The Best Robo Advisors: How To Make Your Decision


Have you been telling yourself that you need to start investing in your future, but you aren’t sure where to start?

Advancements in technology have made wealth management more accessible than ever with robo-advisors. Therefore, you can now get access to automated investing right from your home

Once you know how to choose the best robo advisors, you can click on an automated form, fill it out, and start investing. There are options for everyone. For the older adult who is afraid to invest but wants to leave something for her grandchildren, there are low-risk investment options that will return a steady income. Additionally, for the savvy, aggressive businessman who is just getting started on his career, there are high-risk options that can yield high returns.

Ten Questions You Should Consider Before Starting Your Robo-Advisor Search  

  • What is a robo-advisor?
  • How long have robo-advisors been around?
  • Can I trust a robo-advisor?
  • Will a robo-advisor meet my financial needs?
  • How much will a robo-advisor cost?
  • Is a robo-advisor the same thing as a financial advisor?
  • Am I protected if the company goes bankrupt?
  • What company offers the best robo-advising?
  • What are the benefits of having a robo-advisor?
  • Is a robo-advisor right for me?

What Does a Robo-Advisor Do?

The short answer: A robo-advisor is a computer-generated financial planning service. 

The more complicated explanation is that a robo-advisor is a digital platform. The platform collects information about your financial habits and goals through an online questionnaire and then uses algorithms to offer advice. Using the information you provide, an automated investment portfolio is created to fit your needs.

Understand the Background of Robo-Advisors

Robo-advisors are not new. They have been around for about ten years. The thing is, only banks and financial managers used them for most of that time. Now, some programs skip the middleman, saving you time and money

Ernst & Young, LLP, a global leader in transaction and advisory services, released a publication outlining the evolution of robo-advisors.

In 2008, the first robo-advisor was created due to an increase in the analytic potential (value of data for analysis), interest in more affordable financial guidance, and an increase in distrust toward personal advisors after the 2008 recession.

By 2013, financial advisors had begun to use robo-advisors to track trends in client behavior and to enhance personal financial guidance.

Within three years, many major financial institutions began to invest in the technology required to run the digital numbers for their clients. 

In 2017, Betterment announced a hybrid model that would allow clients to receive advice from a combo of robo-advisors and human, financial advisors.

Understand the Rapid Growth of Robo-Advisors.

Because of the rapid growth and popularity of robo-advisors, the U.S. Securities and Exchange Commission (SEC) issued an investor bulletin and a press release on robo-advisors in February 2017. The SEC’s main reasons for issuing the publication were to protect investors from potential harm and educate them on the quickly growing market. 

The SEC believes that robo-advisors can provide affordable access to investment services but warns investment advisors that they must still meet the requirements of the law. Additionally, they caution investors to understand the service they are being provided and what they could miss with no personal interaction.

Decide if You Can Trust Them 

Robo-advisors are quickly growing because people do trust them to handle their personal advisor services. Some laws ensure robo-advisors have to follow the same rules as all other fiduciaries. 

According to a publication in the Columbia Law Review, there are five conditions personal advisors must meet to be considered a fiduciary by the SEC. 

  1. The investor must be able to enter into a contract independently.
  2. The advisor must notify the investor of any conflicts of interest that exist.
  3. The investor must be notified of any modifications.
  4. The substance of the modifications must be fair to the investor.
  5. The investor must give clear consent to the modification.

How the Best Robo Advisors Meet Those Standards

  1. They offer clients an independent choice between services.
  2. Robo advisors disclose full information about conflicts through their Form ADVs, a background check on financial companies.
  3. They notify clients that the advice is based only on the information they enter into the online form.
  4. Clients accept the limitations of the online system in exchange for lower costs.
  5. The client’s consent is clear – they give specific consent to the modifications via the online system.

Possible Concerns

Some concerns using questionnaires to gather investor information are that they can miss vital information that can only be learned in casual conversation. To combat that, many companies who offer advising services recommend that you use a combo of both a financial advisor and a robo-advisor for more complicated investing. 

Another argument of nay-sayers is that robo-advisors are not as effective as financial advisors because they lack human perception. The reality is that the human connection and trust depends on the relationship that is developed between individuals. Robo-advisors may have less chance of a conflict of interest because there is no chance that incentives or personal relationships can sway them.

Computers are already trusted to handle most of our personal information. If you are unsure about robo-investing, you may want to start with a small investment to see how you like it. 

