If you want to invest but don’t care to pick stocks, mutual funds, or ETFs for your account, a robo-advisor could be a good fit for you. Robo-advisors are a category of financial advisor that relies on automation technology to help keep your investments aligned with your personal financial goals. Robo-advisors bring a combination of comfort, knowing that an expert chooses your investments without paying the high fees of a traditional financial advisor.
Here’s a closer look at the best robo-advisors on the market today to help you decide which could best meet your unique needs.
|Account Minimum||Management Fees||Bonus||Best For|
$100 initial deposit requirement for taxable accounts or $500 for retirement accounts
Commission-free and fee-free for most accounts
New customer bonus depending on current available promotions
0.25% annual fee
Various promotions available
No minimum for Digital plan ($100,000 minimum for Premium plan)
0.25% annual fee for Digital plan or 0.40% for Premium plan
Check for currently available signup bonus promotions
0.30% annual fee
No management fees for first three months (limited time offer)
Traditional discount brokerages
No account minimum (certain investments have minimums)
No management fee
Promotions may be available for a bonus deposit at signup
0.49% to 0.89% annual fee
Varies based on source and account balance
Rotating promotions for new customers and large deposits
M1 Finance is a robo-advisor offering highly customizable automated portfolios as well as expert-designed portfolios. There’s no minimum balance requirement outside of an initial minimum deposit of $100 ($500 for IRAs). Standard accounts have no recurring fees and require no trading commissions. A premium program is available for a $125 subscription per year, which includes an additional daily trade window in the afternoon, automated funds transfers, and custodial accounts.
Investment accounts are made up of portfolios called Pies, and each investment is called a Slice. Slices can be stocks or ETFs, and each Pie can hold up to 100 Slices. You can choose to allocate a percentage of your portfolio to each investment.
You can pick a fine-tuned portfolio of your own, which M1 automatically keeps in balance. Expert Pies are pre-designed to follow specific themes and may require an annual fee. Expert Pies are good for new investors who don’t know much about the markets and expert investors who clearly understand how they want their portfolios allocated.
Wealthfront is a robo-advisor ideal for investors who are new to investing and want to keep costs low while having access to powerful automated features. New customers fill out a brief questionnaire explaining their investment goals, risk tolerance, and current financial situation, and Wealthfront suggests a low-cost portfolio optimal for investors like you.
All account features are included in a 0.25% annual management fee. No additional Wealthfront fees or trading commissions are required, though, like other robo-advisors, you may pay fees through one of the low-cost ETFs in your account.
Investing features include tax-loss harvesting, automatic rebalancing, and the option to focus on sustainable investments. If you’re okay with the 0.25% fee, Wealthfront’s combination of features makes it an excellent choice for many investment needs.
Betterment pioneered the modern robo-advisor industry and is one of the largest robo-advisors in assets under management (AUM) and number of customers. Betterment features an easy-to-use automated investing platform that works well for beginners or anyone looking to invest hands-off.
The standard account is the Digital plan and requires a 0.25% annual management fee. The Digital plan has no minimum balance requirements, so it’s a great way to test Betterment before making a bigger commitment. With $100,000 or more, you can upgrade to a Premium account with a higher 0.40% annual fee. Premium accounts also include human financial advisor access.
Betterment core features include tax-loss harvesting, portfolio rebalancing, socially responsible investing, and crypto portfolios, with about a dozen other expert-curated portfolios on the menu.
Complete investment newbies who don’t want to learn the ropes of stock picking may find Betterment a good fit. Betterment portfolios are based on a set of quick signup questions so they can help you invest in a way that’s ideal for your finances.
Core Portfolios are the robo-advising product from E*TRADE by Morgan Stanley. Core Portfolios give you access to convenient robo-advising tools alongside other E*TRADE and Morgan Stanley accounts. In addition to coming from some of the most recognizable Wall Street brands, E*TRADE is noteworthy for its high-quality mobile experience.
Core Portfolios are available with a $500 minimum opening balance and require a 0.30% annual fee. That’s not the cheapest, but it also includes access to customer support and licensed investment advisors at no extra cost. You can call for help 24/7 or visit a physical E*TRADE branch for additional support.
If you already invest with E*TRADE or want to have both robo-advising and other investment accounts under one roof, E*TRADE may be a good fit.
Q.ai is a unique robo-advisor driven by artificial intelligence. Rather than invest your funds in a set of ETFs, you choose investment themes, and Q.ai picks stocks it believes will be top performers in those areas. Sector, seasonal, and risk-related topics are among the many “Investment Kits” (the Q.ai term for portfolios).
Owned by Forbes, Q.ai analyzes a high volume of financial and news data to predict hot stocks rather than spending time chasing stock tips. Portfolios are updated regularly based on the Q.ai analysis algorithms.
As of this writing, Q.ai charges no investment management fees and requires no specific minimum for an account. However, your investments in Q.ai may have a minimum, ranging from $25 to $250. For robo-advising with single stocks, Q.ai offers a unique and compelling product.
