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The Best Robo Advisors [Comprehensive Guide]

top robo advisors

At Insurance&Estates we want to help you build wealth and leave a legacy. One way we can help you achieve your goals is to provide you with wealth building strategies through intelligent investing in the various investment vehicles available.

And, although we believe that the best home base for your money is cash value life insurance, you will enhance your wealth building capabilities outside of your life insurance policy through different opportunities that increase your velocity of money. One such opportunity is via robo advisors.

In the following article, we will address what a robo advisor is, the current top robo advisors available and the features you need to consider in order to find the best robo advisor for you, based on your personal goals and objectives.

Our Comprehensive Guide to Robo Advisors

The advent of the Internet age has led to the disruption of industry after industry as the efficiency of doing business online alters business models and creates new ways of connecting businesses with customers.

The financial sector has not been immune to these changes, with advances in technology providing financial firms with innovative methods of delivering advice to investors.

Robo advisors represent the logical extension of this trend: by providing their clients with personalized portfolio allocation based on standardized investment templates these services cut out the middleman – the investment advisor or stockbroker who traditionally provided the same or similar advice.

Cutting out the middleman enables a typical robo advisor to reduce the management fees charged for offering investment advice.

While the typical human advisor might charge anywhere from 1% to 1.75% a year or thereabouts, robo advisors typically charge much less, from 0.10% to 0.65% or so, with some even offering free advice models.

At first glance, saving 0.50% or so a year on fees may not appear to be a significant enough savings to outweigh the benefit of working with a human investment advisor, however, over the long terms such savings can make a significant difference in your investment performance, all else being equal.

Most robo advisors use portfolio management models adopted from well tested investment theories such as Modern Portfolio Theory (MPT), which seeks to devise portfolios designed to provide the maximum return possible for a given amount of risk.

As a result, unless you are seeking advice relating to investing in specialized investment opportunities such as buying particular individual stocks or bonds, robo advisors can offer investment advice that takes into account much of the same long-term investment strategies human advisors use.

It should be noted that these services focus primarily on long-term investment strategies, investors looking to make short term investments will generally be better served either making such trades themselves or hiring a human advisor to help them do so.

Their ability to help investors manage their long-term investments at attractive price points has contributed to the popularity of robo advisors among cost-conscious investors. These services also particularly appeal to tech-savvy investors who are accustomed to managing their affairs online.

Millennials especially may be drawn to robos to establish an investment account and manage their investments online. These investors are unlikely to be as prone to rely on a human investment advisor as the generations which came before them, given their familiarity with handling their finances online.

What is a robo advisor?

A robo advisor is an automated digital investing platform that provides algorithm-based investment advice to investors with little or no human contact.

Robos typically use questionnaires to determine an investor’s financial circumstances and then offer portfolio allocation advice based upon the answers.

In addition to offering online account opening, management, and funding, robo advisors generally offer services such as portfolio rebalancing, tax loss harvesting, and dividend reinvestment.

The services have different approaches in terms of the investment allocation algorithms they use, services they offer, and fees they charge, but the common thread is their ability to offer portfolio management services based on algorithms over the internet.

How do robo advisors work

A robo advisor takes the financial information provided by its clients and runs it through whatever algorithms it uses to offer investment advice to come up with a recommended portfolio allocation.

This allocation will be based on factors such as an investor’s:

  • Investment goals
  • Time horizon
  • Risk tolerance
  • Tax situation

Most robos use broad diversification to reduce the volatility, or risk, of their clients’ portfolios. This often includes global diversification, so a portfolio’s performance is not excessively linked to any one country, and asset class diversification so that if one asset class performs badly others can pick up the slack.

It should be noted that diversification, while it may reduce risk, doesn’t eliminate it entirely; if the stock market declines, as occurred during the financial crisis of 2007-2009, even the most diversified portfolio is likely to decline along with them.

