Financial Advisers

Find the Best Robo Adviser for You

We sort through the evolving world of automated investment services, including some that offer a human touch.

As befits a rapidly growing, innovative industry, robo advisers are changing quickly. At a basic level, these automated investment advice services have similarities. Investors answer questions about their time horizon, risk tolerance and financial goals. The robo matches you with a computer-driven diversified portfolio full of low-cost exchange-traded funds, then monitors and rebalances the portfolio and, in some cases, helps with tax-efficient investing (more on that later). Most have low account minimums and charge a modest annual advisory fee of about 0.25%.

But not all robo advisers are akin—and many are sharpening their marketing in order to focus on different types of investors. Some of these automated portfolio managers are squarely aimed at first-time investors who have one investment goal. Others appeal to users with multiple financial goals and a need for financial planning. Still others target affluent people near or in retirement with complex planning issues who seek unlimited access to (live) financial advisers along with the digital investment platform.

A pandemic boost. As with video conferencing and other virtual services, 2020 was a banner year for robo ad­visers. “Digital transformation has been accelerated through the COVID epidemic,” says Brian Walsh, senior manager of financial planning at SoFi. Several industry trends were also evident in 2020. More digital advisers added socially responsible investing funds to their portfolio lineups. Ad­visers encouraged clients to consolidate their personal finances, integrating checking, savings and other bank accounts with their managed port­folios. Finally, many robos have set up tiers with different levels of service—for example, availability of human advisers is now the norm, and several have rolled out premium tiers, with higher fees, for those who desire high levels of service from certified financial planners and other qualified live advisers. Says James Burton, chief growth officer of Personal Capital, “Automated investing has a role, but there is no replacement for the benefits of working one-on-one with a trusted adviser.”

The list of robo advisers that follows is intended to help you navigate among 12 offerings in this dynamic industry in order to identify a service that might be suitable for your particular situation. Our dozen-robo list is not a ranking of the top virtual advisers. Rather, we used several criteria to construct our list, such as assets under management, a sufficient track record, the quality of the digital platform and, in some cases, investment per­formance. (We excluded TD Ameritrade and E*Trade from our list because both outfits were recently acquired by large corporations and there is still little clarity on how their robo services will be affected once the dust settles.)

A word about investment portfolio performance: For this data, we relied on studies by Backend Benchmarking, a leading independent source of robo adviser industry research. But there is generally not a huge variation in investment returns, which makes intuitive sense because pretty much all robo advisers use similar low-cost ETFs and base their asset allocations on similar theoretical assumptions to determine the optimal allocation for your preferred level of risk. There are some performance overachievers, however, which we have noted in our profiles.

Acorns

Acorns’ mission is to help new investors begin to save and invest for the future. With 8 million accounts, it has been successful in this endeavor. Acorns teaches financial literacy to its novice investors. “Education is fundamental to informing and encouraging our customers to make better decisions,” says Noah Kerner, the chief executive. The digital investing platform is basic and easy to use. Acorns steers its customers to invest spare money by offering to sweep change from everyday shopping, as well as rebates on purchases at brand partners including Apple and Lyft, into investment accounts that hold ETFs. Acorns bills using a subscription model: $1 a month for an investment account or $3 for an investment, retirement and checking account; $5 a month gets you all of Acorns’ products, including an investment account for children.

Ally Invest Managed Portfolios

Launching a robo adviser was a natural progression for Ally, which was first a purely digital bank. About 70% of its robo clients (predominantly millennials) are existing banking customers; they told the bank they didn’t want much complexity in the investment platform. “We live and die by simple,” says Lule Demmissie, president of Ally Invest.

Ally’s basic robo offering levies no annual fee and has a minimum account balance of just $100. But this “cash enhanced” allocation comes with a twist: It is aimed at anxious types, with 30% of the portfolio in cash. Says Demmissie, “Our goal is to get people invested and not let the perfect be the enemy of the good.” But it’s a suboptimal strategy for young savers. Investors with a better understanding of the risks involved should opt for Ally’s fully invested portfolio, which comes with a 0.30% annual fee.

Axos Invest

Axos’s investment portfolios are consistently among the industry’s top performers, according to Backend Benchmarking’s quarterly Robo Report. Moreover, annual fees (0.24% of assets, with a $500 account minimum) are on the low end for the industry. Portfolios offer numerous stock and bond asset classes, as well as features such as tax-loss harvesting (the practice of selling an investment for a loss in order to offset taxes on gains). Axos Invest does not offer a human adviser option. The firm was a pioneer in digital banking, and the chief executive of Axos Financial (Axos Invest’s parent), Greg Garrabrants, says the principal focus in 2021 is to integrate its digitally managed port­folio offering with its banking services. Clients with enough assets wrapped in a bundle will be offered lower fees, along with benefits such as discounts on mortgages.

