Best Robo-Advisors – 2023

Last Updated on March 10, 2020 by Barbara A. Friedberg, MBA, MS

Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link. That said, I never recommend anything I don’t  believe is valuable

How to Choose the Best Robo-Advisor for You

In this ultimate robo-advisor guide you will discover the best robo-advisors and how to choose the a digital investment manager for you and your unique financial needs. We will answer all of your robo-advisor questions, including:

  • How does a robo-advisor work?
  • How do I choose a robo-advisor?
  • Are robo-advisors worth it?

You’ll learn about about robo-advisor differences, fees, minimums, investments, services and more.

Since we understand that many of you are in a hurry, we’ll start off with a list of our five best robo-advisors.


*Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link.

Which are the Best Robo-Advisors? 

With all the robo-advisors on the market, it’s difficult to settle on just one. Below are 6 favorites here at Robo-Advisors Pro.

1. Betterment – Best Robo-Advisor for Financial Advisor Access

Betterment, launched in 2010, is one of the first robo-advisors on the market. Betterment has two levels, Digital and Premium as well as several fee-based a la carte investing options , making it one of the more affordable and customizable robos available. We like Betterment for its easy and affordable access to financial advisors. Investors with $100,000 can select the Premium option for unlimited access to digital investment management and financial advisors for 0.40% AUM. Digital clients can access can purchase a set number of planning sessions for a one-time, flat fee.

OverviewGoals-based digital investment manager with access to financial advisors, for low fees.
Minimum Investment AmountBetterment Digital - $0.00 ($10 to invest)
Betterment Premium - $100,000
Fee StructureDigital-0.25% AUM for accounts worth $20K or more (or with $250/month auto deposit)
$4 per month AUM less than $20,000
Premium-0.40% AUM
Crypto-1% AUM
Cash-No Fee
Top FeaturesDigital and hybrid investment management (with financial advisors). SRI, income, smart beta and Crypto.
Contact & Investing AdvicePhone week days and email.
Investment FundsLow fee exchange traded funds from diverse asset classes. Crypto portfolios.
Accounts AvailableSingle and joint taxable brokerage. Roth, Traditional, Rollover and SEP IRA. Trust.
Promotions and WebsiteFree account management special promotion.

Betterment Review

2. M1 Finance – Best Robo-Advisor for DIY Investors

M1 Finance is incredibly customizable, which makes it the best robo-advisor for investors who like to take control of their finances and design their own investment strategies. M1 Finance uses a “pie” concept to help investors structure their investments. Clients decide what fractional portions of the pie are allocated to which investments, making this easily one of the most customizable investment strategies available today. You can opt for 60 pre-made expert portfolios/pies or invest in stocks, bonds and crypto.

OverviewFree robo-advisor with opportunity to customize investments. Access to stocks, ETFs crypto and custom portfolios.
Minimum Investment Amount$100 for typical brokerage account. $500 for retirement account.
Fee Structure$0.00 Basic account $125 per year - M1 Plus with added features.
Top FeaturesChoice to use pre-made portfolios or to create your own. M1 Finance manages + rebalances. M1 Borrow + M1 Spend offer lending and banking.
Free ServicesAccount creation, management + rebalancing. Investment trading.
Contact & Investing AdviceEmail or phone 9-5 M-F CT + on-screen help button.
Investments6,000+ stocks and/or ETFs traded on the NYSE, NASDAQ + BATS exchanges. Custom ETF portfolio. Digital crypto coins.
Accounts AvailableIndividual and joint taxable accounts; traditional, Roth, SEP and rollover IRAs; corporate, trust, LLC + partnership business accounts.
PromotionsCurrent promo includes limited interest free loan from M1 Borrow

M1 Finance Review

3. Wealthfront – Best Robo-Advisor for Techies

If you like technology, Wealthfront has you covered. This premier digital investment manager offers various investment portfolios and individual ETFs to customize those portfolios or create your own. The Wealthfront stock account offers fee-free stock trading. A high yield cash account and lending are also available. Clients benefit from Path, a digital financial planner, programmed to answer 10,000+ questions. While daily tax-loss harvesting is useful for those with taxable investment accounts. One of the original robos, Wealthfront also offers cryptocurrency funds. All customer service reps are licensed and competent to answer investment and platform related questions.

