Robo Advisors only started making an impact in the financial world in the last couple of years, but they are growing in both number and popularity. It is estimated that more than $2 trillion worth of investments will be managed by Robo Advisors by the year 2020. In fact, Wealthfront and Betterment – two of the current market leaders in automated investing – manages close to $5 billion worth of investments between them.
On this Page:
- Fully-automated services
- Semi-flexible services
- Active trading services.
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
Fully Automated Investing Services
The most common type of Robo Advisors offer fully automated investing services. What this means is that you simply sign up to the service, answer a few questions (regarding your age, risk tolerance and investment preference), deposit your funds and you’re good to go! The Robo Advisor will provide asset allocation advice and produce a portfolio made up of different investments which typically consist of stock ETFs and bond ETFs.
They all provide asset allocation and automatic rebalancing of your investment portfolio to maximize the profit potential of your investment. They also offer automatic reinvestment of dividends so that all your money is put to work. However, those are the only things they have in common. They impose different fees and deposit limits, and they also have added features depending on the level of your investment.
In terms of minimum deposit, Betterment has no minimum deposit while Wealthfront requires a $500 minimum investment. Schwab Intelligent Portfolios has a $5,000 minimum deposit.
When it comes to management fees, they all manage to impress. Schwab Intelligent is the most unique because it doesn’t charge any fees. Wealthfront will not charge fees for accounts less than $10,000 but will start asking for a 0.25% fee if your account is more than $10k. If you use our link (found on our Wealthfront review) this amount is raised to $15,000 managed free. Betterment is different because it offers a three-tiered fee structure: 0.35% for accounts below $10,000, 0.25% for accounts between $10,000 and $100,000 and 0.15% for account balances higher than $100k.
The provision for tax loss harvesting is also a welcome feature. Wealthfront offers this service to all accounts above the $500 minimum, and the service will include Direct Indexing (more efficient tax planning) for accounts worth $100,000 or more. Betterment and Schwab Intelligent Portfolios also provide tax loss harvesting but only for accounts with balances of $50,000 or more.
Semi Automated Flexible Services
There are fully-automated Robo Advisors, and there are those that offer a degree of flexibility. If you want more control over your investments, then you need to choose a service that allows you to modify your portfolio so you can make your own decisions. These are the Semi-Automated Robo Advisors:
FutureAdvisor is a good example of a Robo Advisor that can fully automate your investment portfolio, but it can also work within the bounds of your existing brokerage account. This means that you can still work with your trusted brokerage provider while still benefiting from automatic rebalancing, dividend reinvestment and tax loss harvesting. FutureAdvisor will manage your existing retirement and investment accounts for you – all for a 0.50% management fee. You can also choose from a free plan, which gives lots of valuable advice.
Vanguard Personal Advisor Services (VPAS) is a high-end Robo Advisor with a slightly different manner of flexibility. Yes, this service is ideal if you have at least $50,000 to invest and is designed specifically for investors with deeper pockets. However, the service combines automation with traditional personal advice. If you sign up with VPAS, you can contact a human advisor at any time whenever you need financial advice. The service also includes tax planning strategies on a per client basis, and even goes as far as offering your own personal financial advisor if your account holds more than $500,000.
Active Trading Services
Motif Investing is one of the best Robo Advisors for US investors who desire hands-on active trading. If you sign up to this service, you will quickly realize that this service is unique because it gives you the opportunity to choose from a selection of ‘Motifs’ (which are basically a collection of up to 30 stocks and ETFs), or you can simply create your own allocation. This service will give you far more control over your portfolio. You pay $9.95 to buy into a ‘Motif’, and you can actively trade for just $4.95.