What Is A Robo-Advisor? Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure
Advertiser Disclosure
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Our articles, interactive tools, and hypothetical examples contain information to help you conduct research but are not intended to serve as investment advice, and we cannot guarantee that this information is applicable or accurate to your personal circumstances. Any estimates based on past performance do not a guarantee future performance, and prior to making any investment you should discuss your specific investment needs or seek advice from a qualified professional. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. Editorial disclosure
All reviews are prepared by our staff. Opinions expressed are solely those of the reviewer and have not been reviewed or approved by any advertiser. The information, including any rates, terms and fees associated with financial products, presented in the review is accurate as of the date of publication. SHARE: On This Page
South_agency/Getty Images October 07, 2022 Bankrate senior reporter James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our investing reporters and editors focus on the points consumers care about most — how to get started, the best brokers, types of investment accounts, how to choose investments and more — so you can feel confident when investing your money. Investing disclosure: The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Investing involves risk including the potential loss of principal. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Robo-advisors have become tremendously popular over the last decade, and rightly so. They automate the investing process for you, making it simple to invest in a diversified portfolio of assets, and they charge much less than a typical financial advisor. So it’s little wonder that many investors have turned to them, and robo-advisors now manage hundreds of billions of dollars. Here’s what a robo-advisor does and who the major players are, including a few hiding inside some of the big financial institutions you already know. What a robo-advisor does
A robo-advisor is really just a fancy term for a financial advisor that automates the process of investing and financial planning. A robo-advisor uses the planning tools that a human advisor would use and crafts a portfolio based on your risk tolerance and when you need the money. But a robo-advisor does things that would be tedious, expensive or impossible for a human advisor to do. For example, robos automate the process of so that you’re maximizing any taxable losses, even on a daily basis. It can also rebalance portfolios so your stays on track. Other robos may provide further services, such as advanced goal planning, including making your investments more conservative as you near your goal. Like a good human advisor, a robo-advisor tailors your investments to your needs. If you have a long-term goal such as retirement, the robo-advisor will tend to pick , which have a track record of high returns. If you have a short-term goal, the robo would likely select , such as bond funds or even cash. To invest your portfolio, a robo-advisor typically uses that have certain characteristics, such as what they’re invested in (stocks, bonds, cash or some mixture), or a certain level of volatility, including very little volatility at all. ETFs charge an , which is a fee paid to the fund management firm based on how much you have in the fund. A typical expense ratio might be 0.05 percent to 0.35 percent per year, or $5 to $35 for every $10,000 invested. You pay these fees no matter which robo-advisor you select, but some robos offer funds with lower fees, so check what they’re charging. With a robo-advisor, clients simply deposit money into the account, and the robo-advisor invests it according to the investment plan that’s been laid out. The client can access the robo-advisor account at any point of the day to see the current market value of the account and how it’s invested. Biggest advantages of a robo-advisor
A robo-advisor really shines in a few key areas, especially where its automation gives it a real edge over human advisors. Robo-advisors can be very good at tedious or formulaic tasks, such as designing a portfolio based on your goals. (Human advisors excel at the more sophisticated and less-routine tasks – ) Value-added features: As mentioned above, robo-advisors stand out in features that would simply be too tedious for a human to handle such as daily tax-loss harvesting. They also make rebalancing a portfolio easy, and they automate and simplify the process of investing a client’s money. Simplicity: Investing with a robo-advisor is tremendously easy, because clients can simply send in money, and the robo does the rest. Investors don’t need to do anything else, and they can always check on the account or even adjust it, if needed, when their financial situation changes, for example. Cost: Robo-advisors tend to be much cheaper than traditional financial advisors because everything is automated. Robos typically charge a percentage of the funds you have invested with them, and that fee is often around 0.25 percent per year, or about $25 per $10,000 you have invested. That’s a significant difference from the typical 1 percent charged by human advisors. Some robos charge more, but offer higher levels of service, such as access to a human advisor. One even charges no fee at all, in part because it compensates by investing you in its funds. Who should get a robo-advisor
