If you’re a novice, computerized advice may make sense. For others, it’s a tougher call. Thinkstock By Nellie S. Huang, Senior Associate Editor From Kiplinger's Personal Finance, August 2015 Can a machine dispense good investment advice? Plenty of people seem to think so. As the number of online investment advisers has swelled in recent years, so has the pot of money they manage. Financial-services giants Charles Schwab and Vanguard Group recently joined such upstart sites as Betterment, SigFig and Wealthfront in dispensing customized, computer-generated financial advice. Vanguard’s offering officially launched in May, but from the time testing began in early 2013 through early June, it had already pulled in $7 billion. Schwab’s online advisory business, which opened in March, attracted more than $2.6 billion in assets in just over three months. “It just goes to show there was this massive unmet need,” says Naureen Hassan, head of Schwab Intelligent Portfolios, the firm’s online advisory business.See Also: Best Online Brokers Robo advisers (a term the industry detests) use technology to generate investment advice and manage your portfolio. You answer a few easy online multiple-choice or fill-in-the-blank questions that touch on your risk tolerance and time horizon. In seconds, a program analyzes your answers, applies modern investing theories about diversification that include gauging thousands of possible risk-reward outcomes, and—presto!—out comes a portfolio designed for you. Because keeping costs low is a key objective, robos mostly use low-fee exchange-traded funds to build portfolios. In most cases, the firms charge a management fee of 0.25% to a bit less than 1% a year, based on the amount you have with them (some charge a flat annual fee). You also have to pay the expenses charged by the funds you own. But in most cases, you pay no commissions when you trade ETFs. No two robo advisers are exactly alike. Some are fully automated. With others, you can speak with an investment professional by phone or online chat if you need personalized advice. And still others provide a nearly full-service experience by matching technology with a real adviser. Some robos are better for young, inexperienced investors with small portfolios, and others are geared toward investors in their forties and fifties. Below, we tell you where to go, depending on where you are in your investing life cycle. Advertisement If you're starting out According to the stereotype, millennials expect instant gratification and they prefer to be spoon-fed. And they love a good bargain. We mean no offense, but if any of that is true, robo advisers are perfect for them. Luckily, young investors have a cornucopia of firms from which to choose. Fees at Betterment and Wealthfront are low; TradeKing Advisors charges nothing the first year and keeps fees low thereafter; and WiseBanyan charges nothing at all (its plan is to make money in the future by charging fees for financial services that it expects its younger clients will need as they get older). And none of these levy trading commissions. You have to transfer your money to each of the firms if you want them to invest it for you (other firms use a major brokerage, such as Fidelity or Schwab, as their custodian and clearinghouse for trades; more on them later). For a 25-year-old just starting out, Betterment is best. It has no minimum to open an account (beyond the $10 required to set up an electronic transfer from your bank). Its databank has more than 400 portfolios, all of which invest in ETFs. The typical Betterment portfolio costs 0.14% in underlying annual expenses. On top of that, you have to pay the firm a management fee that runs from 0.35% a year on assets of less than $10,000 to 0.15% for accounts of more than $100,000. Another plus for young investors is that Betterment’s algorithms tend to spit out stock-heavy portfolios, which is the way to go for someone with a long-term horizon. For example, for a 25-year-old saving for retirement who has $5,000 to invest, Betterment recommends a portfolio with 90% devoted to stocks, with half of that in foreign companies. Most of the U.S. holdings are ETFs with a value tilt. Advertisement Runner-up is WiseBanyan, which charges no management fee and requires just $10 to start. One drawback: Although the one-year-old firm is growing quickly, it managed just $30 million at last report. That pales in comparison with the $2.3 billion at Betterment. And frankly, size is a concern in a fledgling industry in the midst of an aging bull market. When stocks head south, as they eventually will, and investors start to bail out, as they are wont to do, the smallest firms may not survive. Whither the other players? Both TradeKing and Wealthfront charge low fees. But each firm has a $5,000 minimum, which may be a big hurdle for someone just starting out. If you're building wealth As people move past their thirties, they may have a portfolio made up of myriad pieces, such as a taxable account, an IRA to which they are currently contributing and one that was rolled over from a former employer’s 401(k) plan. On top of that, they may have multiple goals, such as saving for a bigger house, kids’ educations and their own retirement. What’s more, all that money may be held by multiple firms, so hiring a robo adviser may mean you’ll have to move your money. If so, be sure to consider the potential tax consequences. Some online investment advisers actually have arrangements