8 Best Robo-Advisors of 2020
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New to the idea of robo-advisors? Here’s how they work: Robo-advisors are computer automated investment platforms. After signing up and filling out a short survey answering questions about your age, retirement goals and risk tolerance, the robo-advisor will put together an optimal portfolio for your goals and automatically manage it to stay on track over time. They typically cost less and offer more than a traditional investment advisor, but take out the one-on-one human element from the equation. This leads to more objective and lower cost investment services, a big win for retail investors of all backgrounds.
Robo-advisors have quickly become a preferred method to invest for investors with a range of portfolio sizes and objectives. And it makes sense: They are a great way to manage your money with relatively low risk and low fees. Compared to expensive, old-school financial advisors, robo-advisors will leave you with more money in the end, as they charge fewer fees, offer tax loss harvesting and choose time-tested index fund strategies to help you reach your goal as efficiently as possible.
If you are on the hunt for a robo-advisor, be on the lookout for fees, tax loss harvesting, investment fund fees and the track record of your top choices compared to major market benchmarks, like the S&P 500. If you can find an investor that helps you reach your goals while saving money, you have a winner on your hands. That’s what robo-advising is all about. To help you decide which ones are right for you and your needs, take a look at the guide below that discusses the best robo-advisors today.
Betterment is credited as the oldest robo-advisor and has grown to the top of the heap. Betterment has $13.5 billion in assets under management, making it the largest of the independent robo-advisor firms.
Betterment offers accounts with annual fees ranging from .25 to 0.40 percent, with up to a free year of management depending on the size of your opening deposit. Most accounts have a .25 percent fee, though premium accounts are available with additional features for accounts over $100,000 in size for a 0.40 percent fee.
There is no minimum balance to open a new account, which makes it particularly attractive to new investors without much to invest.
When you sign up for Betterment, you’ll complete a short survey about your investment goals and risk tolerance, which is then turned into an automatic investing plan. Plus Betterment customers get access to tax loss harvesting to squeeze out even bigger gains on your portfolio.
With over $10 billion in assets under management, Wealthfront is another great robo-advisor option. The majority of accounts pay a low .25 percent management fee. ETF fees charge a weighted 0.08 percent APR, among the lowest rates out there.
The first $5,000 you deposit is managed free, which makes Wealthfront the top choice for those looking to test out the waters in robo-advising. You can put in a very small part of your portfolio, or the whole thing for smaller portfolios, without paying a penny in management fees (you will still pay mutual fund/ETF fees).
Wealthfront scores top marks for its reliance on Modern Portfolio Theory to build portfolios of low-cost ETFs. It also offers direct indexing for accounts with $100,000 or more, which mimics ETFs with direct investments in stocks to capture the greatest tax loss harvesting benefits. This makes it a winner for tax management as well.
Schwab Intelligent Portfolios is the robo-advisor product from Charles Schwab, one of the biggest investment companies in the United States. Schwab has $3.36 trillion in assets under management, with $23 billion in robo-advising accounts.
What makes Schwab Intelligent Portfolios most noteworthy isn’t the management company, it’s the fees. Schwab charges no advisory or management fees for Schwab Intelligent Portfolios, and you can open an account with a $5,000 opening minimum balance.
Like other robo-advisors, you’ll fill out a survey when you sign up looking at your goals, risk tolerance and timelines. From there, Schwab takes care of the rest, putting your funds into a diversified portfolio of ETFs. Schwab Intelligent Portfolios uses tax loss harvesting and automatic rebalancing, among other tools, to give investors the best possible deal.
Personal Capital is more than a robo-advisor. When you start with Personal Capital, you get free access to a personal finance management platform that is a great tool in its own right. If you sign up for the financial management product, you’ll get a hybrid robo-human advisor experience that makes many investors a bit more comfortable than handing everything over to a computer.
The advising product has $7.5 billion in assets under management. Depending on your portfolio size with Personal Capital, you’ll get access to a range of different services. Pricing is a bit more expensive than most other robo-advisors, as you are paying for a human as well. Portfolios up to $1 million pay .89 percent per year. Prices go down for portfolios over $1 million, but that isn’t all that common for typical investors.
Even if you don’t sign up for the advising service, the Personal Capital free investment and finance management tools are hugely valuable and worth a look.
SoFi is a top destination for highly educated young professionals to refinance student loans, but the company has grown to include a range of financial services, including other loans and investment management.
If you have existing loans at SoFi, you won’t pay fees for wealth management. If you only use the investing service, you’ll pay no fees up to a $10,000 portfolio, beating the portfolio size for free investing at Wealthfront, and charges a competitive .25 percent for balance over $10,000. You can start an account with $100.
SoFi Wealth members get more than computer investment management, however. They also get access to human advisors for help setting things up, making sure they are on the right track and accessing free SoFi events around the country. You even get access to a career coach with salary guidance. That’s a lot for a little, if any, fees.
If you want to feel good about your portfolio and not just look at it as a money-making endeavor, consider Wealthsimple. Fees are a bit higher than some top competitors, with fees ranging from .50 to 0.40 percent depending on the size of your portfolio.
With $1.5 billion in assets under management, Wealthsimple isn’t the biggest of the bunch. However, it’s socially responsible investing options are a unique standout feature. You can choose to emphasize your portfolio in companies that align with your values, such as companies with low carbon emissions, that support gender diversity or that promote affordable housing.
Accounts come with all the bells and whistles such as tax loss harvesting, dividend reinvestment, automatic rebalancing and access to human advisors.
The first $5,000 is free, while accounts with up to $100,000 pay the higher .50 percent fee. Over $100,000, you get the lower rate and a few more features. Those premium Wealthsimple Black features include free VIP airline lounge access, which is a great perk for frequent flyers.
Ellevest stands out for a great investment mix, but it is most noteworthy for its focus on women investors. Ellevest charges competitive rates. Customers pay .25 percent for accounts up to $50,000. Once you reach $50,000, you can upgrade to a premium service with access to financial planners and executive coaches.
Ellevest has a good tax strategy but does not include tax loss harvesting. But it offers personalized portfolios at a great rate. It only invests in ETFs that charge from .06 to .16 percent per year in fees.
Accounts of all sizes have a big benefit: Unlimited access to financial advisors via text and e-mail. This Ellevest Concierge Team includes financial professionals that can give advice on a range of financial topics such as consolidating and managing old retirement accounts, customizing your account to meet your goals, as well as advice on managing investments while paying off debt.
WiseBayan is an older robo-advisor among the young industry and is most noteworthy for its fee-free approach. Yes, free! WiseBanyan only charges for optional products and services, and the core robo-advising service is free to use.
To make it work, WiseBanyan offers a fully automated platform. It doesn’t offer every type of investment (for example, muni bonds), but it does have a range of investment options and includes cash as a part of your portfolio if you so choose.
WiseBanyan also offers a smaller range of portfolios than some of the others. Your risk profile and goals toggle the investment choices, which are not as flexible as you might get elsewhere. In some ways, you get what you pay for.