Besides providing investment advice, robo advisors offer a number of other helpful portfolio management services, including:

  • Portfolio rebalancing
  • Tax-loss harvesting (for taxable accounts)
  • The opportunity to speak with a human advisor (typically for accounts with higher balances)
  • Investment tracking and planning tools

Who should consider a Robo Advisor

Any investor who would like assistance in managing long-term investments may find a robo advisor helpful. By providing investment recommendations based on popular financial theories such as Modern Portfolio Theory, robos save you the time it would take to learn and apply these theories yourself, as well as providing a convenient online interface for managing your money.

There are some specific classes of investors that may be more inclined to use such services or better positioned to benefit from them, including:

  • Beginning investors or those with small amounts to invest
  • Cost conscious investors
  • Tech savvy investors/Millennials
  • Financial advisors who want to focus on client service rather than managing money

Robo Advisor Taxes

Any profits realized in a taxable account held with a robo advisor, whether in the form of dividends or realized capital gains, are subject to taxes as they would be in a brokerage or mutual fund account.

A number of robos offer tax loss harvesting services which offset your losing trades against winning ones to help reduce your taxable investment income.

Robo Advisor Pros and Cons

Pros
  • Benefit from lower fees for investment advice
  • Reduce potential for investment underperformance
  • Handle investments online
  • Tax loss harvesting
  • Automatic portfolio rebalancing
Cons
  • Not designed for short term trading
  • No or limited access to human advisors (especially for smaller accounts)
  • Not designed to, in most cases, attempt to outperform the market

Best Robo Advisor List

Acorns

Acorns is a savings app designed to turn small change from online transactions into long-term savings. Its purpose is to encourage investors to start saving by enabling them to do so a little at a time, rather than having to invest a large amount to get started.

The Acorns app functions by rounding up your purchases to the nearest dollar (or more, if you choose), and investing the change.

Once your account exceeds $5 your money is invested in ETFs managed in accordance with algorithms inspired by Modern Portfolio Theory (MPT), the investing theory pioneered by Nobel Prize winner Dr. Harry Markowitz. MPT seeks to identify a portfolio allocation designed to offer the highest potential reward with the lowest amount of risk possible for any given level of risk, using broad diversification and historical data about asset class price fluctuation for this purpose.

The app asks you a variety of questions about your financial situation and investment goals to help it come up with investment recommendations for you based on MPT.

This makes investing simple by reducing it to two decisions: 1. how much do you want to invest and 2. how much risk do you want to take with the money you have invested.

Funds invested with Acorns are placed in ETFs.

In addition to rounding up, you can also invest in the service by making a lump sum deposit or recurring investments.

Acorns charges $1 per month if your account is under $5,000, and 0.25% per year for accounts above $5,000. The service is free for students and those between 18-23 years of age.

The service is app only, no website access to your account is available.

Asset Builder

Asset Builder helps investors with at least $50,000 to invest seek investment advice and management through a financial advisor.

Index funds are used to invest money placed with the robo advisory service. The service uses the DFA mutual funds for its investments. The funds are available only through advisors, so you need to work with one to sign on to Asset Builder.

Asset Builder has you complete a questionnaire gauging your risk tolerance and time horizon, then directs you to an investment portfolio according to your answers.

There are 12 portfolio buckets available.

As with Acorns, Asset Builder uses Modern Portfolio Theory to help construct portfolios.

The robo strives to improve on the basic passive investing approach to index funds by utilizing an approach known as smart indexing. This method holds that small cap and value stocks tend to do better than broadly diversified indexes over the long haul.

In addition, the robo advisor employs smart allocation in an attempt to do better than the typical approach to diversification using the Fama/French model. This works by optimizing holdings for variance with the goal of achieving the highest return for the lowest risk while taking into account any asset class combination.

Asset Builder’s fees fall below those of the typical human advisor, but are higher than most robo advisor services. Between $50,000 and $249,000 the fee is 0.45%, $250,000 and $599,999 pay 0.43%, with the fee falling as the amount invested drops to as low as 0.24%.

As with other robos, the underlying ETF or index fund fees must be taken into account as well. DFA fund fees range from 0.25% to 0.45%, depending on the specific fund.

Betterment

Betterment is one of the largest robo advisors currently in existence, measured by assets under management (AUM).

