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The Best Robo Advisors of 2020

If you’ve avoided investing because it seemed costly and complicated, you’ll be happy to hear that both of these problems have been solved with the emergence of robo advisors.

The terms “robo advisor” and “automated investment manager” may sound high-tech, but the idea is actually quite simple. Investment companies are now using AI-powered financial advisors to help you select and invest in stocks, retirement accounts, and mutual funds.

The best robo advisors have quickly become mainstream, replacing the human financial advisors who have traditionally done this work. Robo advisors have helped expand the market for consumers looking for low-cost financial advice.

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Fortunly's Top 3 Robo Advisor Picks

Top 3 Picks

Wealthfront

Daily tax-loss harvesting

Low ETF expense ratios

Automatic portfolio rebalancing

Open Account READ REVIEW

Betterment

Multiple investment strategies

Ability to sync external accounts

Useful goal-based tools

Open Account READ REVIEW

Sofi

Wide range of low-cost investment options

Access to a team of certified financial planners

Free account management

Open Account READ REVIEW

The 4 Best Robo Advisors

1. Wealthfront

Founded in 2008, Wealthfront is a goal-based robo advisor that provides automatic portfolio rebalancing, tax-loss harvesting, and an excellent selection of investment account types. The company charges some of the industry’s lowest fees and its services appeal to both new and experienced investors.READ REVIEW

Daily tax-loss harvesting

Low ETF expense ratios

Automatic portfolio rebalancing

Open Account

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Account minimum:

$500 (investment accounts); $1 (cash accounts)

Account management fee:

0.25% monthly

Investment expense ratios:

0.07%-0.16% of ETFs annually

2. Betterment

Considered one of the industry’s top players, Betterment offers two robo advising service plans, financial planning tools, tax-loss harvesting, portfolio rebalancing, robust financial planning tools, access to a human advisor, and the ability to sync external accounts and receive advice on them. READ REVIEW

Multiple investment strategies

Ability to sync external accounts

Useful goal-based tools

Open Account

show more


Account minimum:

$0 (Betterment Digital); $100,000 (Betterment Premium)

Account management fee:

0.25% monthly for Betterment Digital, 0.40% monthly for Betterment Premium

Investment expense ratios:

0.07%-0.17% of ETFs annually

3. Sofi

Popular for its lending products, SoFi is a newcomer to the realm of robo advice. However, thanks to its lack of fees, access to low-cost ETFs, goal-based planning tools, automatic portfolio rebalancing, and human advisors, the company has quickly established itself as one of the top players. READ REVIEW

Wide range of low-cost investment options

Access to a team of certified financial planners

Free account management

Open Account

show more


Account minimum:

$0

Account management fee:

0%

Investment expense ratios:

0.03% to 0.08% of ETFs annually

4. M1 Finance

Launched in 2015, M1 Finance can be described as the future of financial advice, as it combines all the benefits of automated portfolio management with the level of control investors have in a traditional brokerage account. READ REVIEW

Options to trade fractional shares

No asset management fees

Flexible portfolio building

Open Account

show more


Account minimum:

$100 (non-retirement accounts); $500 (IRAs)

Account management fee:

0%

Investment expense ratios:

0.06% to 0.20% of ETFs annually

Picking the Right Robo Financial Advisor: Our Methodology

Determining which robo advisor is the best fit for you depends on factors like your current portfolio, your investment goals, and your preferences in regard to having access to a human advisor. We considered these factors along with fees and features to come up with a list of the market’s top players. Here’s a more detailed overview of our evaluation metrics.

Account Types

Investment accounts come in many types, individual and joint brokerage accounts, trusts, and more. Given that each account type offers different benefits, it’s important to determine which option best suits your goals and needs before signing up with a robo investment advisor.

Investment Strategies

Like traditional financial advisors, automated investing platforms instruct clients to base investment choices on factors such as how much risk they can comfortably bear, the level of returns they want, and when they might need the money. Based on these factors, robo advisors design a portfolio of stocks, exchange-traded funds, and other instruments using proven investment-management strategies.

Some providers let their clients adjust goals and risk levels after the initial investment strategy is done.

As extensive research has revealed that portfolio diversification reduces risk and increases returns, most robo advisors employ Modern Portfolio Theory to create and manage clients’ investment portfolios. Here’s a simple example of the best way to invest money according to MPT: Instead of investing everything in a single fund, robo advisors usually create diversified portfolios for clients. MPT is a framework that is intended to help financial advisors balance the client’s desire for a good return on their investments with their aversion to risk-taking.