OverviewAutomated investment management robo-advisor with ETFs and stock trading
Minimum Investment Amount$500
Fee Structure0.25% of AUM. Zero fees for cash or stock trading account.
Top FeaturesDigital financial planner. Daily tax loss harvesting. Cash account. Loans. Customize with individual ETFs including crypto funds.
Free ServicesFree Path financial planner and portfolio review. Home buying guide.
Contact & Investing AdvicePhone for clients & Email 24/7. Client service reps have Series 7 or CFP designations.
Investment FundsLow fee, diversified stock & bond ETFs. 100+ ETFs. Crypto funds available. Fee free stock trading.
Accounts AvailableJoint & individual taxable. Trust. Traditional, Roth, rollover, and SEP IRAs. 529 College Savings.
PromotionsFree cash bonus for new clients.

Wealthfront Review

4. Ellevest – Best Robo-Advisor for Women

Ellevest is the first robo-advisor designed specifically for women. While anyone, regardless of gender identity, can open an account with Ellevest, this robo-advisor was designed by and for women. This is important because women have many more obstacles to successful investing. They tend to earn less than men because of the gender wage gap and lost earning potential due to childbirth and caretaking, for one. Ellevest is designed to account for the difference in women’s overall earnings and makes recommendations based on these unique challenges.

OverviewAutomated investment management robo-advisor that invests specifically with the needs and challenges of women in mind. Offers financial and career advisors for discounted fees..
Minimum Investment AmountNo minimum.
Fee Structure
Plus - $5 per month

Executive - $9 per month
Top FeaturesGoals based investing, enabling you to invest in portfolios developed for various goals, such as emergency funds, retirement and home downpayment. Tax-minimization strategy. Discounted access to financial planners & career coaches.
Free ServicesFree access to Ellevest Magazine with articles and videos tailored for women’s financial concerns, email courses, live workshops with CFP’s & Executive Coaches.
Contact Live chat, email, phone, or text, Instagram DM and FB Messenger
Investment Funds 21 low-cost, commission-free ETFs primarily from Vanguard. Other fund providers include Barclays, Nuveen, iShares, Charles Schwab and Van Eck.
Accounts AvailableTaxable brokerage accounts, Traditional, Roth, and SEP IRAs. Spend and save cash account with debit card.

Ellevest Review

5. Empower (formerly Personal Capital) – Best Robo-Advisor for Affluent Investors

Empower (Personal Capital) is among the automated investment advisors most similar to a traditional financial advisor. Certified Financial Planners come standard for Empower Advisory Wealth Management investors. Additionally, clients can expect tax-loss harvesting, diverse asset classes, and individual stocks, as well as a comprehensive financial plan. Empower also offers Private Banking with access to estate and tax planning.

The best thing about Empower is that everyone, client or not, has  access to a suite of financial planning tools, such as cash management and retirement and investment planning tools. These free financial tools are comparable to other paid investment management trackers.

OverviewDigital investment management robo-advisor in concert with human financial advisors.
Minimum Investment AmountZero minimum for access to free investment management tools. $100,000 minimum for managed accounts.
Fee Structure0.89% for investments of $1M to $2.9M. Fees decline as assets increase. Low 0.49% for accounts over $10 M.
Top FeaturesFree investment and retirement management tools for all.
For paid users: Certified Financial Planners, full financial plan, individual stocks, diverse asset classes, tax-loss harvesting and cash management.
Free ServicesThe most comprehensive suite of financial planning tools including cash management, investing and retirement planning tools.
Contact & Investing Advice24/7 email access. Phone, video and chat with financial advisors (for paid users).
Investment FundsIndividual stocks, ETFs, low fee bond and alternative asset ETFs. Individual bonds for accounts +$1M.
Accounts AvailableIndividual & joint investment accounts. Roth, traditional, SEP & rollover IRAs. Trusts.
PromotionsFree financial, retirement, and portfolio tracking tools.

Empower (formerly Personal Capital) Review

6. Schwab Intelligent Portfolios – Best Free Robo-Advisor

Schwab Intelligent Portfolios is among a handful of fee-free robo advisors. The Schwab Intelligent Portfolios offers broadly divdersified portfolios which include both market- and fundamentally-weighted investment portfolios. This added diversification is good for those that want a broader asset allocation. Some find Schwab’s requirement to hold 8-`0% cash in high yield cash account a drawback. Although with rising interest rates, cash is now a viable asset class. The Schwab Intelligent Portfolios Premium offers digital investment management plus unlimited access to Certified Financial Planners. Premium requires a $25,000 investment minimum and charges a low subscription price.

