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Robo-Advisor vs Financial Advisor – Which is Best?

Last Updated on September 19, 2022 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

By contributing columnist, Hank Coleman

Robo-advisors are everywhere you turn. Or, so it seems. These automated online investment platforms appeal to new and younger investors, but they can be a good fit for seasoned pros as well. Contrary to popular opinions, robo-advisors aren‘t all alike and come in many varieties. In fact, when comparing financial advisors vs robo advisors, you might find the hybrid robo-advisors, that also include access to financial advisors are nearly identical to investing with a human advisor, but for a lower cost.

The extremely volatile investment markets of 2022 are causing a lot of anxiety, even for serious and accomplished experts. These are the times when direct human contact can calm your nerves. But traditional advisors aren’t the only solution. The list of robo-advisors with human advisors is long, and the fees can be lower than if you invest with a traditional advisor.


*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.

The key to deciding whether to go robo-advisor or human financial advisor is to understand which one is right for you and your financial situation.

There are differences between a robo-advisor and a traditional financial advisor and overlap between the two. Each one has their strengths and weaknesses.

The best investment solution between robo-advisors vs financial advisors depends on several factors:

  • Your investment expertise – Do you have the skills to manage your investment account?
  • Your comfort level with DIY or do-it-yourself investing – Do you have the time and interest in financial planning?
  • Your investing style, risk tolerance, and goals – Are you looking for personalized investment advice and portfolio management best provided by a professional advisor?
  • Your net worth – Older, high net worth investors seeking tax, estate, and retirement planning might prefer traditional investment advisory services or a robo-advisor for the wealthy.

Today, choosing between a robo-advisor and human advisor isn’t black and white.

Many robo-advisors offer financial advisor access among their services. Hybrid robo advisor firms like Personal Capital and Ellevest also offer financial advisors and comparable wealth management services, for lower fees than most wealth managers.

Robo-advisors can work well for a variety people and today, robo investment advisors are so diverse that in many cases, they are difficult to distinguish between human financial advisors.

In fact, many human financial advisors are using robo advisors to manage their client’s investments, which enables the advisor to lower their fees and frees up time to work one-on-one with clients.

What is a Robo-Advisor?

A robo-advisor is a broad category of computerized financial advisors.

These money and financial managers create diversified investment portfolios influenced by computer algorithms. Most robo-advisors are based on Modern Portfolio Theory which designs the investment portfolios to offer the greatest returns for the clients chosen risk level.

Learn: Robo-Advisor FAQ

After responding to several questions about your goals, age, and risk tolerance, the robo creates a group of investments to match your needs. The portfolios typically range from conservative to aggressive. Most robos invest your money in diversified ETF index funds, known for their low costs and market-matching returns.

Many robo advisors offer financial advisor access, borrowing, lending and other services.  

Top Robo-Advisors

Robo AdvisorManagement FeeInvestment Minimum
m1 finance image
M1 Finance
$0.00$100Sign up
$0.00$1.00Sign up
wealthfront review logo
0.25% of AUM ($5,000 managed for free)$500Sign up
ellevest logo$5-$9 per month NoneSign up
schwab intelligent portfolios logoBasic-$0.00 Premium-$30/month ($300 set up fee)$5,000Sign up
Betterment logo0.25% of AUM for accounts worth more than $20,000 | $4.00 for accounts worth less than $20,000None - $10 to begin investingSign up

Robo-advisors typically manage your money with lower fees than human financial advisors.

What is a Financial Advisor?

A financial advisor is someone who helps you manage your investments and may provide other services including tax and estate planning. Financial advisors come in many varIeties with a laundry list of credentials, compensation plans, and work locations.

When choosing a financial advisor it is important to understand the advisor’s:

  • Education, experience, and credentials
  • Fee structure
  • Whether they are a fiduciary (required to put your interests first) or not
  • If they have been sanctioned (use BrokerCheck to investigate the advisor)

The following comparison chart of robo-advisors vs financial advisors will give you an idea of which type of financial investment manager might be best for you.

Examine each feature, on the left side and determine if it is important to you or not.

This checklist will help you decide whether to go robo, choose a robo-advisor with a financial advisor, or hire a financial advisor.

Robo Advisor vs Financial Advisor

Robo-Advisor vs. Financial Advisor

Robo-AdvisorFinancial Advisor
Low CostX
High Minimum BalanceX
Zero or Low Minimum Balance X
Personal ContactX (a few robos)X
Targeted Personalized AdviceX (a few robos)X
Can Choose AssetsX
Less Human Error/BiasX
Automatic RebalancingX
Automated Tax-Loss HarvestingX
Active Investing StrategiesX (a few robos)X
Robo-advisor vs financial advisor - which is better. Get the pros & cons.

Here’s what you need to know about the differences between investing with a robo-advisor and traditional financial advisors.

Benefits of Investing with a Robo-Advisor

Who are They Best For?

Robo-advisors are different than traditional financial advisors. From the cost, client interaction, investment selection, and more, robo-advisors can be a great choice for the right investor.

Robo Advisors are Best for Fee-Conscious Investors

One of the biggest benefits to robo-advisors is the cost. In comparison with traditional financial advisors, most robo’s fees are quite low. And, your investment costs have a direct impact on your performance as more of your money goes into your investments not paying for advisory fees.

Most robo advisors charge a percent of the assets invested, from zero for SoFi and M1 Finance to 0.89% for our most comprehensive automated advisor plus Certified Financial Planner access, Personal Capital.

Bonus: Robo-Advisors With the Lowest Fees

Traditional financial advisors typically charge 1% or more of the value of your investment portfolio to manage your investments and provide financial information and support. You may also pay transaction and other fees on top of the 1% management charge.