This pioneering robo launched in 2010 and has experienced rapid growth over the intervening years.

The company takes data about your investment objectives and financial situation and uses that to provide investment recommendations designed to fit your situation. Betterment’s algorithms take this data and use it to provide you with suitable investment allocation recommendations.

Betterment allows users to go as much as a year without paying management fees, charging a 0.25% fee per year thereafter for users of its Digital plan.

One benefit of opening an account with Betterment is that there is no minimum account balance required.

Access to Betterment’s digital services are available to all client and include strategies for tax efficient investment, automated portfolio management and investment allocation advice.

And $100,000 will give you the option of a yearly call with Betterment’s team of financial experts if you choose to sign up for Betterment Plus, with an annual fee of 0.40%.

Additionally, a 0.50% fee along with a $100,000 minimum balance allows you to sign up for the Betterment Premium plan for unlimited access to Betterment’s support staff of financial experts.

Betterment clients may choose between different accounts such as individual, joint, traditional IRA, Roth IRA, rollover IRA, SEP IRA, non-profit, and trusts.

Different account services are offered, including:

  • Automatic rebalancing
  • Tax loss harvesting
  • Tax-coordination
  • Retirement Calculator
  • SmartDeposit: Using this service allows you to automatically deposit funds into your Betterment account if your bank account balance exceeds a certain amount.
  • Two-Factor Authentication

As with a number of other robos, Betterment uses Modern Portfolio Theory (MPT) to manage client assets.

According to Betterment, a portfolio consisting of 70% stock would have returned 6.4% on average per year from January 2004 through May 2017. That is a cumulative return of over 130%. Additionally, Betterment states that a private client investor at similar risk levels over the same period would come in at 50 percentage points below the 130% number.

The main Betterment Portfolio uses world markets as its baseline, diversifying risk by investing globally.

In addition, the company offers a variety of other portfolios, including socially responsible investing, generation of a target income, and using a smart beta approach to attempt to beat the market.

The service’s asset allocation excludes investments in REITs and commodities.

Personal Capital

Personal Capital offers two services, a free suite of investment tools and a human advisory service using Personal Capital’s digital asset management interface.

The advisory service aims at higher net worth clients, with an account minimum of $100,000, and offers access to human advisors as well as to its digital asset management advice.

Clients with account balances above $200,000 are given two dedicated financial advisors, while smaller accounts can access a team of advisor account representatives.

This added service comes at a cost; the fee for using Personal Capital is 0.89% per year, with accounts above $1 million earning lower rates, with 0.49% being the lowest rate available.

The service provides its users with a number of free financial planning tools, as well as enabling them to track their spending, net worth, and portfolio performance.

Clients with more than $200,000 invested are placed in customized portfolios containing individual securities using Smart Indexing, which involves investing equally in all sectors, instead of copying an index like an index fund or ETF does. This approach is also known as smart beta.

The company says that this strategy can lower risk while boosting return. Directly investing in stocks, rather than ETFs which charge annual management fees can also reduce costs.

In hypothetical tests, according to Personal Capital, this strategy was able to outperform the S&P 500 by more than 1.5% per year with reduced volatility.

The service also supports tax-loss harvesting and automatic rebalancing if your portfolio diverges by a certain amount from your selected asset allocation.

The free personal finance software side of the service offers a number of financial tracking tools, including budgeting, investment tracking, a retirement planner, investment checkup, and asset allocation target. These tools can be used to enable you to manage your investments by yourself if you don’t want to hire a human advisor.

MarketRiders

MarketRiders goal is to enable its users to better manage their retirement portfolios.

To this end, the service offers tools to help you manage your own investments as well as a managed service for users who would like assistance in managing their portfolios. Both services use the same methodology, with the managed service actually placing trades for you as a robo advisor would.

MarketRiders was founded in 2007, and provides recommendations that enable the management of a retirement portfolio that is diversified globally at a low cost. The service attempts to accomplish this by seeking to avoid unnecessary fees.

MarketRiders hopes to help Americans better manage their retirement portfolios by providing them with the tools to do it themselves or to hire MarketRiders to do it for them.

