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By Noel Dávila
March 1, 2021
A man sits across a smiling robot using a laptop, there is a snow globe with a bull inside on the table
Jose Velez / Money

Billions of dollars are in the digital hands of robo-advisors, automated investment advisors that act based on advanced portfolio management algorithms. While they are automated, the strategies they employ are developed by human experts.

Robo-advisors are typically user-friendly and less expensive than traditional financial advisors, making them a welcome option for new and seasoned investors.

Money’s Best Robo-Advisors of 2021

Bank/Institution Account Minimum Features Learn More
Betterment $0 Fees: 0.25%
Human advice: Yes, but will incur a charge
Read Full Review
Vanguard $3,000 Fees: Between 0.15% and 0.20%
Human advice: No
Read Full Review
SoFi $0 Fees: None
Human advice: Yes
Read Full Review
M1 Finance $100 Fees: None
Human advice: No
Read Full Review
Wealthfront $500 Fees: 0.25%
Human advice: No
Read Full Review
Personal Capital $100,000 Fees: 0.89% or 0.49% for accounts over $1 million
Human advice: Yes
Read Full Review
Acorns $1 Fees: $1 to $5 per month
Human advice: No
Read Full Review
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Best Robo-Advisors Reviews

Betterment

If complicated enrollments are deal breakers for you, Betterment offers a user-friendly process, ideal for beginner investors who want to get started with a small amount and have access to financial goal-setting and retirement-planning tools.

Setting up an account is relatively straightforward, with the usual risk-related questionnaire substituted by asset allocation suggestions. After that, you can adjust your risk tolerance as you see fit. Also, Betterment’s platform is sufficiently intuitive that it will let you know if any changes will impact your taxes.

Betterment’s robo-advisor requires a $0 account minimum and charges an annual fee of 0.25% of your assets under management (AUM). The company also offers responsible investing through one of its portfolio options.

Pros:

  • Zero minimum account balance
  • Easy account set-up
  • 0.40% annual percentage yield (APY)

Cons:

  • Access to human advisors increases the fee to 0.40%
  • Human advisors also require a $100k minimum balance
  • You cannot borrow against your positions

Other Notable Features

For a 0.40% annual fee, you can get in-depth investment advice from a team of certified financial planners (CFPs) under Betterment’s premium plan. However, you’ll be required to maintain a minimum balance of $100,000.

Betterment also offers a chance to look into their portfolios’ historical returns going back 15+ years. This allows you to evaluate their long track record and decide if Betterment is the right investment platform for you.

Vanguard

Vanguard Digital Advisor offers entry-level service at a low cost for new investors looking for fully automated investing. While this robo-advisor is still in its early stages, the service provides tools for retirement planning backed by Vanguard’s reputable investment infrastructure.

Vanguard Digital Advisor lets you build a retirement plan using four low-cost and low-requirement Vanguard exchange-traded funds (ETFs). The advisor’s algorithm recommends an allocation model based on your specific needs and goals.

This fully-automated robo-advisor relies solely on its tech to deliver results without any input from traditional human advisors.

Vanguard Digital Advisor requires a $3,000 account minimum and charges an annual fee of 0.15% to 0.20% of your assets under management (AUM).

Pros:

  • Access to Vanguard’s investing infrastructure and expertise
  • The debt payoff calculator is a useful tool to tackle loans
  • Low investment expense ratios and no additional fees besides the annual advisory fee

Cons:

  • The program has just started, so some features and account types are under development
  • Tax-loss harvesting is not available
  • Retirement is the only goal you can plan for at the moment

Other Notable Features

Vanguard Digital Advisor can access individual brokerage accounts, individual retirement accounts (IRAs), and 401(k)s.

While the service doesn’t include human advisors, Vanguard Digital Advisor offers customer support via phone during business hours and across social media platforms.

SoFi

SoFi’s Automated Investing is a no-cost robo-advisor. That means it is a free product — zero fees and no account minimums. You’ll only be charged if and when you decide to close your account.

If you’re looking for a robo-advisor that has a lot to offer, SoFi puts low-cost ETFs within your reach along with free access to traditional human advisors.