with the big brokerage firms. SigFig, for instance, can manage your money in an account at Fidelity, Schwab or TD Ameritrade. Its minimum is $2,000, and it charges 0.25% per year. Its portfolios are appropriately aggressive, but we were surprised to find that we got the same asset-allocation recommendations for three different kinds of investors. (We may have encountered a technical glitch; SigFig says that its service recommends 20 different portfolios.) FutureAdvisor can connect through Fidelity or TD Ameritrade. It has no minimum, but its 0.50% annual management fee is on the high side. Advertisement And then there are the brokerage firms themselves. Fidelity, E*Trade and Schwab offer their own version of online investment advice (if you already have accounts with any of them, all the better). Fidelity’s option, called Portfolio Review, analyzes your holdings and makes recommendations about how to fix them. Then with a click of a button, you can buy and sell based on those suggestions; some moves may involve a commission, but the tool itself is free. E*Trade’s adviser takes a tiered approach. It offers a “minimal help” service (just allocation guidance with some investment picks) and a “some help” service (a free recommended portfolio of ETFs or mutual funds). Schwab’s Intelligent Portfolios is worth a special mention, in part because it’s new, a little different and growing like gangbusters. It’s free—no management fees and no trading commissions—and it requires just $5,000 to start. But it comes, in our view, with one hitch: The portfolios that Schwab recommended in response to our queries were among the most conservative of the bunch. Schwab advised even the most aggressive investor, a 25-year-old saving for retirement, to hold only 70% in stocks, with the remainder in bonds (21.5%) and cash (8.5%). (When we asked Schwab about this, it said that its “broadly diversified approach will serve investors well through inevitable periods of volatility, while also providing an appropriate amount of long-term growth potential.” It also told us that its most aggressive portfolio allocates 94% to stocks, a reasonable figure.) In any case, it’s a good no-fee, low-cost option for investors who need guidance. If you're in the homestretch For people near or in retirement, it is often the point at which even those who have never had an investment adviser want a sit-down with a pro. That’s where the hybrid robos come in. They mix complex algorithms with a human touch. Advertisement Vanguard’s new Personal Advisory Services program stands out. You need $50,000 to start. For 0.30% of assets a year, you get access to 300 certified financial planners employed by Vanguard. You typically consult with them by phone, video or e-mail, though you can also drop in at one of the firm’s offices, which are located in Charlotte, N.C.; Scottsdale, Ariz.; and Malvern, Pa. “At the heart of the advice is the investment portfolio, but comprehensive true financial planning is available,” says Karin Risi, head of the Vanguard program. You begin the process by answering 15 questions online. The computer generates a portfolio, which an adviser then customizes for you. Naturally, the portfolios toe the Vanguard line, which means they contain only index funds. The adviser will give you holistic advice on all of your investments (even those held in accounts at other firms) but if you want the firm to handle all of the monitoring, trading and rebalancing, you’ll need to move all of your accounts to Vanguard. If you come in with a few holdings you just can’t bear to part with—say, some shares of Apple or Dodge & Cox Stock fund—the adviser will build a portfolio that incorporates those securities, says Risi. Find your match Best for conservative investors. Each of Schwab’s Intelligent Portfolios holds cash, which might appeal to a risk-averse investor. In our test, Schwab prescribed a portfolio with 70% in stocks, 21.5% in bonds and 8.5% cash for a 25-year-old saving for retirement. Best for adventurous investors. Hedgeable’s portfolios hold alternative investments, such as master limited partnerships and bitcoins, as well as the usual suspects. “Accredited” investors (individuals with $200,000 of annual income, couples with $300,000 of income or clients with $1 million in investable assets) can buy a stake in firms that have yet to go public. There is no minimum, and fees are between 0.30% and 0.75%; the more money you invest, the lower the percentage. Best for investors who don’t want to move. You can stand pat if you currently do business with a big broker. Fidelity, E*Trade and Schwab offer several levels of advisory services, whether you just need suggestions of what to invest in or you want someone to handle everything for you. Minimums and fees vary, depending on the track you take. At Fidelity, the Portfolio Review tool is free, but it’s up to you to monitor, rebalance and execute the trades, for which you may incur fees. Best for investors who only have an employer-sponsored retirement plan. Blooom (yes, that’s the correct spelling) patches into your 401(k) account, your 403(b) or your federal-government Thrift Savings Plan. It invests in the lowest-cost funds and monitors, rebalances and shifts the asset allocation over time. Of course, you could just invest all of your money in a target-date fund, if your plan offers one, and save yourself the $15 monthly fee for balances of $20,000 or more ($1 a month for balances of less than $20,000).