Personal Capital is a hybrid robo-advisor where your investments are managed by both a human and a computer. Unlike most other robo-advisors, all Personal Capital paying customers have access to a professional financial advisor. Personal Capital is a good path into robo-advising for those apprehensive about letting a computer have too much control over their portfolios.
Even if you’re not a paying customer, you may want to sign up for Personal Capital’s free investment analysis app. This free app helps you analyze your portfolio, examine investment fees, and optimize your investments to align with your goals.
The big negative is that the advising service requires a hefty $100,000 minimum balance. Fees are also higher than some competitors, starting at 0.89% and going down as your balance increases. If you have enough cash to invest and don’t mind the higher cost for having access to a human, the Personal Capital investment service could be right for you.
Short for ‘Social Finance,’ SoFi is a banking, lending, and investment platform that stands out for its extremely low costs (often fee-free) and user-friendly investment interface. Investors can start with as little as $1, and SoFi charges no management fee for the service. You’ll only pay the regular ETF fees you would pay with any advisor for the investments you hold.
The app uses an intuitive signup process and encourages users to invest for specific future goals. SoFi members also have free access to a financial advisor to ask questions about your investment strategy and ensure you’re on the right track.
The low costs and easy-to-use platform make SoFi a great choice for anyone looking to invest automatically without paying any management fees to an advisor. If you enjoy it, the full suite of banking and investing products features the same low-cost, user-friendly experience.
To pick the best robo-advisors for this article, our team did in-depth research on a range of robo-advisors with a focus on cost, available investments, user-friendliness, and what types of investors may find the best experience with each particular platform. While every investor has unique needs and goals, there’s likely a good fit for you on this list.
How to choose a robo-advisor
No robo-advisor is perfect for everyone, but there is a best robo-advisor for you. When choosing a robo-advisor, it’s important to focus on costs and investment features. If you get those right, the rest will likely fall into place.
Cost is extremely important to your investment results in the long term. While a fee of 0.25% or 0.50% may not sound like much, it can easily add up to an effective cost of tens of thousands of dollars or more in your investment account over a period of decades.
Next, you’ll want a robo-advisor you can trust and understand how to use. Picking the most high-tech platform may not make the most sense if you’re not comfortable with computers. Your level of investment knowledge and tech-savvy can help guide you into the right investment platform for your needs.
When should you use a robo-advisor?
You may also be wondering, do I need a robo-advisor at all? Many investors are knowledgeable enough to pick their own combination of investments without relying on an advisor. Others are happy to pay a premium to have someone else handle all of their investments, with occasional financial advisor check-ins at most. Robo-advisors are ideal for those who fall between the two.
If you’re okay paying a small fee (though some are free) and know a little about investment risk and your goals but not how to pick investments, a robo-advisor is likely right for your needs.
Robo-advisor versus financial advisor
Traditional financial advisors are finance professionals who help you manage your money and choose investments. Traditional advisors are best for those who want a completely hands-off experience, but you will likely pay a little more for that level of service.
Robo-advisors bring the investment expertise of financial advisors to an unlimited number of users through the internet, so they can charge a lot less than traditional advisors. You’ll generally get less personalized service, but the portfolios and investments are often based on some of the best and most tested investment strategies around.
What are the disadvantages of using a robo-advisor?
There are few downsides to robo-advisors. Certain platforms are more costly, which is a negative, but you can find no-cost robo-advising from several companies. As with human advisors, high fees paid to robo-advisors can take a huge chunk of your long-term investment gains.
Robo-advisors also rely on you knowing how to find and use the apps. If you’re confident with online banking, you shouldn’t need many more skills to use a robo-advisor. However, if you consider yourself tech-illiterate, robo-advising may be intimidating.
There’s also a risk that your portfolio won’t perform as expected. The robo-advising platforms disclose that there are no guarantees in investing. For example, you could miss out on investment profits if you pick a robo-advisor with poor performance compared to rivals. But, in most cases, robo-advisor portfolios are very similar.
Frequently asked questions (FAQ)
What is a robo-advisor?
A robo-advisor is an investment platform where investors are assigned to professionally designed portfolios based on questions about their investment goals and assets.
How do robo-advisors work?
Most robo-advisors ask about your age, target retirement age or goals for the account, and how you would respond to various stock market conditions. Based on the results, you are assigned a portfolio of low-cost exchange-traded funds (ETFs) ideal for your goals. A computer keeps your investment account on track and aligned with your target allocation.
How many funds should you be invested in?
There is no perfect number of investment funds to own. Some simple target date fund investors may buy only a single mutual fund or ETF, while others with more complex portfolios may hold dozens of funds.
Is a robo-advisor good for beginners?
Robo-advisors are an ideal investment platform for new investors. You only need to know enough to connect your bank account and answer a few questions about your finances. The robo-advising system assigns you to specific investments, so you don’t have to research or choose them yourself.
How much does a robo-advisor cost?
Most popular robo-advising platforms have fees up to around 0.89% and as low as 0%. Most advisors charge around 0.25%, though several advisors charge no management fees.