Other human advisors or stock brokers receive a commission when you buy or sell securities.

So,  if you had $1 million invested with a traditional financial advisor, you might pay $10,000 annually in management fees. That adds up over the long term. On the other hand digital investment managers typically charge less than 1%. In fact, many robo-advisors have investment fees lower than 0.5% per year.

While M1 Finance and SoFi Invest don’t charge any investment management fees and SoFi investors also have access to half-hour calls with an investment advisor. Also, investors at both M1 Finance and SoFi can also invest in individual stocks and ETFs.

Betterment and Wealthfront each charge 0.25% AUM. That’s only $2.50 per year for each $1,000 invested.

Robo Advisors are Best if you Don’t Need Hand-holding (maybe)

Most robo-advisors don’t provide much if any, direct contact with investors. So, if you have questions or want to pick up the phone and ask an advisor why the stock market is down, robo-advisors may not work for you.

But, if you’re fine with your financial advisor not providing hand-holding services, robo-advisors can be a great automated approach to investing. You’ll need a sense of your investing goals and time horizon. And, you need to be prepared to ride out a market dip with a robo-advisor who you can’t call.

Although, several robo-advisors also provide human or almost-human financial planning as well.

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

Robo Advisors are Best if you Don’t Have a Lot to Invest

Most traditional financial advisors work with clients with a considerable nest egg. Since financial advisors typically earn a 1% fee based on your assets, managing large investment portfolios is how they earn their living. Many investors don‘t meet the minimum $250,000 to $1,000,000 requirements for a traditional financial advisor. Most robo-advisors have lower initial minimums and a few will manage your money if you only have $100, or less.

Read: Top 5 Robo-Advisors With Low Investment Minimums

Robo Advisors are Best if you Like the DIFY (do-it-for-you) Approach

With robo-advisors, you have to be willing to give up control over your investment choices. Robo-advisors are the perfect choice for investors who don’t have enough time, interest, or knowledge to pick the best investments.

You create your goals and timeline, and then decide how much risk you are willing to take. Although the funds within each robo-advisor vary, most are low-fee, well-diversified, and well-managed. Ultimately, based upon your preferences, the robo chooses the optimum asset allocation and strives for the highest returns, given your risk level.

Benefits of Investing with a Traditional Human Financial Advisor

Who are They Best For?

Many people still like to work with a traditional financial advisor. Financial advisors have a few key advantages despite the lower cost and rising popularity of robo-advisors.

Traditional Advisors are Best for More Targeted Advice

Investing is not a “one size fits all” with a traditional financial advisor. You can receive specific advice about your family’s financial situation. Everyone’s situation is different . Being able to address all the nuances of our lives is a big advantage for traditional financial advisors.

That said, Vanguard does start their robo-advisory process with human financial advisors and Personal Capital and Betterment also have a slate of advisors for consultation and advice.

You Like Meeting Face to Face 

If you like to meet face to face and look someone in the eye when you turn over a pile of money to him or her, then you’re not alone. A lot of people are still simply not comfortable conducting business solely online. Traditional financial advisors manage your investment portfolio and are also available to listen to your questions and fears. You have someone to call even if it’s to calm your fears or reassure you that you’re doing the right thing. You can visit a traditional financial planner in their office.

The firms that run robo-advisors typically have a customer service phone line you can call, but they’re there to answer questions about the service or website, not provide investment advice. With robo-advisors, there typically isn’t a single person responsible for your account.

As previously mentioned, there are a few robo-advisors that have  services where you can talk to a financial planner over the phone or via video chat.

SoFi invest offers automated investing with zero account management fees and includes financial advisor access. Take a look around the SoFi website.

Greater Control Over Investments 

Using a traditional financial advisor gives you more control over your investments. You have a greater say in how you want an advisor to invest your funds on your behalf. If you want your advisor to stay away from tobacco companies and shares of gambling stocks, it’s as simple as a phone call conversation with your financial advisor.

The same isn’t true with robo-advisors. Once you provide the robo-advisor with your time horizon and risk tolerance, the investing is hands-off for you. Investing with robo-advisors is designed to use a proprietary blend of exchange traded index funds (ETFs) that have a set asset allocation and automatic rebalancing. There’s no wiggle room for you to customize your investment portfolio and load up on a single stock or a specific industry if you wanted.

That said, customization to some degree is possible with robos. There are robo-advisors that offer socially responsible investments.

M1 Finance allows you to customize your own portfolio and the firm will rebalance for you. Check out the M1 Finance website.

While Wealthfront allows users to customize their portfolios with 100s of ETFs and Axos Invest has a list of sector-specific funds that you can invest in.

Robo-Advisors vs. Human Financial Advisors Wrap Up

Robo-advisors offer a great alternative to traditional financial advisors. They are a well-researched, low cost investment management alternative. They are even more accessible with the growing number of hybrid robo-advisors, especially at firms like Schwab and Vanguard as well as stand-alone firms like Ellevest and Personal Capital. If you want low fee or free investment management, a robo advisor is a sound choice. Other reasons to choose a robo include: you don’t need all of the services offered by a traditional financial advisor, you don’t meet the minimum required initial investment, and don’t need specific, individualized attention.

On the other hand, if you want an in-person meeting, you’re more likely to get that from a traditional financial advisor. Wealthier investors with complex situations typically might lean towards a live planner.

Finally, both robo-advisors and traditional financial advisors have their distinct differences. You should weigh your options and find an advisor that fits your preferences and your family’s needs. And, as the robo advisory industry evolves, you’ll find more robo-advisors with a human touch and more financial advisors with automated investment options.

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

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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