.25% management fee for $10K+
- $100 minimum balance
Vanguard Review
Vanguard Personal Advisor Services is best for intermediate to advanced investors who require more complex financial planning. The hefty $50,000 minimum balance alone makes it less than ideal for beginners.
However, this hybrid robo advisor is a fantastic option if you can afford it. You get a high level of access to human advisors, along with advanced online tools and a broad pool of securities (not just ETFs). With this platform, you can also be more hands-on with investment strategies than other robo advisors.
Vanguard Personal Advisor Services isn’t as high-tech as other platforms and relies more on the client-advisor relationship. For example, tax-loss harvesting isn’t automated but rather done on a client-by-client basis.
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Price
- 0.3% account management fee
- $50,000 minimum balance
- Access to human advisors
Investment Terminology
- ETFs: Exchange Traded Funds (ETFs) are investments that are similar to mutual funds but trade like individual stocks. Like mutual funds, ETFs are diversified, managed baskets of many different securities. Unlike mutual funds that can only be traded at the end of the day, ETFs can be traded throughout the day like individual stocks. ETFs incur lower trading fees and taxes than traditional mutual funds.
- Rebalancing: This practice involves periodically buying and selling assets in a portfolio to maintain the desired level of asset allocation in a diversified fund. Diversified funds combine a balance of stocks, bonds, and other types of investments and protect you against risky losses associated with investing money in a majority of one type of investment. Ultimately, you want a mix of funds that aren’t affected by the same factors and timing of the market.
- SIPC: The Securities Investor Protection Corporation (SIPC) is a non-profit corporation that provides account protection to customers of registered broker-dealers. SIPC doesn’t cover losses from declining investment values, but it protects investors against losses resulting from the failure of a brokerage company. SIPC meets claims up to $500,000, including a maximum of $250,000 for cash claims.
- Socially Responsible Investing (SRI): SRI refers to portfolios that enable you to grow your money while investing in industries that don’t negatively affect the environment and people. This includes companies that produce or invest in gambling, weapons, tobacco, harmful environmental practices, or socially unjust practices.
- Tax-Loss Harvesting: In basic terms, tax-loss harvesting means selling securities that are now worth less than what investors paid for them. By realizing (or “harvesting”) a loss, investors can offset taxes on both gains and income. The sold security is replaced by a similar one, maintaining an optimal asset allocation and expected returns. Under current tax law, you can offset up to $3,000 of income and capital gains each tax year.
Is Robo Advising Changing The Investment World?
Experts predict that the use of robo advisors will continue to grow, causing a significant shift in the way people plan financially. Check out this brief video to learn more.
Other Smart Online Finance Tools And Guides
Need a better way to manage your family’s finances (including investments)? Be sure to read our reviews of the best personal finance software, including pros, cons, features, and more.
Want to learn more about financial planning products, be sure to read our guide on the types of retirement funds and types of life insurance to help you understand the benefits and drawbacks of each.
Finally, if you’re investing to save up for a home down payment and are a fan of online financing, you may want to consider one of our best online mortgage lenders.
Disclaimer: Investment products are not insured by the FDIC or any government agency and carry a certain degree of risk, including the risk of loss of principal. The information provided is for reference only and is not intended to be investment advice. Please consult with your professional financial adviser before purchasing any investment or insurance product.
Tagged With: Comparison, Investing