OverviewAutomated investment management robo-advisor with basic service and premium. Cash flow income also available.
Minimum Investment Amount$5,000 for Intelligent Portfolios. $25,000 for Schwab Intelligent Portfolios Premium.
Fee StructureZero management fees for Intelligent Portfolios. $30 per month for Schwab Intelligent Portfolios Premium plus $300 set up fee.
Top FeaturesCertified Financial Planners for all Premium Customers. Branch access for all customers. 53 ETFs across 20 asset classes. Monthly income paycheck available for distributions from accounts.
Free ServicesZero management fees for all basic Intelligent Portfolio customers.
Contact & Investing Advice24/7 live phone support, branch access, online live chat, and email.
Investment Funds53 low fee stock and bond ETFs representing 20 asset classes.
Accounts AvailableIndividual, joint, and more types of investment accounts. Roth, traditional, SEP, Simple & rollover IRAs. Trusts.
PromotionsFree account management for basic plan.

Schwab Intelligent Portfolios Review

7. SoFi Automated Investing – Best Free Robo-Advisor With Financial Advisors

SoFi Automated Investing is tough to beat with fee-free investment management, low and no-fee ETFs and access to free financial advisors. You’ll get a customized automated investment portfolio with goal planning, automatic rebalancing, and access to career coaches along with investment advisors. SoFi members are part of a community that includes member events, self-directed investing and various lending alternatives.

OverviewFree automated investment management robo-advisor platform with financial advisors
Minimum Investment Amount$1 to open account - $5 to begin investing
Fee StructureNo management or transaction fees
Top FeaturesLive CFP advisors with personalized service; access to SoFi member benefits; career planning.
Free ServicesFree account management, Financial and Career Consultants, and member benefits
Contact & Investing AdvicePhone, Monday through Friday, Chatbot and email 24/7. Financial advisor by appointment.
Investment FundsDiversified low-fee exchange traded index funds-ETS; stock purchases available through SoFi Active Investing
Accounts AvailableIndividual and Joint taxable accounts; Traditional, Roth and SEP IRAs
PromotionsRegular ongoing promotions

SoFi Automated Investing Review

Finally, all of your robo-advisor questions will be answered here, and you’ll come away understanding if a low-fee digital investment manager is best for you.

What is a robo-advisor?

Robo-advisors are the digital response to traditional human financial advisors. Most robo-advisors use algorithms—a set of calculation rules—to help you manage your money with minimal human involvement. Other robos use algorithms and/or other financial management tools in connection with human financial support.

Though robos have been gaining rapidly in popularity, they’re hardly a new concept: they first appeared around the financial crisis in 2008. Wealthfront, one of our favorites at Robo-Advisor Pros, has been around since 2010. Robo-advisors are not going anywhere soon.

Robo-advisors have very little overhead costs since they are hosted electronically, whereas human financial planners need buildings, lighting, and a livable salary—in short, robo-advisors are able to charge less for similar services. And since they don’t need to sleep, robo-advisors are often “always on” and ready to help you manage your money. This makes them a very appealing alternative to traditional money management as we have known it.

Learn more: Robo Advisor FAQ

how does robo advice work

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How does robo advice work?

If you’re wondering how does a robo-advisor work? you’re not alone.

Robo advice is very similar to traditional financial advice: the robo-advisor performs a series of calculations based on your financial goals, your risk tolerance, and the market conditions. Depending on the robo-advisor you are using, the platform might either make investment decisions for you or a human financial advisor may act as a liaison between you and the robo.

A computer algorithm is created to give you the best investments for your goals, age, and risk-tolerance.

Robo-advisors make investment decisions based on your preferred portfolio allocations as well. Many robos will periodically rebalance your portfolio to ensure that your investments stay in-line with your goals and preferences.

The benefit to using a robo-advisor is that their calculations can be completed very quickly—much faster than a human counterpart, no matter how talented the financial advisor may be. And the robo-advisors computer algorithms aren’t impacted by emotional decision-making.