The minimum investment for a managed account is $1,000, and fees for access to the investment planning tools for DIY users are $14.95 monthly or $149.95 for the year.

If you choose the DIY service, you would clear trades through your own broker, with the managed service you would work with the clearing firm used by MarketRiders.

The cost for using the investment management service is 0.45% per year with a minimum monthly fee of $7 for accounts $50,000 and less in value. Accounts from $50,001 to $100,000 are charged 0.35% and those over $100,000 are charged 0.25%.

The following tools are available for free to all users on the service’s website.

  • Mutual Fund Fee Calculator
  • Mutual Fund Fee Report
  • Mutual Fund Fee Database
  • Educational Webinars

MarketRiders uses Modern Portfolio Theory, as do many other robo advisors, to formulate its investment strategy. The optimal portfolio mix for an investor is determined using inputs such as risk tolerance, time horizon, age, and investment experience.

Nine basic portfolio allocation models are used, varying from aggressive to conservative, with higher levels of bond ETFs in a portfolio the more conservative it is. No individual stocks are used in the portfolios recommended by the service.

ETFs used by MarketRiders are those sponsored by Vanguard, iShares, and State Street Bank. The default portfolio rebalancing setting rebalances your portfolio in cases when an asset class diverges from the recommended portfolio allocation by greater than 15%.

DIY users can use the service to determine if they need to rebalance and then make the changes themselves.

Rebalance IRA

Rebalance IRA was co-founded by the founder of MarketRiders.

The service offers a deeper dive into portfolio management, and is designed for investors with portfolios of $100,000 or greater.

The aim is to offer insight into your investments by helping you avoid letting your emotions get in the way of making good decisions and trading too frequently.

At the same time, it assists you in figuring out the appropriate asset allocation for your portfolio.

The service includes an annual checkup where you speak with a human advisor regarding your investment goals, portfolio performance, and any action steps to take.

There is a $250 setup fee to open an account, and a 0.50% per year fee on your assets under management. The average ETF yearly fee is 0.20% annually.

All Rebalance IRA accounts have two service representatives assigned to them, an experienced retirement investment advisor along with a well qualified retirement service rep.

The service utilizes globally diversified ETFs and real estate to build thoroughly diversified portfolios.

Portfolios are rebalanced automatically in accordance with MPT using software algorithms that take into account your individual financial circumstances.

Charles Schwab Intelligent Portfolios

The Schwab Intelligent Portfolio robo advisor has a minimum account balance of $5,000, with fees ranging from 0.08% to 0.24%.

The service offers automatic rebalancing and tax-loss harvesting for accounts with more than $50,000 invested.

Account services can be accessed via the use of a mobile app.

The service doesn’t charge any management fees or trading fees, but, as with most other robo advisors, fees are charged by the ETFs used to construct portfolios. Schwab estimates these fees as follows:

  • Conservative portfolio: 0.08%
  • Moderate-risk portfolio: 0.19%
  • Aggressive portfolio: 0.24%

The Charles Schwab Intelligent Portfolios robo advisor creates a personalized portfolio allocation recommendation based on your financial objectives, time horizon, and risk tolerance.

You can accept these suggestions or modify your portfolio by choosing different ETFs to replace the ones selected by the service. The service also features 24/7 phone and live chat for any questions users may have.

The portfolios created by the service contain fairly large cash components compared to competitors, from 6% up to as much as 29.4%. This can act as a drag on performance in times when the markets are strong.

However, the ability to talk to human advisors without needing a large account balance has been cited as a strength of Schwab’s platform compared to its rivals.

SigFig

The SigFig service offers a variety of services, including investment management, portfolio tracking, and diversified income.

The portfolio tracking tool is free to use, while the investment management function offers a simple, no frills approach to automated investment advice.

The SigFig platform works with accounts held at third-party brokerage firms such as Charles Schwab or Fidelity.

The investment advice delivered by the service is designed to improve a portfolio via the automatic balancing and diversifying of its holdings while seeking to reduce risk and lower fees.

SigFig helps you optimize your portfolio’s performance while continuing to hold it at a brokerage of your choice.