Furthermore, SoFi’s Automated Investing offers free career coaching for clients who invest at least $20 a month. The lack of fees coupled with the educational resources makes this robo-advisor stand apart from its competitors.

SoFi’s Automated Investing requires a $0 account minimum and charges 0% of your assets under management (AUM).

Pros:

  • Free access to traditional human advisors
  • Zero account minimum and zero management fees
  • Automatic rebalancing performed every quarter

Cons:

  • Tax-loss harvesting is not available
  • Does not support 401(k) accounts
  • Does not offer a socially responsible investment strategy

Other Notable Features

SoFi’s Automated Investing offers the choice of 10 different investment strategies with varying degrees of risk. If you’re a new investor and you’re unsure which strategy will work for you, just answer a questionnaire relating to your income and goals, and SoFi will recommend a strategy that fits your needs and wants.

M1 Finance

M1 Finance’s robo-advisor offers all the perks of automation combined with high customizability. Unlike other companies on this list, M1 lets you build your portfolio using any combination of individual stocks and low-cost ETFs. This affords you a level of control that is rare in the robo-advisor market.

After choosing your investment portfolio — or let the company choose for you — M1’s algorithm will execute trades on your behalf. The advantage of this robo-advisor is that you can decide your level of involvement and let the technology handle the rest.

M1 Finance’s robo-advisor requires a $100 account minimum and charges 0% of your assets under management (AUM).

Pros:

  • Zero management fees
  • Ability to trade fractional shares
  • No fees for depositing or withdrawing from a connected bank account

Cons:

  • No access to human advisors
  • Accounts with no activity during a 90-day period will be charged a fee
  • Cannot time trades

Other Notable Features

M1 Finance’s platform uses visual representations to help you better understand how your portfolio is working. Using pie charts, you can better visualize how your investments are distributed and how well they’re performing. While the pie is designed to run on its own, you can make adjustments as you see fit and add more funds to your portfolio at any time.

Wealthfront

Wealthfront is well-equipped to help you reach your long-term goals thanks to an algorithm called Path. Developed by a team of PhDs, Path is free of charge and makes calculations to let you know how to reach life achievements such as paying off your home, saving for your kids’ college education, and retirement.

To make the most out of this tool, you must link your financial accounts. With that information at hand, the algorithm will make projections and recommend steps to achieve your financial goals. Wealthfront’s Path is available to customers even before they start investing.

This robo-advisor requires a $500 account minimum and charges an annual fee of 0.25% of your assets under management (AUM).

Pros:

  • Robust assistance for setting goals
  • Tax-loss harvesting performed daily
  • Free financial planning tool
  • Automatic rebalancing

Cons:

  • No access to human advisors
  • Cannot trade fractional shares
  • Line of credit is only available for accounts with a minimum of $25,000

Other Notable Features

Depending on your risk tolerance, Wealthfront offers 20 different portfolios with investment options consisting mostly of low-cost ETFs, along with real estate, foreign stocks, among others. Rebalancing is not done regularly. Instead, the algorithm determines if a rebalance is necessary to stay on track with the investment strategy. Also, with tax-loss harvesting performed daily, Wealthfront makes it a point to strive for tax minimization.

Personal Capital

For investors who want unlimited access to traditional human advisors, Personal Capital’s investment management service offers a hybrid approach. You get the chance to both automate and be hands-off with your investments, all while relying on the expertise of advisors who can weigh in on the nuance of your particular financial situation.

That said, Personal Capital caters to high net worth individuals who have the means to invest over $100,000. If you’re a novice investor with a humble balance, you might consider looking elsewhere for your automated investment needs.

Personal Capital’s robo-advisor requires a $100,000 account minimum and charges an annual fee of 0.89% of your assets under management (AUM). Accounts over $1 million are charged 0.49%.

Pros:

  • Unlimited access to human financial advisors
  • Free financial planning tool included
  • Tax optimization aimed at minimizing tax liability

Cons:

  • Very high account minimum at $100,000
  • High fees at 0.89%
  • Wealth management service is paid separately

Other Notable Features

Tax optimization is a part of Personal Capital’s investment plan. It involves tax-loss harvesting, allocating assets where they’ll be less taxable, and choosing the most efficient investment vehicles to minimize taxes. The result is higher returns with less tax liability.

