It seems like an ever-larger share of our time is spent online. With so many people working online, keeping in touch with friends online and meeting significant others online, why not find a financial advisor online, too? That’s where robo-advisors come in. They can offer competitive rates to help you manage your retirement savings and other investments.
Traditionally, having a financial advisor meant turning up to an office for a sit-down with a certified financial planner (CFP) or other financial expert. It was more common for folks with high incomes to have financial advisors. The rest of us trusted on our own investing savvy, our company pensions or Social Security.
Now, the financial advice landscape has shifted. Online-only financial advisors are offering lower fees for advice based on sophisticated algorithms. Although these companies are called robo-advisors, they do have financially savvy humans on staff. The difference is that they use fewer person-hours for every account, allowing them to pass savings on to their customers.
Here are some of the biggest names in the game, the top 10 robo-advisors:
The Vanguard Group is known for its low fees and popular index funds. In fact, many other robo-advisors (and traditional advisors for that matter) invest client assets in Vanguard funds. Vanguard also offers a robo-advisor of its own, Vanguard Personal Advisor Services. With billions in assets, the robo-advisor is already an industry juggernaut.
As for particulars, the annual fee of 0.30% is about average for robo-advisors. The minimum required investment is a bit high though at $50,000. Unlike many robo-advisors, Vanguard’s service also offers access to human advisors. That means you get the advantages of a digital service and the ability to talk to a real person when you have questions.
Betterment has gained over 270,000 customers since bursting onto the robo-advisor scene in 2008. You’ll find yourself drawn to the site’s clean, user-friendly design. You’ll also enjoy the low fees and features like tax-loss harvesting.
Management fees start at just 0.25% and there is no minimum balance for opening an account. Once you sign up, you can track your progress toward retirement and other financial goals. You also get unlimited phone calls with a certified financial planner (CFP) if you invest at least $100,000. Unlike a number of other services, Betterment also offers trust accounts.
3. Schwab Intelligent Portfolios
Schwab Intelligent Portfolios is the robo-advisor arm of Charles Schwab. This robo-advisor doesn’t charge advisory fees, commissions or account service fees. You will have to pay fees for individual funds, but that is true for any robo-advisor. As long as you have $5,000 to invest, you can become a Schwab client and take advantage of automatic rebalancing and tax-loss harvesting.
If you enjoy paying low management fees (for portfolio management and for individual funds), then you should consider Schwab.
4. Personal Capital
Personal Capital starts by aggregating all your financial holdings and assessing the strengths and weaknesses of your current investing strategy (or lack thereof). You’ll get a report outlining Personal Capital’s findings and an improvement plan. The management fees and minimum balance are higher than average for a robo-advisor, but there is also free software available to DIY investors.
Clients with $1 million or more get access to the lowest management fees and the most account features.
As a FutureAdvisor client, your IRA, Roth IRA, rollover IRA or SEP-IRA will be held by either Fidelity or TD Ameritrade. The FutureAdvisor Recommendations Engine (the robot) and a team of human advisors keep an eye on your investments, helping you rebalance and grow your money. If you don’t want to start investing right away, you can create an account for free. That account is enough for you to get free portfolio analysis and recommendations.
Wealthfront offers robo-advising for many account types, including IRAs, 529 college savings, personal and joint savings accounts. The minimum balance requirement is $500, while clients with $100,000 or more get access to the company’s tax-optimized direct indexing service. The management fee is a flat 0.25%. That’s one of the lowest fees around.
WiseBanyan is all about getting people to start investing sooner. The minimum investment needed to sign up as a WiseBanyan customer is just $1. Rather than charging fees as a proportion of assets that each client invests, WiseBanyan makes money from a la carte services its clients choose. There is a premium plan with a management fee of 0.24%, but even that is capped at $20 per month.
Blooom’s focus is on the 401(k), a retirement savings vehicle many Americans have without fully understanding how it works. Blooom charges $10 a month for accounts no mater how much you have in your 401(k). True to its name, Blooom represents the health of your 401(k) with an image of a flower that will wilt if something is off.
SigFig charges a 0.25% annual fee on accounts over $10,000. Accounts under $10,000 do not have a management fee (though there is a $2,000 account minimum). Other fees are embedded in the exchange-traded funds (ETFs) that form the cornerstone of the SigFig investing strategy. SigFig uses a variety of funds from Fidelity, TD Ameritrade Institutional and Charles Schwab.
It complements its algorithms with the services of financial consultants who can chat with you about rebalancing and improving your existing investments.
Acorns takes the spare change from your everyday purchases and invests it according to your risk tolerance. It rounds up all your transactions to the nearest dollar and takes the difference, moving the money to a range of ETFs. You can connect a debit card, credit card or checking account to your Acorns account.
This service is not ideal for big retirement savings, but it is a pain-free way for people to start saving and investing. Opening an account is free and the management fee is just $1 per month.
If You Use a Robo-Advisor…
As robo-advisors fight to offer lower fees than their competitors, all that competition can be good for the consumer. The trend toward offering robo-advising services is a response to the preferences of younger Americans who would prefer easy, online advisory services with mobile apps to match.
But here’s the thing: Robo-advisors rely on your answers to the questions that give them a sense of your goals, investment knowledge and risk tolerance. Make sure you answer questions honestly or you could end up with an investing strategy that’s more (or less) aggressive than what you really want. And always shop around for low fees and find the best deal you can get for your needs.
Tips for Finding a Robo-Advisor
- An important consideration as you try to find a robo-advisor is what exactly your financial goals are. For example, are you trying to save for the down payment on a house? If so, then you won’t want to put your savings into a traditional IRA or 401(k). However, both of those account types could be useful if you want to save for retirement. And if you are just trying to start investing but don’t have much money yet, a service that focuses on saving spare change, like Acorns, may be the way to go.
- If you don’t want to get too hands-on with investing, robo-advisors can help you put your investments on autopilot. But if you would prefer to talk with a human, you will need to choose a robo-advisor that provides clients with access to human advisors. Even then, some services only let you work with a human advisor if you invest a certain amount of money.
- If you have a complex financial situation or you want to ensure you work with a human, a traditional financial advisor might be a better fit. A matching tool like SmartAsset’s SmartAdvisor can help you find a person to work with to meet your needs. First you’ll answer a series of questions about your situation and goals. Then the program will narrow down your options from thousands of advisors to up to three registered investment advisors who suit your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.
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