After you have linked each of your investments accounts to the service, SigFig displays your portfolio’s performance and provides investment advice based on your answers to a questionnaire it supplies.

The three levels of products SigFig offers include;
  • Portfolio Tracker — This free tracking tool brings together your complete investment portfolio in one location.
  • Asset Management — This service offers personalized portfolio allocation and rebalancing services, along with tax harvesting when appropriate. The service costs 0.25% annually, and the minimum investment is $2,000. The first $10,000 of assets is not charged a management fee.
  • Diversified Income — This service attempts to improve your yield on fixed-income investments such as CDs, bonds, U.S. Treasuries and bank savings accounts. The cost is 0.50% annually, and the minimum investment is $100,000. The portfolio attempts to generate a total return of 4% annually. It has an annual average fee of 0.50%

Vanguard Personal Advisor

Vanguard Personal Advisor Services is a full service robo advisor sponsored by the well-known Vanguard mutual fund company.

Its minimum account balance of $50,000 means that the service is not aimed at beginning investors, as opposed to robos such as Betterment, SigFig, or Wealthfront, which have no or much lower account minimums. Its fees are comparable with many of its competitors, at 0.3% per year.

All Personal Advisor Services users are granted access to human advisors, placing the service at a price advantage over a competitor such as Betterment in this regard, as Betterment’s on demand advisor access fee is .50%.

Betterment has advisors review accounts periodically and also answer investor questions.

At the $500,000 level, a dedicated advisor is assigned to your account.

As with many of its competitors, Vanguard offers portfolio rebalancing, the ability to make automatic deposits and a mobile app.

The service differs from many of its competitors by using index funds and some actively managed funds rather than relying primarily on ETFs.

While tax harvesting is available, it is performed at the request of a client rather than automatically.

WealthFront

Wealthfront’s robo advisor service has a minimum account balance of $500. Those clients with less than $10,000 invested are charged a 0% management fee, with accounts greater than $10,000 charged a fee of .25% .

The company offers direct indexing to investors with more than $100,000 to invest, a service that sets it apart from the vast majority of its competitors, including Betterment. This enables Wealthfront to utilize individual securities to search for chances to take advantage of tax-loss harvesting opportunities.

This serves as another method for making use of tax losses along with the tax-loss harvesting on a daily basis provided by Wealthfront for all taxable accounts. This makes the service attractive for investors with large taxable account balances.

Wealthfront’s fee of 0.25% after the first $10,000 is highly competitive with its competitors and its AUM is, along with Betterment, among the largest in the sector with billions invested at the firm.

The service does not support fractional shares.

It utilizes MPT in creating its automated asset allocation recommendations, which it carries out using ETFs, which are rebalanced when necessary.

While the service is very competitive on the fee front and when it comes to tax harvesting, its portfolio analysis tool is not quite as comprehensive as that of competitors such as Betterment or Personal Capital.

WealthSimple

Based in Canada, Wealthsimple is a robo advisor now available in the U.S. as well as its home country.

The service has no minimum account balance, but some of its most attractive services are not available until you have invested at least $100,000 and quality for a Wealthsimple Black account.

Fees range from 0.4% to 0.5%, with the first $5,000 being free of charge.

The service offers portfolio re-balancing, dividend reinvesting, automatic deposits, tax loss harvesting, and access to human advisors.

The service uses MPT to recommend globally diversified portfolio allocations. WealthSimple offers a socially responsible portfolio, matching its competitors Betterment and Wealthfront in this regard.

Unlike these firms, no goal setting tools are included on its platform.

Free tax loss harvesting is offered to any customer who requests this service.

Some of the features the service offers include:
  • Portfolio Rebalancing: This service involves Wealthsimple creating a diversified portfolio for you in accordance with your risk tolerance. The portfolio is automatically rebalanced when necessary.
  • Automatic Reinvestment of Dividends: This enables you to reinvest earnings from your investments, thereby benefiting from compound interest.
  • Automatic Deposits: You can set up automatic deposits and make changes to them as needed.
  • Tax-Loss Harvesting (Wealthsimple Black clients only): This service uses losses in your taxable accounts to help lower the amount of taxes you owe.
  • Financial Planning (Wealthsimple Black clients only): You can setup a session dedicated to financial planning session with an advisor supplied by Wealthsimple to make plans for meeting your financial objectives.