Learn more: How do Robo-Advisors Work?

What are the main differences between robo-advisors?

Choosing between robo-advisors comes down to deciding what sort of support you need for your investments. There are 8 main differences between robo-advisors. These differences affect how robo-advisors work to manage your money, what options you have in terms of accounts or investment types, and what you will pay for the services you will receive.

1. Robo-Advisor Investment Minimums

Robo-advisors have a very wide range of required minimum investments. Some robo-advisors, like SoFi and Ellevest Digital, do not have minimums. While M1 Finance requires a mere $100 to sign up.

Not all robo-advisors are as immediately affordable to newcomers. Schwab Intelligent Portfolios requires a $5,000 minimum. And while clients can use Betterment Digital with no minimum investment required, they will need a $100,000 minimum investment in order to use Betterment Premium.

The good news is that these robo-advisors represent the extreme ends of the minimum investment spectrum. There are plenty of affordable, low minimum investment robo-advisors on the market.

2. Robo-Advisor Fees

Another difference between robo-advisors is the fees you pay for the services. Just like with investment minimums, the fees charged by robo-advisors can vary from completely free to upwards of 0.90%.

There are many low-fee robo-advisors available, and they are often fairly comparable to the higher-fee alternatives. However, fees alone shouldn’t completely dictate which robo-advisor you choose—you’ll need to determine whether the services provided truly meet your needs.

Learn more: Robo Advisor Fees from Lowest to Highest


3. Robo-Advisor Services

The service that comes standard with all robo-advisors, regardless of fees or minimum investment amounts is portfolio rebalancing.

Portfolio Rebalancing – Nearly all robo-advisors offer portfolio rebalancing, which is performed to keep your portfolio in-line with your preferred allocations. Robo-advisors vary on how frequently they rebalance their portfolios—some may rebalance once a quarter, whereas others will rebalance whenever your portfolio deviates from it’s pre-determined asset allocation percentages.

Tax Loss Harvesting – Many robos also offer tax-loss harvesting. Tax-loss harvesting uses your investment losses to offset any capital gains taxes at the end of the year. Unlike portfolio rebalancing, tax-loss harvesting is not universally available with robo-advisors .

Premium Services – There are also premium services to consider, which are usually available from the robo-advisors with higher fees or investment minimums. Ellevest, for example, offers premium clients a career coaches and financial advisors.

Access to human financial planners is often a premium service as well, with some of the low-fee robo-advisors adding this in only for their Premium—higher balance, higher fee—clients.

SoFi Automated Investing is the only robo-advisor that we’re aware of that provides fee-free half-hour planning sessions with a Certified Financial Planner.

4. Robo-Advisor Advice Options: Human or Robo?

Some robo-advisors completely forego the human touch, relying solely on the robo-advisor algorithms to provide financial support to their clients. M1 Finance and Wealthfront are examples of this approach. Clients of M1 Finance and Wealthfront can access human support for technical issues but should not expect any financial advice from human financial planners. Although, all of Wealthfront’s customer representatives are licensed and can provide basic investment advice along with assistance with the Wealthfront Platform.

Digital robot advisors are adding human assistance more frequently, as clients request it.

Robo-Advisors with Human Financial Planner Access

Robo AdvisorManagement FeeInvestment Minimum
Betterment logoDigital: 0.25% of AUM for accounts worth more than $20,000 | $4.00 for accounts worth less than $20,000 | Premiun: 0.40% AUM Digital None - $10 to start investing | Premium: $100,000Sign up
zero for free tools - 0.89% - 0.49% AUMzero for free tools - $100,000 for asset managementSign up
None$1.00Sign up
0.25% of AUM ($10,000 managed for free)$2,000Sign up
schwab intelligent portfolios logoBasic-None Premium-$30/month ($300 set up fee)$5,000Sign up
ellevest logo$5-$9 per month NoneSign up

5. Investment Approaches: Passive and Active Robo-Advisors

Most robo-advisors rely on a passive investment strategy. Passive investment accounts are usually created with index-matching ETFs that attempt to match the stock and bond market returns.

Research substantiates the passive index fund investment approach and finds that in most cases it is quite difficult for active fund managers to best the returns of the market.