Determine if Robo-Advisors Can Meet Your Financial Needs

The automated systems that Robo-advisors use enable them to perform some tasks much more efficiently than human advisors, specifically, threshold-based rebalancing and tax-loss harvesting. However, be aware that without personal advice, there is no one to stop you from panicking in the event of a significant market change. The robo-advisor system will not be able to help you decide what to do with your investments. Therefore, in such a situation, you may want to reach out to an advisor or trusted friend.

For more complex financial planning jobs, you will want to consider a financial advisor or a combination of the two. But there are some things that robo-advisors can do well.

Investments Robo-Advisors Can be Great For

Exchange-Traded Funds

ETFs offer investors a way to earn interest from the money that they put in a fund that invests in stocks, bonds, or other assets. They are similar to mutual funds, but they are traded on the national stock exchange at market prices that may not match their net asset value (NAV). 

Automatic Rebalancing

Automatic rebalancing is helpful for those who don’t have a lot of time on. their hands. Overtime market fluctuations can cause your investment portfolio to get out of balance because of the appreciation and depreciation of your investments. Rebalancing puts your portfolio back into its original specified asset allocation. Asset allocation is the division of your investment portfolio by different asset categories, such as stocks and bonds.

Threshold-Based Rebalancing

Threshold-based rebalancing is an automatic rebalancing strategy that resets your target asset numbers (asset allocation) when they have changed by a specified percentage amount.

Ex: Let’s say your target asset for your portfolio is 50% bonds and 50% stocks, and your rebalancing percentage is 5%. If your stocks went up or down by 5%, it would trigger an automatic rebalancing of your portfolio that would return it to 50/50.

Tax-Loss Harvesting

The selling of your losing investments to minimize your tax losses by offsetting them against your winning investments. Robo-advisors can automatically replace the losing asset with a similar one and maintain your target asset allocation.

Tax-loss harvesting is very beneficial on taxable accounts. Investment accounts offered by brokerage firms are examples of taxable accounts. As you earn money on stocks, bonds, and mutual funds, you will be required to pay taxes annually.

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Compare Costs for the Best Robo Advisors

Robo-advisors have several ways that they charge depending on the company. Some companies are fee-free up to a specific amount. Many only charge management fees while some also charge trade fees (up to 49.95 per trade) and fees for account maintenance (things like opening and closing an account). 

Robo-advisor management fees are one of the ways many robo-advisors get paid. Management fees are charged as a percentage of your assets under management (AUM). That is just a fancy way to say; brokerage firms receive a percentage of your annual return on your investment. For example: If you earn 5% in a year and their fee is .25%, then your return will be 4.75%.

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What to Expect

In most cases, you can expect to pay .25% annually for management fees. However, fees can range from as low as 0% to as high as .89%. It is essential to compare prices to make sure you are getting the highest return possible for the lowest rate. To see a more in-depth chart comparison of management fees, visit ValuePenguin.

You may also pay an expense ratio which is the percentage of assets paid to run an investment fund. It is basically the operating expense. In brokerage policies, it may be referred to as “Annual Fund Operating Expenses.” The expense ratio is deducted from the gain on exchange-traded funds for management and operational costs. The expense ratio is calculated by dividing your total fund costs by your total fund assets.

What Assets Under Management Mean for Robo-Advisors.

As we stated above, charging a fee on your assets under management (AUM) is how robo-advisors get paid on your accounts. The more assets under management the firm has, the more income the company makes. By 2023, the U.S. robo-advisory market is charted to be worth 34.05 billion dollars. 

Top Companies Contributing to that Growth Pattern and Their 2019 AUM

  • Vanguard: $115 billion
  • Schwab: $37 billion 
  • Betterment: $16 billion
  • Wealthfront: $11 billion

The projected growth is more evidence that investors are expected to continue moving some or all of their funds into accounts that offer robo-advising. That doesn’t mean that financial advisors are becoming extinct. They are still very helpful to investors who want financial advice on large or complicated investments. Let’s compare the two. 

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Compare Robo-Advisors and Financial Advisors

Robo-Advisor vs. Financial Advisor
Great for single investments   Good for complex services
Automated portfolio rebalancing   One-on-one assistance
No advisor provided   In-person financial advising
Low cost   Higher cost
As low as $0 account minimums   Start at about $100,000 minimum
Fees as low as .25%   Fees as high as 2%

With a robo-advisor, there is little to no human supervision or interaction. Robo-advising is a cheaper, less complicated way to get help with your financial planning. On the other hand, a financial advisor will meet with you in person to discuss your goals. You will pay a higher cost for a financial advisor because you are getting individualized attention from a pro. 