Wise Banyan

Self-described as the “world’s first free financial advisor,” Wise Banyan charges no account management fees and has no minimum account balance.

It should be noted that the ETFs it uses when building a portfolio do charge yearly management fees.

Also, tax-loss harvesting, a service which comes standard with most other robo advisors, is performed for a fee, making the service comparable to its competitors cost-wise for investors who desire this service from a robo advisor.

As with many other robos, WiseBanyan bases its investment algorithms on Modern Portfolio Theory. Once clients have answered some questions about their financial situation and investment goals, WiseBanyan complies a “risk score” that assists in building a recommended portfolio of ETFs that reflect the investor’s risk tolerance. You can adjust your risk score and the services’ portfolio recommendations will automatically adjust in accordance with the changes you have made.

The ETFs the company use have an average expense ratio of approximately 0.12%.

The service uses a goal-based approach to enable investors to place their money in buckets called “milestones.”

Wise Banyan gathers information from its users about their investment goals, times horizon, financial situation, and then calculates recommendations for investments that should be made in a particular milestone. Users can then make alterations to these recommendations if they choose using a bar slider.

Wise Banyan has not of yet attracted substantial investor interest in the form of AUM compared to its competitors, perhaps because of questions about whether the firm is likely to survive in the long run given its fee structure.

Best Robo Advisor Features

The best robo advisor features to look for will vary, as investors will prefer different features when selecting a robo advisor, depending on each investor’s personal circumstances and preferences. As a result, there are a variety of specific features which are likely to be attractive to certain types of investors. Designated by type of investor, these features include:

Best Robo Advisor for Beginning Investors

Low account opening minimums: Investors just starting off or with small amounts to invest can benefit from the expert advice offered by robo advisor investment services, as long as their account minimums aren’t set too high.

The winners here are robos such as Betterment, Wealthfront, WiseBanyan, MarketRiders, Acorns, SigFig, and WealthSimple.

Charles Schwab Intelligent Portfolios gets an honorable mention: although its minimum account level of $5,000 is higher than the other robos mentioned, it is much lower than that of other robos that offer the ability to speak with human advisors.

Savings apps: Investors just starting out likely don’t have a large sum of money to invest right away. Thus, services which help you build up your savings, even if only in very small amounts, can be extremely helpful in building your portfolio.

Acorns is the leader in this regard with its app serving as a handy means of encouraging you to save money every time you make a digital transaction.

Betterment has a comparable savings plan that is very competitive with Acorns in this regard.

Platforms which offer easy to follow financial tracking tools such as SigFig and MarketRiders can also help you save by showing the advantage of putting aside funds on a regular basis.

Investment allocation assistance: As a beginning investor, you may not have had time to become familiar with the various theories of investment allocation, including Modern Portfolio Theory, Fama-French, etc.

Robo advisors allow you to benefit from these theories by helping you design a portfolio aligned with them.

In addition, they typically offer automatic rebalancing services to help keep your portfolio allocation in harmony with your investment objectives and risk tolerance.

Most of the robo advisors covered in this article use some form of Modern Portfolio Theory in building a portfolio.

In addition, most use ETFs when building a portfolio, but they differ in the types of ETFs used and the management fees charged by the ETFs.

Some, such as Vanguard Personal Advisor, primarily use index funds instead.

Performing research into these factors is recommended to find the best robo advisor that aligns with your approach to investing.

Best Robo Advisor for High Net Worth Investors

Comprehensive account management: Investors managing large sums of money often have a variety of accounts at different investment firms. A robo advisor can help aggregate all of these funds for comprehensive money management.

Tax loss harvesting and optimization: Investors with large taxable accounts can benefit from tax harvesting to use against any losses incurred during the year to offset gains for the purpose of reducing your taxes.