Although, some robo-advisors offer active investment management strategies. While the robo-advisors still rely on their algorithms to calculate investment decisions, just like they do in the passive management strategy, actively managed robo-advisors use human financial professionals to help make decisions and strive to beat the market. Vanguard Digital Investors recently added the option to invest in actively managed as well as passive index funds.

6. Robo-Advisor Account Types

Robo-advisors tend to offer various IRA accounts. Most offer traditional and Roth IRAs, though others provide Simple IRAs, SEP IRAs, and 401(k)s.

It is also common for robo-advisors to offer both joint and individual account options.

If you’re looking for something besides an IRA, you’re in luck: robo-advisors like Wealthfront also include college 529 accounts. Still other robo-advisors offer UTMA and UGMA custodial accounts, business accounts, and trusts.

7. Types of Investments Available for Robo-Advisors

Many robo-advisors use exchange-traded funds, otherwise known as ETFs. The ETFs robo-advisors use include stocks and bonds, and may be limited in their diversification option or incredibly varied, M1 Finance and Wealthfront offers their clients thousands of options.

For religious or socially-aware investors, robos have begun to offer both Halal-compliant and socially responsible investment options. Robo-advisors who offer these sorts of investments favor companies and movements that make a difference in society by promoting sustainable practices and fair treatment of workers.

Finally, still other robo-advisors may offer their clients the opportunity to invest in real estate or commodities.

8. Cash Management and Lending

Convenience is one of the highest selling points for robo-advisors. In order to best serve their clients, many robos offer lending services and high yield cash accounts, typically through partner banks. This prevents clients from having to search around for multiple financial services.

Wealthfront is one of the robo-advisors now offering a portfolio line of credit for investors who need to borrow money for one-time expenses. SoFi, of course, was a lender before becoming a provider of investment services.

The current Wealthfront Cash Account interest rate is 4.55%. The rate will vary based upon market interest rates.

Learn more: What are the differences Between Robo-Advisors?

best robo advisor guide

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Who is robo investing best for?

There are both general and specialized robo-advisors on the market now, making it easy for everyone to find a robo-advisor that fits their specific needs and financial situation. Whether you’re a seasoned investor with a multimillion-dollar portfolio or a novice looking to start a retirement account with funds from your first full-time job, you are bound to find a robo that you can rely on.

If there’s a robo-advisor out there for anyone, you might be wondering how to choose a robo-advisor. First ask yourself: What is your most important financial management need? Are there any niche investing interests you have? For example:

  • If you’re a beginner investor or curious about robo-advisors, but don’t have much to invest, you might benefit from a robo-advisor that appeals to millennials.
  • Women may find a woman-focused robo-advisor like Ellevest to be their best choice. Though anyone can invest with Ellevest, the creators of this robo-advisor specifically kept women’s unique challenges in mind when they designed their algorithms.
  • If you’re looking for general money management, including budget tracking, you might check out Personal Capital, Mint, or Quicken—however, if you want the added benefits of a robo-advisor, you’ll need to look toward Empower (formerly Personal Capital).
  • Retirees don’t need to miss out! Many robo-advisors specifically cater to retired or soon-to-be retired individuals.
  • Several robo-advisors allow cryptocurrency investment options!
  • Investors seeking active investment management strategies might consider Vanguard Digital and Personal Advisor Services, Zacks Advantage or T.Rowe Price Active Plus Portfolios.
  • Investors with large portfolios may prefer to work more closely with human financial planners. Schwab and Empower (formerly Personal Capital) each offer hybrid robo advisors, at different price points.

Visit the robo selection wizard, answer 4 questions and get a robo-advisor recommendation. 

History of Robo-Advisors

Robo-advisors have been around for more than a decade—a tribute to their staying power. Far from going out of style, robo-advisors have been careful to adjust according to market changes in an effort to best serve customers; they have also embraced new developments in technology in order to keep pace with the world of finance.

The first iteration of a robo-advisor was in 2006, when Mint’s personal financial management systems began. Although Mint is more of a money management tracker than a true robo-advisors.

Betterment and Wealthfront were launched in 2008, Personal Capital, renamed Empower, began in 2009 and FutureAdvisor hit the market in 2010.

Since 2010, robo-advisor assets under management have climbed exponentially. Only 4 years after Betterment and FutureAdvisor were offered to the public, robo-advisors were estimated to hold $19 billion in assets under management. This exploded to $224 billion AUM in 2017, and are expected to hit $1 trillion in the near future.

