Robo-Advisors Compared – Which is Best?

Robo-advisors provide automated investing services managing portfolios of ETFs and other funds. With customized algorithms, robo-advisors aim to offer sound returns at low fees. This guide examines the top robo-advisor platforms to consider their unique features, strengths and ideal users.

What is a Robo-Advisor?

Robo-advisors are digital platforms that use algorithms to automate portfolio management based on your financial profile. After entering details on risk tolerance, goals, time horizon and more, the robo-advisor selects investments and manages your account on an ongoing basis.

Key features robo-advisors offer include:

Automated portfolio rebalancing
Tax-loss harvesting
Low account minimums
Low management expense ratios
Convenience of passive investing

This allows DIY investors to tap into sophisticated tools previously only accessible to higher net worth clients.

Robo-Advisor Comparison

Betterment

Overview

Betterment pioneered the automated investing space and remains one of the largest independent robo-advisors with over $28 billion in assets under management. The platform focuses on long-term, tax-efficient passive investing.

Strengths

Tax-loss harvesting offered even on basic plan
Wide selection of goal-based portfolio options
Smo Smoothing withdrawals feature for retirement income
Excellent user experience and tools

Ideal For

Investors who want a complete hands-off investing solution focused on passive strategies. The tax-smart features appeal to high earners.

Cost

0.25% annual fee. $0 minimum. Premium plan adds $100k cap on tax-loss harvesting.

Wealthfront

Overview

Wealthfront relies on algorithms from leading financial experts to service over $25 billion in assets. It offers broad diversification and automatic rebalancing. Unique features include direct indexing and margin lending.

Strengths

Hyper-personalization based on user details
Direct indexing with thousands of stocks
Margin lending option at low rates
Strong focus on tax minimization

Ideal For

Tech-focused investors who believe in passive strategies optimized through advanced algorithms. Margin lending appeals to sophisticates.

Cost

0.25% fee. Account minimum $500. Tax-loss harvesting premium service costs 0.50%.

Schwab Intelligent Portfolios

Overview

From leading broker Charles Schwab, this robo-advisor has gathered over $70 billion in assets. It offers solid diversification and rebalancing paired with the full suite of Schwab trading products.

Strengths

$0 account minimum
Unlimited phone and chat support from experts
Integrated with other Schwab accounts
Wide array of portfolio options

Ideal For

Investors who want seamless access to human help alongside robo investing. Schwab clients benefit from integrated platforms.

Cost

Free for accounts with cash allocation. Schwab ETFs used have $0 transaction fee. $5,000 minimum to waive fee.

Ellevest

Overview

Ellevest aims to close the investing gender gap using algorithms focused on challenges women face like longer lifespans. Portfolios emphasize low-cost ETFs, impact investing, and tax minimization.

Strengths

Portfolios tailored to women’s needs
Impact investing options
Good fit for goal-based investing
Quality educational content

Ideal For

Women investors who want a robo-advisor that incorporates challenges like salary gaps and longer lifespans into the algorithms.

Cost

0.25% fee. $0 minimum. Premium support starts at 1% fee.

M1 Finance

Overview

M1 Finance offers customizable, prebuilt portfolios of stocks and ETFs alongside robo-investing. The platform allows mixing individual stocks with ETFs in a single pie.

Strengths

Custom stock and ETF portfolios
Easy dividend reinvesting
No management fees
Good for goal-based investing

Ideal For

Investors who want more flexibility to select individual stocks alongside automated mutual fund and ETF investing.

Cost

No management fee. Just $100 minimum to start.

Choosing the Right Robo-Advisor

Consider these factors when selecting a robo-advisor:

Account Minimum

Some require as little as $0 to get started while others expect $500 – $5,000 minimums. Smaller portfolios should evaluate minimums.

Customization Options

Do you want preselected portfolios or ability to customize with stocks and funds? Robos vary in flexibility.

Tax Considerations

Investors in high tax brackets benefit from robos with robust tax-loss harvesting features.

Human Support

If you want access to human advisors via phone, chat or virtual meetings, ensure the robo-advisor provides this.

Fees

Compare management expense ratios across firms. Some charge only for premium add-ons while others have set fees.

Mobile App Experience

The experience monitoring your portfolio daily via the app matters. Test drive some to evaluate.

When Robo-Advisors Fall Short

While robo-advisors succeed at passive investing in ETFs and basic rebalancing, limitations exist:

Require large sums to unlock full value – not ideal for smaller portfolios
Struggle to model complex needs like trusts, estates, and businesses
Algorithms slow to respond to changing markets and new conditions
Lack flexibility to implement creative investment ideas
No assistance with comprehensive financial planning needs

For these needs, human financial advisors maintain advantages over robo-advisors. Hybrid options combining both digital management with advisor access provide a balance.

Conclusion

Robo-advisors excel at providing low-cost, optimized and automated passive portfolio management suitable for a wide range of investors. Selecting platforms aligned with your account size, interests in customization, tax considerations and desire for human assistance allows matching robo-advisor capabilities with your needs. Evaluate robo-advisors closely on provided features and fees to determine the best option.