Some of the robo advisors mentioned provide this type of service automatically, while others only do so upon client request. Make sure you understand which approach a robo takes to this service when you sign up with one to avoid any surprises.

Direct Investing: By purchasing individual stocks instead of ETFs, investors with large enough account balances to qualify for this service can reduce fees by avoiding the extra management fees (above and beyond the fees a robo advisor charges) associated with investing in ETFs or index funds.

The practice can also help improve tax loss harvesting, making it attractive to investors with large taxable accounts. Wealthfront and Personal Capital are the leaders among robo advisors currently in offering direct investing to their clients.

Best Robo Advisors for DIY Investors

Some investors want to make their own investment decisions as to portfolio allocation but don’t have the time or the ability to perform the analysis by themselves. DIY tools that analyze your investments in light of your investment objectives and risk tolerance can help you do this.

Of note among the platforms cited are MarketRiders and SigFig, which have economical DIY platforms, and Personal Capital, which offers free tools that provide comprehensive assistance when it comes to analyzing and managing your own portfolio.

Best Overall Robo Advisors for All investors

Low management fees: Beginning and experienced investors and those with small and large amounts to invest can benefit from low management fees to boost performance. While low fees should not be the only criteria you use in assessing a robo advisor, all else being equal they can help boost your investment performance.

Please note that in addition to any management fees charged by a robo advisor, fees attributable to ETFs used by the advisor must be considered, as well as any transaction charges levied when making trades.

Betterment and Wealthfront are two robo advisors with substantial AUM that feature low fees for accounts that don’t have access to human advisors.

Among those that do offer human advisor access fees are typically higher.

Vanguard Personal Advisor is a standout in the low fee category for investors who can meet the service’s minimum investment amount of $50,000, with most of their competitors clustered close behind them at somewhat higher rates.

Charles Schwab Intelligent Portfolios charges no management fees, but ETF-related fees do apply.

While this is the least expensive of robo advisors with significant AUM strictly from the standpoint of fees, because accounts are required to keep a certain amount of their investments in cash, their performance may be negatively impacted relative to their competitors in bull markets.

Portfolio rebalancing: Portfolio rebalancing to help keep your portfolio invested in conjunction with your investment objectives and risk tolerance is helpful to making sure changes in investment performance don’t knock your allocation out of balance.

While almost all robo advisors offer some form of portfolio rebalancing, you should look into the particular approach a robo takes to make sure you understand how often such rebalancing is done. Because it involves trading this can add extra fees to your account, depending on whether or not the robo you select charges transaction fees.

Tax loss harvesting and optimization: Investors with large taxable accounts can benefit from tax harvesting to use against any losses incurred during the year to offset gains for the purpose of reducing your taxes.

Some services automatically apply this feature, while others let the client choose whether to use the service or not.

Make sure you know which approach a robo advisor takes in this regard when opening an account.

Services which apply direct investing in stocks rather than exclusively using ETFs, such as Wealthfront, may create more opportunities for tax losses than those which don’t use this approach.

Human support: There are times when you may want to speak with an advisor about your account, or at least communicate by email or text chat. Typically, robos that offer the option to speak with human advisors will require higher account balances and charge higher fees.

An exception to this is the Schwab service, which charges no fees (ETF fees do apply) and has a low minimum investment threshold of $5,000. However, as mentioned earlier, the service’s insistence on keeping a portion of your account in cash at all times can affect the account’s performance, so keep this in mind when comparing Schwab to its competitors.

Conclusion

The rise of the robo advisor has provided investors with a helpful option for managing their long-term investments. Instead of being forced to choose between paying a typically substantial fee to hire an advisor to help manage your investments and doing it yourself, you can now receive assistance in the form of expert advice and technical assistance from a robo advisor at a fee that is typically significantly lower than what a human advisor would charge.

While there is no one “best” robo advisor, there are a number of factors you can analyze to help distinguish which robo is likely to be best for you.

This article has delved into what distinguishes these services from each other on the basis of the features they offer, investment approach they take, and fees they charge, which can help you narrow down your search if you are interested in investing with a robo advisor.

 

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