Robo-Advisors vs. Financial Advisors

If financial planners have been working just fine, why switch to robo-advisors?

The problem is that human financial planners aren’t working just fine for many people. Financial professions often charge 1-2% AUM annually. Compared to the average robo-advisor, which charges 0.20-0.50% AUM, these financial professionals seem quite expensive. While some robo-advisors like Schwab, M1 Finance, SoFi, and Fidelity Go (for the first $25,000) do not charge investment management fees.

Because of the necessary expenses and time restrictions of keeping human financial planners employed, traditional financial advisors are often only available to wealthier investors who have a a mid-six figure portfolio.

On the other hand, human financial professionals are able to answer your questions, provide education, and walk you through turbulent market conditions in a way that their all-digital robo counterparts cannot. For some investors, this is the biggest selling point: they’re looking for someone to walk with them every step of the way.

Still, robo-advisors have the edge in terms of access: since they’re available 24/7 and rely on automated algorithms to make decisions, clients can be assured their money is constantly working for them.

Robo-advisors aren’t completely erasing the need for human financial planners, of course. When humans and robos work together, they complement the others’ strengths in a way that helps you, the client, have a stronger portfolio.

Learn more: Robo Advisor vs. Financial Advisor vs DIY Investing

How much do robo-advisors cost?

In most cases, robo-advisors are much cheaper than their human advisor equivalents. While human financial planners may charge up to 2.0% AUM, a robo-advisor like Betterment charges only 0.25% AUM. On a $100,000 portfolio that would be $2,000 in fees for the financial professional, but only $250 for Betterment.

M1 Finance is one of the most affordable robo-advisors out there, with no account management fees for the basic service, and a low annual fee for M1 Plus, with added features.

Quite a few robo-advisors offer basic and premium packages, with rates ranging from 0.25 – 0.50% AUM. Betterment and Ellevest each offer a low-fee Digital plan and Premium services at a higher price point.

Though its free retirement calculator services are fantastic, Empower (formerly Personal Capital) is one of the more expensive robo-advisors on the market. Clients who want to go beyond their calculator services can expect to pay 0.89% AUM on accounts under $3 million. However, there’s good news for very wealthy investors: Empower’s sliding scale, charges accounts valued over $10 mil only 0.49% AUM. Empower also offers private wealth management which include estate planning, tax and other services.

To help you make a decision at a glance, we’ve compiled a ranking of robo-advisors from lowest to highest fees.

Which robo-advisor has the best returns?

Everyone wants to know, “Which robo-advisor has the best returns?” But, a robo advisory platform with the best returns one year, might be an underperformer the next.

To understand robo-advisor returns, consider that the majority of these digital investment advisors select low-fee, diversified index ETFs for the components of their portfolios. For example, nearly all robo advisors include an S&P 500 stock market index ETF or a total US stock market ETF. The majority of firms have a diversified international stock index ETF and a diversified bond ETF. From there you’ll find a smattering of small cap, value, real estate and international bond ETFs.

Depending upon your risk tolerance, you’ll have varying percentages of you assets in each ETF.

In most cases, your portfolio performance will depend upon two factors:

  • The percentage of your portfolio you have invested in each asset class.
  • Which asset classes are in your portfolio.

If you own 60% in an S&P 500 ETF and 40% in a diversified bond fund and the stock fund rises by 10% and the bond by 3%, then your portfolio will deliver a total return of 7.2%. In fact, your asset allocation determines your returns more than the individual holdings.

Finally, portfolios dominated by the best performing asset classes will prevail, until the market changes.

In general, lower fees translate into higher returns, as more of your investment dollars are deployed in the financial markets.

You might review robo advisor performance, but it’s best to pick a robo advisor who best fits your personal financial needs.

How do robo-advisors make money?

Robo-advisors still need to make some money in order to stay in business. But how do robos like M1 Finance, Schwab and SoFi Automated Investing make money when they don’t charge account management fees?

Robo-advisors all make money in different ways, but some of the most common include:

Percentage-based fees for account management. This is the most obvious way that robo-advisors earn money. These are the fees that many robo-advisors charge, though there are a few exceptions. Many robo-advisors also cut clients a break, lowering the fees as the clients’ portfolios grow in value.