Key Points to Consider

A robo-advisor may be the better option if you are looking for some low-cost advice on responsible investing or help with managing investments. If you want help with managing stock options or estate planning, you will need to choose a financial advisor. 

You will need a significantly higher amount of money to open an investment account with a financial advisor. While many robo-advisors have minimum investment requirements of zero to $500, financial advisors often will not open an account with less than $100,000. 

If you are afraid to trust a robo-advisor entirely but need help from an advisor, you may want to consider combining the two. Some investment companies offer the option to use a robo-advisor for your automated portfolio and meet with a financial advisor when necessary. 

Best Robo Advisors

Evaluate Companies That Offer Robo-Advising.

To choose the best robo-advisor, you will need to compare costs, decide which company fits your investment needs, and check the qualifications and standards for the company. 

You should perform a broker check to make sure the company complies with SEC rules. That is the first step in protecting yourself. When you click the broker check link, you can enter the person’s or company’s name. You can then choose to stay on the broker check or go to the SEC site. The SEC site will provide you information on the company, such as its registration status and approval date.

You can also access its Form ADV which is essentially a background check for financial advisors. Kiplinger does an excellent job of explaining the form. The forms are the government’s way of conducting a background search on the broker or brokerage firm. The forms have to be made available to consumers.

Make a Price Comparison

To help you begin here is some information on 10 of our top choices.


Betterment offers three goals for an easy to start investment portfolio with options for emergency funds, retirement funds, and general saving funds. In addition to the .25% annual management fee, investors are charged a .11% expense ratio. 

  • Personalized financial advice
  • Low-cost, diversified investment portfolios
  • Automatic rebalancing
  • Automated tax-loss harvesting on taxable accounts
  • Sync external accounts to see all money in one place
  • Customer service available seven days a week


M1 allows you to build a customized portfolio (referred to as a pie) or the option to choose from 80 expert portfolios. Offers the purchase of securities with fractional shares and the option to schedule automated investing.

  • No fees
  • M1 line of credit available when you invest $10,000 (up to 35% of your portfolio with a 4% APR)
  • Advanced security technology
  • Automatically allocates money from deposits to maintain target asset
  • Uses lot allocation strategy when selling to help reduce taxes owed
  • Automatically invests any cash over your preset maximum cash balance


Acorns offers five different investment portfolio options from conservative to aggressive and shows the percentages of investments for each. Diversity to invest as little as spare change with Acorns Core account and option to save big for retirement with Acorns Later. Additionally, you can combine this with Acorns checking account option – Acorns Spend.

  • Automatic daily, weekly, and monthly investments
  • Uses “round-ups” to invest change from your bank account automatically
  • Free for students with a student e-mail address
  • Free for people under 24 years of age


Fidelity offers options for digital-only and hybrid investing. With the hybrid option, there is a $25,000 minimum for investments. It charges the same annual fee for both taxable accounts and tax-advantaged accounts. Furthermore, there are no hidden costs, and its interface is easy to use. 

  • Focuses on low-cost funds
  • E-mails you monthly progress updates
  • Uses target tracking to focus on your goals
  • Live chat and phone support
  • Annual reviews to make sure your account still works for you
  • No additional fees for trading or account management
  • Fees are deducted quarterly; you are not billed


Vanguard does not offer a robo-advisor only option. It uses robo-advisors in conjunction with an investing coach or financial advisor. It offers one of the lowest fees out there for personal advising. The account management fee varies based on the account balance

  • Options to sign up online or contact them at a toll-free number
  • Requires consultation with an advisor
  • Offers many investment options
  • Caters more to larger investors


Wealthfront provides a low annual cost and effective, free financial planning tools. It also offers a cash management account with a 2.32% APY. The low cost of the service means you will get very minimal human interaction.  

  • Automatic rebalancing
  • Automated tax-loss harvesting daily
  • Ability to link outside accounts
  • Phone support Monday – Friday
  • No human advisor option

Charles Schwab

Charles Schwab offers hybrid advising with a combination of robo-advisors and financial advisors. Portfolio investors are required to hold $6 to 30% of deposited funds in a Schwab account at a .70% APY.

