Robo Advisors use virtually the same (or similar type) of software as traditional human advisors, but they charge less for the service. Back in the old days, you’ll need to consult an expensive financial advisor just to get your hands on portfolio management tools.
Not anymore. With Robo Advisors, you get direct access to your investment portfolios and you can choose either an automated or hands-on type of service. The best part is that most Robo Advisors charge very low fees compared to a human advisor.
WealthfrontLow or Zero Fees
- First $15k managed free
- Tax Loss Harvesting for all accounts
- Low 0.25% Fee for over $15k
- Easy, hands-off investing
Betterment6 months free
- Easy, hands-off investing
- No minimum deposit
- Low 0.25% mgmt fee
- Tax-efficient investing
- Access to personal expert advice
FutureAdvisorFree Advice for Life
- Free allocation advice
- Works with existing accounts
- Lots of features for paid accounts
- Very easy to use
The 3 Characteristics of the Best Robo Advisors
Take our advice: there is no single best Robo-advisor for every investor. Each individual investor has different needs, and not all can invest a large sum of cash. This means that each investor will require something different depending on any given circumstance. That’s the reason why you need to understand the 3 fundamental characteristics of the best Robo Advisors, and these are:
- Fees and minimum deposits
- Account types and services
We dug deep into each of the top Robo Advisors in the market today, so we can give you an idea on which one will work best for your investment strategy.
Fees and Minimum Deposits
In general, Robo Advisor fees are between a third and a quarter of what a typical human advisor would charge for the same service. However, the fees will differ from one service to the next, and it is also important to understand the differences.
Most services charge annual management fees which are expressed as a percentage of the total account balance. Those fees differ greatly according to the Robo Advisor in question, and often operate on a sliding scale, with the percentage decreasing as account balance increases. In some cases, balances up to a certain amount have no fee charged on them, with fees coming into action at perhaps $5,000 or $10,000 and higher.
The minimum deposit amount of Robo Advisors will also differ from one service to the next. These deposit minimums can range anywhere from $0 to $100,000, and those differences obviously make some Robo Advisors more suitable for investors with larger amounts to invest, while some are better for those with lower balances.
In terms of flexibility, the best Robo Advisors can be split into three main categories. But which among is best for you? The answer will depend entirely on what you want in a Robo Advisor.
Examples include: Motif Investing
Account Types and Services
In assessing the best Robo Advisors, you need to know the types of accounts they offer, and how you can benefit from each account or service. For instance, some Robo Advisors only offer taxable accounts. Others have that same option along with Individual Retirement Account (IRA) options, and will also include Simplified Employee Pension Individual Retirement Arrangement (SEP IRA) options, which both cater to different tax brackets and the specific financial circumstances of the investors involved.
The range of account services will differ significantly. The vast majority of Robo Advisors will offer general portfolio management advice, asset allocation and rebalancing services, but other tools may not be offered. Dividend reinvestment and tax loss harvesting are two good examples of features which are sometimes offered as standard, but these are offered as costly extras (or sometimes, not offered at all).
When deciding which Robo Advisor to choose, finding out what tools and services they provide is just as crucial as researching the fees and the flexibility that they can give to each individual investor.
For a more detailed report on each service, check out our 2017 Robo Advisor reviews.
You can also read our 2017 Robo Advisor comparisons so you can get a more comprehensive look into the fees, deposit limits, flexibility, and account types and services of the best Robo Advisors online.