Betterment

A pioneer in the robo investing industry, Betterment now has more than half a million customers with a total of $23 billion in assets at the firm. With a robust platform, reasonable fees and an interesting diversity of investment strategies, Betterment Digital appeals to first-time investors, young professionals and people over the age of 50. (Betterment’s platform is also widely used by advisers at other money management firms.) Alongside a core portfolio option, Betterment offers multiple socially responsible investing portfolios; so-called factor-based port­folios from Goldman Sachs that target various strategies, themes and investment styles in an attempt to beat conventional market-weighted indexes; a BlackRock income portfolio aimed at retirees; and a flexible option for users to create their own customized portfolios using ETFs from the core portfolio.

Betterment Digital charges a 0.25% annual advisory fee and has no investment minimum. Users can pay extra for financial planning advice from a team of certified financial planners. Betterment Premium (which has a minimum account size of $100,000 and a fee of 0.40%) provides unlimited access to CFP professionals for those with more-complex planning needs, such as looming retirement or advice on accounts held outside of Betterment.

Blooom

Defined-contribution employer retirement plans, such as 401(k)s, are frequently the largest investment account for middle-class Americans. Yet employee management of these retirement accounts is notoriously lax—poor allocation decisions, excessive cash holdings, failure to rebalance, high-cost funds and so forth. Chris Costello, chief executive and cofounder of blooom (yes, that’s how it’s spelled), saw an opportunity in this mismatch and launched a digital investment adviser dedicated to providing advice to 401(k) account holders. Based on a client’s responses to questions about risk tolerance and retirement goals, among other things, blooom algorithms construct an appropriate portfolio, using the lowest-cost funds from the menu of fund options in the client’s 401(k) investment platform. The average account size is more than $150,000, and blooom charges a flat annual fee: $45 for basic service, $120 for adding trading services and access to live advisers, or $250 for same-day access to an adviser. In 2020, blooom also began managing money for clients investing in individual retirement accounts held at brokers including Fidelity, Charles Schwab and Vanguard.

Fidelity

Fidelity has rejiggered its digital ad­visory business over the past year, sharpening the way it serves certain investors. Previously, Fidelity Go charged all clients an annual advisory fee of 0.35%. To lure more young investors, it now charges no fees for accounts with balances of less than $10,000; a $3 per month flat fee for those with a $10,000 to $50,000 balance; and a 0.35% annual fee for accounts with more than $50,000. Fidelity also launched Spire, a mobile app for access to Fidelity Go. There is no human adviser for Fidelity Go, which is principally aimed at investors pursuing a single financial goal.

For investors with multiple goals and significant planning needs, there is Fidelity Personalized Planning & Advice, with a $25,000 minimum account size and 0.5% annual advisory fee. This hybrid platform offers one-on-one live advice.

All of Fidelity’s robo portfolios, including PPA, use only the firm’s proprietary series of indexed Flex funds. Unlike the funds other robo advisers use, these have zero expense ratios; the stock offerings were the top performers among robos over the past four years, according to Backend Benchmarking’s research.

Personal Capital

Burton, Personal Capital’s chief growth officer, argues that his firm is much more than a mere robo adviser. He has a point. Personal Capital, which combines cutting-edge digital financial planning tools with live advisers, resembles a tech-savvy, old-school financial adviser. With a minimum investment of $100,000, clients can access a team of advisers; $200,000 qualifies you to be assigned two dedicated financial advisers (average firm account size: more than $500,000). The annual fee of 0.89% is high relative to other robos, but it’s lower than the usual fee for a private wealth manager, which typically charges 1% or more for accounts with less than $1 million. Suitable for people with complex financial planning needs, the service has advisers that provide guidance in areas such as retirement withdrawal strategies, Social Security and tax optimization, and estate and insurance planning. If Personal Capital piques your interest, check out the company’s digital tools, which are free and used by 2 million people.

Charles Schwab

As with Fidelity and Vanguard, Schwab has had great success in coaxing its own long-standing, self-directed brokerage clients into the firm’s two robo offerings, Intelligent Portfolios and Intelligent Portfolios Premium, which helps to explain why the lion’s share of its digital-advice clients are over the age of 50.

Intelligent Portfolios, with a $5,000 minimum account balance, charges no advisory fee. Premium, with a $25,000 account minimum, is aimed at investors who desire more-comprehensive financial planning (for instance, a new digital tool enables users to plan for up to 15 different financial goals). Premium also provides unlimited access to certified financial planners; the service charges an initial one-time planning fee of $300 and then a monthly subscription of $30.

Portfolios within these two offerings make use of an unusually extensive menu of asset classes (including master limited partnerships, bank loans and preferred stocks, for example), but investment performance has lagged in recent years, according to Backend Benchmarking. That’s due in part to relatively hefty exposure to value-priced shares and small-company stocks, categories that have struggled until recently.

SigFig

SigFig feels like a high-tech software company, and for good reason. In its first incarnation, the firm created portfolio-tracking software for Yahoo Finance, Forbes and other corporate customers.