  • 24/7 live support from U.S. based professionals
  • No advisory fee or commissions
  • Based on your risk profile, money is placed in a deposit account at Schwab Bank
  • Provides a portfolio of exchange-traded funds
  • Automatic rebalancing
  • Tax-loss harvesting available for accounts over $50,000
  • Several account types to choose from
  • Option to upgrade to Schwab Intelligent Portfolios Premium for more one on one guidance

Ally Financial

Ally offers both robo-advisor only investing and hybrid investing. However, it has some hidden costs like a $50 fee to close out your IRA. Ally does not offer tax-loss harvesting. 

  • Member of SIPC
  • Web-based trading with ease of access from your smartphone
  • 24/7 customer access
  • Easily transfer stocks and online investments from other major brokerages
  • Will reimburse up to $150 for transfer fees (one-time transfer of $2,500 or more)
  • Charges on a per trade or bond structure with commission-free exchange-traded funds

TD Ameritrade

TD Ameritrade provides “socially aware” investing that allows you to align your investing goals with environmentally friendly companies, socially conscious companies, and companies that promote transparency on governance issues.

  • Access to a team of portfolio specialists
  • Automatic rebalancing of your portfolio
  • Tax-loss harvesting is available at no extra cost
  • Offers two higher-level options that provide more goal and service options

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The Breakdown


  • Minimum Investment: $0 for basic; $100,00 for Premium
  • Fees: 25% for basic; 40% for Premium
  • Promotions: One time Advise Packages that start at $199


  • Minimum Investment: $100 for a portfolio; $500 for retirement accounts
  • Fees: $0
  • Promotions: $100 off MI Plus, premium membership with pre-enrollment and $10 referral credit


  • Minimum Investment: $0; $5 minimum to start investing
  • Fees: $1 to $3 a month depending on the account type
  • Promotions: Offers referral bonuses that vary each month. September 2019 is $100 for 3 Acorns Referrals


  • Minimum Investment: $0; $10 minimum to start investing
  • Fees: .35%
  • Promotions: 300 free trades when you invest $50,000; 500 free trades when you invest $100,000


  • Minimum Investment: $50,000
  • Fees: .30%
  • No promotions


  • Minimum Investment: $500
  • Fees: .25%
  • Promotions: Available promotions for free investing for the first $5,000 


  • Minimum Investment: $5,000 for basic; $25,000 for Premium
  • Fees: $0 for basic; $30/month for Premium + $300 account fee
  • Promotions: 500 commission-free trades for two years with a qualifying $100,000 net deposit


  • Minimum Investment: 0%
  • Fees: $4.95 for stock and ETF trades ($3.95 when you trade 30+ per quarter or maintain a balance of $100,000 or more)
  • Promotions: Up to $3,500 in bonus cash + 90 days of commission-free trades

TD Ameritrade

  • Minimum Investment: $5,000
  • Fees: .30%
  • Promotions: Trade commission-free for 90 days when you deposit at least $3,000 + cashback options up to $1,000 with a $25,000 deposit

Make Sure Your Broker is Covered by the Securities Investor Protection Corporation (SIPC)

The Securities Investor Protection Corporation provides insurance that will cover your money if a broker goes bankrupt or out of business. It usually covers up to $500,000 per separate account type and up to $250,000 of cash assets. However, the insurance will not cover any losses due to a rise or fall in the value of the company’s holdings. SIPC will not return money lost due to a poor investment.

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Learn the Benefits of Using a Robo-Advisor.

As a rule, financial advising can cost up to 1% of your portfolio each year with a traditional financial advisor. Robo-advisors usually cost about one-fourth of that amount. Over an extended period, say 30 years, that .25% can add up. But you have to consider the service you are getting in exchange for that fee. 

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Peace of Mind

You will not have to worry about remembering to rebalance your investments because it will automatically be done for you. This step alone keeps your risk level the same and improves investment returns. 

Strategic Tax Help

Tax-loss harvesting requires crunching the numbers, which is done much more efficiently with the help of a computer. This tool alone can save you up to $3,000 a year on taxable accounts. Any losses in excess can be carried into future years.

Care Free Maintenance

Asset allocation is created for you by your robo-advisor. It prevents you from having to come up with your strategy and saves you from having to manage it as your investment accounts increase. 


Because the robo-advisor is doing the work for you, you will have free time to do things you enjoy.

Best Robo Advisors

See if You Fit Into Any of These Categories

New to Investing

Robo-advisors provide a great beginner’s service for people just learning to invest. The easy to follow forms can help get you started.

Starting Small

Robo-advising is recommended for investments of $25,000 or less. Many brokerage firms require little to no minimum investment.

