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Robo-Advisors came on the market in 2008 with the launch of Betterment, and the investment world was totally disrupted for the better. Robo-advisors provide a much more accessible and affordable option for investors. Robo-advisors are automated investment platforms that use algorithms to manage portfolios and provide financial advice.
Today virtually every brokerage firm is offering some type of robo-advisor service as part of their core business or in a separately management business unit. The reason is clear, they needed to adopt this new investment management service or lose business to the new robo-advisors who were rapidly growing and providing a much more affordable, accessible, and technologically advanced investment management system.
In comparing the top Robo-advisors we looked to the main strengths of robo-advisors and what services and products they offer.
- Low or No Account Minimums
- Low Fee Structure
- Personalized Investment Plans
- Features – Tax-loss harvesting, Portfolio Rebalancing, Account Types, Tools
- Investment Portfolio Offerings
Overall, our top pick is Betterment. They are the original company that began the robo-advisor movement. They provide the most complete and affordably priced option. Betterment has a user-friendly interface, low fees, and wide range of investment options. The 0.25% (or minimum of $4) advisory fee is very reasonable for their services and investment options. Betterment offers a range of investment options, including stocks, bonds, and ETFs, which are designed to provide investors with a well-diversified portfolio. With features like tax-loss harvesting and asset location, Betterment can help you optimize your portfolio for tax efficiency, which can lead to significant savings over time. Should you want one-to-one time with a Certified Financial Planner (CFP), you can for a reasonable 0.15% of assets.
Like Betterment, Wealthfront charges low fees for its investment management services. The platform charges an annual fee of just 0.25%, which is significantly lower than what traditional investment firms charge for similar services. They also provide tax loss harvesting as part of that fee. Wealthfront also offers customized portfolios that are tailored to your investment goals and risk tolerance. The platform uses a questionnaire to assess your investment objectives and risk tolerance, and then creates a personalized investment portfolio that is designed to meet your unique needs. In addition to its investment management services, Wealthfront also offers a range of financial planning tools to help you manage your finances more effectively. These tools include a retirement planning calculator, a college savings calculator, and a financial planning dashboard that allows you to track your progress towards your financial goals. Wealthfront does not offer access to human advisors.
Fidelity created a digital advisor to compete with the rise of the robo-advisors. It is called Fidelity Go®, and they combine their digital offering with access to 1-on-1 financial planning and coaching via telephone for clients that invest at least $25,000 in a Fidelity Go account. By enrolling in Fidelity Go you turn the day-to-day management of your investments over to a team of investment professionals. Access to the personalized planning & advice coaching team, Unlimited 30-minute 1-on-1 phone calls, and conversations on budgeting, managing debt, retirement planning, and more. Not surprisingly, your money is invested in Fidelity Flex® mutual funds.
E*TRADE created their own robot-advisor platform, called E*TRADE Core Portfolios. They charge a 0.35% or $1.50 Advisory Fee and offer a broad choice of investment options. They offer customized portfolios that are tailored to your investment goals and risk tolerance. The platform uses a questionnaire to assess your investment objectives and risk tolerance, and then creates a personalized investment portfolio that is designed to meet your unique needs. They do not provide tax-loss harvesting and rebalance only on a set schedule twice per year rather than based upon a particular threshold.
Vanguard Digital Advisor® isn’t intended to be a full-featured robo advisor. Fo a bare minimum of expense, they will construct a portfolio of basic index funds that will be a good match to your investment needs. Your investment options are limited to Vanguard index funds. They do provide automatic portfolio rebalancing but do not offer tax loss harvesting. Vanguard Digital Advisor® doesn’t include access to human financial advisors for this offering.