Also, Personal Capital offers three tiers of service depending on your balance: Investment Services ($100k to $200k), Wealth Management (over $200k to $1 million), and Private Client (over $1 million).

Acorns

Acorns is a simple, user-friendly mobile app that allows you to start investing in no time. You can open an investment account with just one dollar and finish setting up in 10 to 15 minutes.

One of Acorns’ most useful features is the ability to link credit and debit cards to the account and round up all purchases to invest the difference.

You can also specify a monthly amount to be deducted from your checking accounts and invested through Acorns. You can also fund your account with a savings account. This is the very definition of “set it and forget it.” The best part is that anyone can get started with a small sum of money.

Acorns’ robo-advisor requires a $1 account minimum and charges a monthly fee of $1 to $5. It must be noted that, while this fee doesn’t seem exorbitant, it is more expensive than other robo-advisors when you convert it to a percentage (most other robo-advisor fees are percentage-based).

Pros:

  • You can get started with a $1 minimum investment
  • Rounding up purchases and investing the difference
  • No fees besides the monthly dollar amount

Cons:

  • More expensive than similar services
  • Tax-loss harvesting is not available
  • Can’t trade individual stocks

Other Notable Features

Acorns offers five types of portfolios, ranging from conservative to aggressive. You can either choose a type of portfolio or let Acorns recommend one. Once you’re set, you can only invest within that particular portfolio. While it offers little customization, the convenience and simplicity of the Acorns investing platform should incentivize you to not only invest but also remain hands-off.

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The Pros & Cons of Robo-Advisors

Low-cost, automated investment strategies have made robo-advisors an attractive option for new investors looking to access the markets and grow their personal finance. That said, some robo-advisors rely exclusively on portfolio management algorithms with little to no input from human experts.

“I would say that the two biggest pros of robo-advisors are the costs and the minimums,” says David Goldstone, Manager of Research at Backend Benchmarking. “They have expanded access to financial advice to large swaths of the population. Young and lower-wealth investors can access professional management and set up a basic financial plan that puts them on track to reach longer-term goals.”

Despite the perks offered by robo-advisors, whether your investments will benefit from them depends entirely on your financial needs and ambitions. “What you gain in low fees and scalability, you lose in customizability of the portfolios. So, it really depends on the kind of investor you are,” says Goldstone.

With these potential shortcomings in mind, we’ve put together a list of pros and cons.

PROS CONS
• Simple process for opening an account. • Lack the real-life experience of human financial advisors.
• Low account minimum balances and low-cost portfolios. • Little to no investment customization.
• Automated investment strategies. • Same risk as any other kind of investment.
• User-friendly platforms for less-experienced investors. • No one-on-one interaction.

Robo-Advisors vs. Traditional Financial Advisors

Robo-advisors are the result of investment practices and knowledge accumulated throughout the years by human financial experts. But how do these algorithms measure up against the original financial advisors?

For starters, robo-advisors are designed to find certain growth opportunities as part of their algorithm. Since they’re automated, they can do this more effectively than traditional advisors and without the potential for human error.

On the flipside, there is a lot of nuance and gut-reactions that go into making successful stock moves, and that can only come from a seasoned human expert at the helm. Some investors who have a more complicated financial situation and a higher net worth will require a portfolio tailored to their specific needs. Personal advisor services can better meet this need for customization.

“It’s hard to generalize across the board, but I would say that that kind of one-on-one, traditional advisor approach is not typically replicated in digital advice products,” says Goldstone. “The majority of the time, you’re not going to get as much attention from a robo-advisor, especially if it’s a digital-only robo-advisor than you would at a traditional advisor,” he added.

Management Fees Associated with Robo-Advisors

Robo-advisors typically cost less than traditional human advisors — sometimes half the price or even less. Another key difference is that human advisors may charge an hourly rate or an annual retainer instead of the percentage-based system used by robo-advisors. Robo-advisors typically cost less than traditional human advisors.