A robo-advisor can be a great choice for many different types of investors, but they can be especially helpful to or those who don’t want to spend much time thinking about or managing their portfolios. With a robo-advisor, you’ll spend some time setting up your account and answering a few questions to determine your goals and risk profile, but once that’s done you can just check on your portfolio a few times a year. It won’t require the regular monitoring that’s necessary if you’re managing the funds yourself. Robo-advisors can also be a good fit for people who want many of the same services offered by human financial advisors, but at a much lower cost. While you may not be able to consult with a financial expert at a robo-advisor, though some do offer that service, you’ll still get a customized portfolio based on your needs and will probably only spend half the cost or less of a typical financial advisor. If you’re new to investing or looking for a “set it and forget it” approach, robo-advisors could be a great option to consider. How to open a robo-advisor account
It’s surprisingly easy to open an account with a robo-advisor, and since they’re all web-based, you can get going at any time of the day or night. You’ll need some basic personal and financial information such as your Social Security number and bank account details, but you can usually open the account in 15 minutes or less. Plus, you often don’t even need money to get started with many robo-advisors, though some may require that you deposit a nominal $5 to get going. However, others may require $100 or even $500 or more to start, but if that’s a concern, you have options to avoid an upfront deposit. Once you’ve opened the account, the robo-advisor will use a questionnaire to gauge your risk tolerance and time horizon (i.e. when you need the money.) From there it will design a portfolio using ETFs that meets your parameters. The robo-advisor may ask other questions about your financial goals to further tailor your portfolio to your specific needs and situation. Popular robo-advisors
Robo-advisors have grown a lot in the last decade, and many of the independent players – those that offer only robo-advisors – are the best known. However, other well-known financial players may also offer a robo-advisor as part of their total offering, so don’t assume the independent players such as , Wealthfront and Ellevest are the only game in town. Betterment
Betterment is one of the larger independent players, and it requires no account minimum for the entry-level Digital account, which charges a management fee of 0.25 percent. If you’re looking for more access to certified financial planners, you can step up to Betterment Premium for a 0.4 percent fee, but you’ll need to plunk down at least $100,000 in the account. Wealthfront
Wealthfront requires a $500 account minimum and charges a 0.25 percent management fee. Wealthfront offers low expense ratios on its ETFs, no additional account fees and goal-based planning. Ellevest
Ellevest is a newer player, and while it specifically markets itself to women (because traditional planning may not meet their needs), it’s suitable for anyone looking for client-first advice. It offers subscriptions at $5 and $9 per month providing an array of services, rather than a fee based on your assets under management. Company founder Sallie Krawcheck has been a force in the financial world trying to provide women services that meet their specific situation. Schwab Intelligent Portfolios
You might hear “” and think “discount broker,” but this financial powerhouse also runs the second-largest robo-advisor. While you’ll need more money than other robos to get started – a hefty $5,000 – you won’t pay any management fee. You can also upgrade to the Premium offering, which requires a $25,000 deposit, $300 start-up fee and $30 monthly fee. But you’ll also have unlimited one-on-one access to a certified financial planner. Vanguard Personal Advisor Services
And the top robo-advisor by assets under management is , which is best known for its lineup of low-cost funds. But it also runs Personal Advisor Services and now Digital Advisor. It takes some coin to start investing with Personal Advisor – at least $50,000 – and you’ll pay a scaled fee based on your assets, starting at 0.3 percent and declining to 0.10 percent for accounts over $50 million. Meanwhile, the new Digital Advisor can also manage your investments at a lower upfront deposit of $3,000 and a $4.50 annual fee for each $3,000 you have invested. Other larger financial players such as and have recently entered the robo-advisor field as well. Bottom line
While you might feel hesitant to trust your money to a computer app, robo-advisors are actually quite sophisticated. In fact, your traditional human advisor is likely using one anyway to create and manage your portfolio. Robo-advisors provide many attractive services for a reasonable cost, and their ease of use makes them particularly appealing to new investors looking to get started. SHARE: Bankrate senior reporter James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Related Articles