Today, SigFig software powers the robo-investing platforms for clients of advisers at banks including Wells Fargo, Citizens Financial and UBS. But SigFig also markets robo advice directly to individual clients—and it does it well enough to be named the top robo adviser among 21 robo advisers surveyed by Backend Benchmarking in 2020. SigFig’s portfolio performance is consistently at or near the top of Backend’s quarterly investment performance survey.

You can access SigFig in two different ways: by setting up an investment account on its platform, or by keeping your assets where they are at institutions such as Fidelity, Charles Schwab or TD Ameritrade and allowing SigFig to manage the money there. The minimum account size is $2,000, and accounts of up to $10,000 are free of fees; larger accounts are charged an annual 0.25% fee and come with access to a human investment adviser.

SoFi Invest Automated Investing

SoFi made a name for itself among student-loan borrowers, helping customers refinance and manage student debt. After they pay down debt, customers are ready to start saving and, SoFi hopes, commence investing and financial planning with SoFi Invest Automated Investing. There is no fee or minimum balance for robo customers—SoFi makes money in other ways, such as through interest on uninvested cash in customer accounts and through consumer lending—and investors have access to live financial advisers (though the wait can be a few days). So this robo is suitable for first-time investors.

Vanguard

Since its launch in 2015, Vanguard Personal Advisor Services has ballooned into a $189 billion business, as measured by assets under management. Unusual for the industry, Vanguard has from the outset had a hybrid-advice model, combining digital money management with access to live advisers, all for an annual fee of 0.30% (account minimum: $50,000). “We realized early that investors would be better off in an advised portfolio if they could talk to financial advisers at a reasonable price point,” says Jon Cleborne, head of Personal Advisor Services. Clients who are near or in retirement (the average age is 57) can discuss planning issues such as Social Security optimization, Roth conversions and post-retirement health care costs with their adviser.

In 2020, Vanguard launched Digital Advisor, an all-digital service aimed at younger investors. Digital’s minimum is $3,000; the annual fee is 0.15%.

Wealthfront

Wealthfront is one of the robo industry’s last digital-only holdouts—which hasn’t harmed its growth (assets are $21 billion) or popularity with millennial professionals. Its sophisticated digital platform is a one-stop shop that smoothly integrates savings, investment management and personalized financial planning. (In 2020, Backend Benchmarking named Wealthfront the best robo for digital, or computer-generated, financial planning.) About 90% of Wealthfront’s clientele are younger than 40. “From day one, our clients have told us, ‘I pay you not to talk to me,’ ” says chief executive Andy Rachleff. “They don’t want to pick up a phone or schedule a meeting.”

During the past year, Wealthfront has launched banking features—such as high-interest savings accounts and Autopilot, a service that automates the transfer of excess cash from checking or cash accounts into clients’ investment accounts. Wealthfront has an account minimum of $500 and charges a 0.25% management fee.

Still a Need for Human Advice

The rapidly expanding robo adviser industry is a good solution for many—but not all—investors. If you have a high net worth (say, $1 million or more in liquid assets) and complex financial planning requirements, such as comprehensive retirement planning, then you may be better off sticking with a traditional registered investment adviser, an advisory firm that typically charges an annual advisory fee of about 1% of assets under management. Both RIAs and robo ad­visers have a fiduciary responsibility to the client, meaning they must put a client’s interests first and disclose any conflicts of interest. Chris Cordaro, who is chief investment officer and a wealth adviser at RegentAtlantic, a Morristown, N.J.–based RIA, says the types of affluent people and families “with a lot of moving pieces” who would benefit from a one-on-one relationship with an adviser might include a business owner or company executive with multiple types of stock compensation; a working couple with different benefit and retirement plans; or a client with a need for comprehensive estate and tax planning.

The investment piece may also look substantially different, notes Bruce Weininger, senior financial adviser at Chicago-based Kovitz Investment Group. A high net worth brings access to alternative asset classes, such as private equity and hedge funds, as well as private real estate funds that may be more tax-efficient than, say, publicly traded real estate investment trusts. Robo platforms need to be simple, with a menu of exchange-traded funds that don’t require much explanation. Traditional RIAs can customize client portfolios with derivatives to reduce risk, individual muni bonds and, says Weininger, high-yielding fixed-income niches such as bonds issued by business development companies (a type of closed-end fund that invests in small or distressed businesses).

Interestingly, the distinction between robo advisers and traditional private wealth managers is blurring a bit. Robos are adding premium tiers with financial advisers who offer differing levels of personalized service to clients. And RIAs have embraced software—and sometimes the same technology—to, for instance, automatically examine portfolios on a daily basis for rebalancing and tax-efficiency opportunities and to determine if cash balances are too high or too low. Andrew Altfest, president of Altfest Personal Wealth Management, in New York City, thinks the next frontier will be artificial intelligence combined with computing power, which will enable advisers to gain scale while providing equal or better client service. Altfest says that the AI software would serve as a “genius assistant to the financial adviser.”

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