Most companies that provide robo-advisor services charge annual management fees, typically consisting of 0.25% to 0.50% of your assets under management (AUM). Some charge upwards of 0.80%. It’s also worth noting that some financial institutions charge zero management fees.

“Lower management fees are a good thing,” says Goldstone. “The fees you pay are one of the largest drivers of the long-term performance of most accounts. [That’s why] management fees play a significant role in the long-term returns of an account,” he added.

If your robo-advisor offers the option of occasionally consulting with a traditional advisor, naturally, the management fee will be higher. Depending on your particular provider, management fees may be charged monthly or quarterly and prorated in some cases.

Robo-Advisor Tax-Loss Harvesting

Robo-advisor tax-loss harvesting aims to help investors pay the least amount of taxes while staying within the guidelines put forth by the Internal Revenue Service (IRS).

Tax-loss harvesting is achieved through the automated sale of securities in a portfolio. These sales incur losses that offset gains on other investments that would be taxed under different circumstances.

Essentially, by harvesting tax losses, an investor reduces their taxable capital gains and, as a result, reduces their tax liability.

With robo-advisors, tax-loss harvesting is performed automatically because the algorithm is designed to look for these opportunities at all times. This gives robo-advisors an advantage over traditional human advisors.

“With the introduction of automation and technologies that robo-advisors are using,” says Goldstone, “it’s now possible to automatically detect those situations, sell positions at a loss, and harvest that loss whenever it happens, as opposed to just looking once a quarter or once a year for these types of opportunities.”

FAQs About Robo-Advisors

How do robo-advisors work?

Robo-advisors will work on your investments according to your particular needs, budget, and risk tolerance.

After opening up your account, your robo-advisor will set you up with a diversified portfolio that reflects your financial goals. Your advisor will then monitor the market in search of opportunities to buy and sell assets to help you meet those goals.

How do I choose a robo-advisor?

Make sure a robo-advisor is aligned with your financial goals before you sign up.

Typically, many robo-advisors offer similar investment portfolios with index-based mutual funds and exchange-traded funds (ETFs). Where the big differences lie is in the costs and the features.

If a robo-advisor charges management fees that get in the way of your financial goals, consider taking your money elsewhere. Also, take a close look at all the features and benefits that are being offered. Some features such as tax-loss harvesting might help your returns, depending on your tax situation.

Can robo-advisors beat the market?

To “beat the market” can mean different things, depending on who you ask. For some, it can be outperforming indices like the S&P 500 or releasing earnings that exceed the expectations of analysts and stock market experts.

That said, robo-advisors are capable of “beating the market,” but some would argue that’s not exactly the goal.

“Most robo-advisor portfolios aren’t really designed to outperform the market intentionally,” says Goldstone. “The perspective of many investors is that you really want to optimize for long-term growth. In fact, there’s a lot of evidence of the fact that it’s extremely difficult to outperform the market, in a long-term approach.”

What does it cost to use a robo-advisor?

Some robo-advisors don’t have account minimums, so anyone can start investing with as little as $1. Other financial institutions have account minimums that range anywhere between $0 and $100,000.

Furthermore, there are other costs to consider, such as management fees. Management fees are usually a percentage of your assets. In some cases, financial planning services are included, but sometimes they incur a fee.

Is a robo-advisor worth it?

Robo-advisors offer quality portfolios at a low cost. They are also user-friendly, so all kinds of investors can benefit from them regardless of their proficiency.

That said, it’s important to always keep in mind that while top robo-advisors offer useful tools, they are not human financial advisors. When it comes to investing, there are many nuances and complexities better suited for a human mind than an algorithm.

Keep in mind your financial goals when making a final decision.

Summed Up List of the Best Robo-Advisors

Methodology

To put together our list of the 7 Best Robo-Advisors of 2021, we researched a wide range of financial institutions.

Companies must offer valuable features, reasonable fees, and competitive investment strategies to meet our requirements.

These companies were also rated based on their algorithm functions, human advisor availability, account minimum requirements, and overall customer experience.

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