Selling or referring clients to related services help robo-advisors stay make money. These services might be loans, credit cards, or other financial services. This is common for many free robo-advisors nowadays. Even credit bureaus, who offer free versions of their credit score monitoring programs, will push credit-worthy clients toward new credit cards and loan refinancing programs.

Ads on their mobile apps, websites, or blogs, including sponsored posts. Not all robo-advisors will allow ads to display on their websites, but they may appear on mobile apps. Many robo-advisors are also blogging, and sponsored posts are a great way to earn a bit of money while still communicating educational information to their clients.

Kickbacks from proprietary investments. Schwab is a great example of this. Because Schwab Investment Portfolios has dedicated Schwab ETFs, the robo-advisor receives “kickbacks,” or a small commission, for investing client money in these ETFs. Much like affiliate marketing, these purchases don’t cost the client anything—however, robo-advisors who rely solely on proprietary ETFs may be limited in terms of diversity.

Learn more: How do Robo Advisors Make Money?

Benefits of Using Robo-Advisors

The benefits of using a robo-advisor are myriad. Beyond simply being low-cost alternatives to traditional financial management options, robo-advisors are also convenient. They are available nearly on-demand, with mobile apps and websites making it easy for clients to check on their investments at any time. While they do not tend to offer 24/7 human support, many are beginning to increase the hours during which support staff are available by phone, email, or chat features.

The opportunity for professional investment management for a low or no fee is one of the greatest benefits.

Convenience is another pro of robo advisors for those investors who use a popular financial platform like Fidelity and then elect to invest with the platform’s digital investment manager, like Fidelity Go. Additionally, Fidelity Go now offers fee-free investment management for portfolios worth less than $20,000.

robo advisor guide - happy investment guy

Photo by Austin Distel on Unsplash

Pros and Cons of Using a Robo-Advisor

Advantages of Robo-Advisors:

  • Convenient, easy access 24/7
  • Lower fees than traditional financial planners
  • Algorithmic-based investment decisions, which creates lower margin for error
  • No emotions: robos simply adjust to market fluctuations instead of panicking at sudden drops
  • A wide range of minimum balances, fees, and niche services designed to meet unique and ever-changing needs

Disadvantages of Robo-Advisors:

  • Limited customization options
  • Extra charge for Human Financial Advisors (except at SoFi)
  • Limited hours for support, both financial support and tech support
  • Tax-loss harvesting may cause more trouble than it’s worth
  • Little to no control over your investments as robo-advisors handle rebalancing automatically

Learn more: Pros and Cons of Robo Investing

Are Robo-Advisors Worth It? – Best Robo-Advisor Guide Wrap-Up

The short answer to this question is yes, robo-advisors are worth it! Of course, any financial decision should be approached with caution and care: investing is always a risky business, and the market is guaranteed to fluctuate. Investing will never be a get-rich-quick option—those who do well in the market usually settle in for the long haul.

That being said, robo-advisors are a good way to get involved in investing, whether you are just starting out or have been investing for years. They offer low-fee, easily-accessible, automated investing options for a wide variety of individual needs. Higher fee robo-advisors offer additional, premium services that easily rival the services provided by human financial professionals.

While there are some drawbacks to robo-advisors—namely limited connection to human financial support, potential downsides with tax-loss harvesting, and lower control over your individual investments—they are largely outweighed by the many benefits robo-advisors offer.

Are you wondering how do I choose a robo-advisor? Try our robo-advisor selection wizard. This tool makes recommendations based on your risk tolerance, minimum investment amount, and more.

Featured image by Alex Knight on Unsplash

Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link. That said, I never recommend anything I don’t believe is valuable.

Disclosure: I have funded M1 Finance and Schwab Intelligent Portfolios accounts. I use the free investment management tools at Empower (Personal Capital).

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Barbara A. Friedberg, MBA, MS

Barbara Friedberg, MBA, MS brings decades of finance and investing experience to Robo-advisor Pros. She is a former investment portfolio manager and taught Finance and Investments at several universities. Barbara Friedberg's published work includes Personal Finance; An Encyclopedia of Modern Money Management (Greenwood Press), Invest and Beat the Pros-Create and Manage a Successful Investment Portfolio and How to Get Rich; Without Winning the Lottery. Follow her on twitter