Back in the old days, you’d have 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 for a fraction of the cost. The best part is many robo advisors still offer access to a human financial advisor to set you on the right path, with algorithms to take care of the maintenance.
But it’s hard to decide which robo advisor is right for your unique needs, which is why we created this guide. We have a favorite overall robo advisor, which we think is the best choice for most investors, and we will list that below. But since you might have unique financial needs, we then get into the best services for different types of needs.
Best Overall Robo Advisor in 2021
Free Automated Investing
Started in 2015, M1 Finance has quickly taken the automated investing world by storm. Despite have fierce competition, M1 has managed to get over $500 million in assets under management (AUM) as of March 2019, and they are continuing to grow quickly.
What’s causing the growth? Firstly, M1 Finance has zero fees for their services. Correct: completely free automated investing. They also offer a free checking account with a debit card, and if you enroll in their “Plus” program ($125/year) the checking account earns 1.5% APY and 1% cashback.
Their unique “pie” portfolios are great for beginners and seasoned investors alike and come with options for socially-responsible investing, which is becoming more important, and something M1 Finance’s competitors sometimes don’t offer. The one downside we see is that they do not offer tax-loss harvesting, although they do integrate a tax minimization feature on all accounts.
We see M1 Finance as being the best overall robo advisor for all investors. You simply can’t go wrong here – it’s completely free, offers SRI portfolios, supports most account types, and is great both beginner investors and active traders who prefer a hands-on approach.
Best Robo Advisors for 2021
You might have more specific needs, so we’ve broken down this list to let you know what the best robo advisors are for your situation:
- Best free robo advisor (list): M1 Finance (visit directly or read review)
- Best free personal finance dashboard: Personal Capital (visit directly or read review)
- Best for new and beginner investors: Wealthfront (visit directly or read review)
- Best for those with under $10,000 to invest: Wealthfront (visit directly or read review)
- Best for those with over $100,000 to invest (list): Titan Invest (visit directly or read review)
- Best for socially-responsible investing (list): M1 Finance (visit directly or read review)
- Best for Canadians (list): Wealthsimple (visit directly or read review)
- Best for paying off credit card debt: Tally Advisor (visit directly or read review)
- Best for optimizing your 401(k): Blooom (visit directly or read review)
The 3 Characteristics of the Best Robo Advisors
As we said before, 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 their given circumstances. That’s the reason you need to understand the 3 fundamental characteristics of the best Robo Advisors:
- 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. Here we’ll break down the different criteria we used to evaluate the best robo advisors for your needs:
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 best 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, and could be a big factor in deciding which is the best Robo Advisor for you. These account minimums can range anywhere from $0 to $50,000, and those differences obviously make some Robo Advisors more suitable for investors with larger amounts to invest, while some are better for those that need a lower minimum deposit.
In terms of flexibility, the best Robo Advisors can be split into three main categories. But which among them is best for you? The answer will depend entirely on what you want in a Robo Advisor. Let’s dig a little deeper:
The first category is what we would consider your textbook robo advisor, and they provide a fully-automated service. This is the simplest form of Robo Investing and is the one feature that endeared new investors to try the service. After transferring the deposit, the rest is entirely handled by the Robo Advisor.
That would include automated rebalancing, dividend reinvestment and other features such as tax-loss harvesting. This type of service is typically chosen by investors looking for an easy way to invest, or those who don’t want to make too many decisions about their portfolio.
The second category is robo advisors that provide a greater deal of control to investors. They provide a free personal finance dashboard where you can see your finances in one place, including your bank and investment accounts. They usually provide free advice and suggestions to improve your finances or make offers for other services.
Then they optionally take it a step further by providing a fully-automated robo advisor service, which comes with a standard annual fee.
The third category takes the flexibility of robo advisors a step further. There are also a handful of robo advisors that allow you to take a more hands-on approach. They offer certain tools that enable you to choose to invest in individual stocks. After this, you can also choose to leave it alone and allow full automation to handle your portfolio.
The final category of robo advisors we’re going to talk about here are a relatively new batch. As robo-investing has become more popular over the years, a few services have come about to challenge the bigger services by providing specialized services meant to complete one specific goal exceptionally, instead of a wider variety of investing goals. Here are a couple of examples:
- Tally Advisor – This service takes your credit card debt and gives you the best possible way to pay it off as quickly and with as few fees as possible. They even offer low-interest loans to pay off your high-interest debt.
- Blooom – Very few existing robo advisors handle your 401(k) and other defined-contribution plans. Blooom changes that by focusing only on those plans for one low, flat annual fee.
As more automated investing tools come onto the market, more specialized robo advisors will come about, giving you very specific, tailored plans to achieve your financial goals.
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 sometimes only 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 2021 Robo Advisor reviews.
You can also read our 2021 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.