Don’t Have a Lot of Free Time

Deciding on the best investment options takes a lot of research. Trusting the automated processes of robo-advisors will do that work for you.

If you still aren’t sold on online investing, there are some other investment options you can think about.  

Consider Other Options

Mutual Funds

Mutual funds are professionally managed investments made from pools of money invested by different people. They are another low-cost investment option that divides your money to buy smaller pieces of companies. As the stock market changes, so do the value of your mutual funds. You may not know it, but the money deducted from your 401(k) is going into a mutual fund. Therefore, if you need lower-cost investing but still want a human overseeing your investment, mutual funds may be a better option for you.

Certificates of Deposit (CDs)

Certificates of deposit are a risk-free investment option that is similar to a checking or savings account but earns a higher annual percentage yield. If investing makes you nervous, but you want to save money that returns an investment, this may be a good choice. Some CDs offer an APY of up to 2% with a minimum deposit of $2,500. That return is quite a bit smaller than many investment returns, but you know exactly what you are getting. 


Although buying stocks is part of what a robo-advisor will do, you also have the option to invest in stocks on your own. However, you will need to do some research, and here is an excellent guide to buying stocks to help get you started. If you would like to start investing but aren’t ready to pay a percentage of your gain for an advisor’s help, stocks may be a good option for you.

Know What to Expect

Annual returns on investment portfolios will depend on the brokerage firm, your risk tolerance, and the make-up of your portfolio. With a mid-level risk score, you should expect an average annual return of between 3% to 6%. With more conservative portfolio management, you may earn a lower return of around 1.5%. 

Understand the Three Types of Investment Portfolios

According to the Corporate Finance Institute, three main types of portfolios are based on risk tolerance and profit potential. Risk tolerance is a measurement of the amount of risk that is taken with your investments. The questionnaire that you will complete for any financial advisor will help determine which of these options is best for you.

Value Portfolio

The investor’s primary goal is to buy cheap assets from struggling companies with the hope that their value will go up. Portfolio for people with lower risk tolerance. 

Income Portfolio

The focus is on gathering regular income from investments. Consists mainly of stocks that pay dividends but that aren’t expected to go up by much. 

Growth Portfolio

Aims to provide growth by taking more significant risks. Caters to people who have higher risk tolerance. The focus is on taking more significant risks with the hope of higher rewards and potential for more substantial losses. Investments are often made in younger companies that have more potential for growth. Therefore, it is suitable for younger investors saving for retirement. 

Prepare for the Questionnaire

The questionnaire that you will be required to fill out will help determine your risk tolerance. The goal of learning your risk tolerance is to see how you would react to specific changes in the market. It may categorize you into one of three investing styles: conservative, moderate, or aggressive. In this case, it is best to be honest so that your investment portfolio accurately represents your wealth management goals. 

CalcXML has a risk tolerance questionnaire if you are curious to see which category fits you. 

The additional information you may need to complete the online questionnaire:

  • Bank information
  • Total assets: compile a list of all of your assets and total them
  • Any loan you owe: total all loans you owe and your total debt amount
  • Goals: retirement, education, marriage

If robo-advisors don’t meet your financial needs, some top options for financial advisors are:

  • Vanguard
  • Ameriprise
  • Citigroup

Getting Away From Your Financial Advisor

Whether you have invested with a robo-advisor or a financial advisor, if you are not happy with the outcome, it may be time to move on. You will need to find out the terms for leaving the firm you are with. Unfortunately, some brokers or brokerage firms may charge additional fees to close your account. Here are a few steps to help you:

Review the terms of your contract: this will tell you precisely what is required for you to close your account.

Decide on a new advisor: if you intend to choose another advisor, have them picked out before making the switch. Doing so will help make the transition smoother. 

Talk to your current advisor: they may be able to address your concerns and fix the problem. If your relationship and experience have been mostly good, giving the company the chance to fix it could save you the trouble of switching. 

What’s Next?

The bottom line is that robo-advisors are a good option for many people, and their steady growth is proof. They provide numerous options for the investor that wants some help with making the best investment choices but doesn’t want to spend a large amount of cost. However, there is a risk involved with any type of responsible investing, but there are governmental agencies that set rules and guidelines to help protect you from those risks.  

If you are looking for a low-cost investment option that will save you time and energy, you may want to start with a robo-advisor. Remember, the lowest cost options provide little to no human supervision or interaction. If you choose, you can pay a bit more to add that personal connection with a hybrid plan.

Do you think robo-advisors are a higher risk than financial advisors?

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