Additional Services

Each provider on our list of online robo advisors offers a few services. These can include the following features:

Goal-planning tools

Assistance for setting financial goals and tracking progress toward reaching those goals is one of the most important features offered by the robo advisor industry’s top competitors. The best providers even send reminders to help put you back on track should you drift away.

Certified financial planners

A CFP is a finance specialist who possesses rigorous certification for demonstrating knowledge in financial planning. CFPs often have years of experience, and combining their knowledge with the sophisticated algorithms of an automatic investing platform is one of the best ways to approach the complex world of investing. Top-rated robo advisors offer the services of CFPs fee-free to their clients.

Tax-loss harvesting

Tax-loss harvesting is a tax-minimization strategy that focuses on selling assets that drop in value to offset a capital gains tax liability. Typically employed to limit the recognition of short-term capital gains, which are taxed at a higher rate than long-term gains, this technique helps lower the investor’s overall tax liability. If done properly, tax-loss harvesting can maximize your financial gains in the long run. The best robo advisers offer this service at no cost.

Borrowing against your portfolio

Most of the providers on our list offer securities-based lending. In other words, robo advisor companies let their clients take out a loan (usually in the form of a line of credit) using their investments as collateral. The best thing about this type of borrowing is that approvals can be very fast and the cost can be quite low. It’s a good source of quick cash.

Fees and Commissions

One of the biggest advantages of robo investing advisors is that their services can be much less expensive than those of an in-person financial advisor.

While the charges vary from company to company, typically there are two major components that determine the costs of a robo advisor.

Management fee: This fee is usually paid on a yearly or monthly basis, and it ranges from 0.25% to 0.5% of assets per year. For example, a $10,000 investment account might be charged an annual management fee of $25 to $50. Some providers may impose higher or lower charges.

Investment expense ratios: The robo broker you choose to work with may invest your money in funds that charge fees based on your holdings. These costs can vary, but usually average between 0.05% and 0.65% of the assets, incurring a $5 to $65 annual fee for every $10,000 invested.

Transactions – buying and selling funds, moving money out of your account, or changing your asset allocation – shouldn’t incur any cost. Still, before opening an account with a robo advisor, make sure that you’re fully aware of all the fees the company may charge you.

Lastly, when doing robo advisor comparison in respect to cost, we also suggest you take minimum initial deposit requirements into account.

Customer Service

Robo advisors with quick-to-respond and knowledgeable customer support representatives are great. Especially if the customer-service agents have extended working hours and can be contacted via multiple avenues of support. Just because they favor a tech-first approach, it doesn’t mean that robo advisors can’t offer attentive customer service.

4 Best Robo Advisors for 2020

  • Wealthfront

  • Betterment

  • SoFi

  • M1 Finance

Launched in 2008, Wealthfront has quickly established itself as one of the market’s biggest robo advisors. The company’s automated investment management and holistic financial advice appeal to both new and experienced investors.

Multiple tax-optimization strategies, low fees, and free financial planning guides make Wealthfront worthy of consideration, especially since you don’t need lots of experience or a huge amount of money to get started.

Account Types

Wealthfront offers traditional, Roth, SEP, and rollover IRAs; individual and joint non-retirement accounts; 529 college savings plans; trusts; and cash accounts.

Investment Strategies

Designed to meet the needs of both hands-off investors who want expert guidance and hands-on investors who need help making smarter decisions, Wealthfront’s investment management is automated but also strategic and adjusted to each client’s individual risk levels.

Getting Started

When starting your robo portfolio management relationship with Wealthfront, you’ll be asked to provide some basic information. The website will inquire after personal information, and then ask about how much you have in savings and what your pre-tax income is.

Then you’ll be given an opportunity to choose your investment goal – this can be anything from long-term investing to retirement or college savings. Lastly, to assess your risk tolerance, Wealthfront will require you to complete a short questionnaire.

Portfolio Management

After assessing your level of risk tolerance, the Wealthfront robo advisor proceeds with building a diversified portfolio with up to 11 asset classes (most portfolios include six to eight asset classes). Wealthfront’s investment options cover US and foreign stocks, dividend stocks, real estate, natural resources, emerging market bonds, US government bonds, corporate bonds, and Treasury inflation-protected securities.

The robo advisor primarily uses low-cost exchange-traded funds, while investors with six-figure investments can opt for a stock portfolio.

From there, the process is completely automated. The software may rebalance your portfolio when money is deposited or withdrawn, dividends are reinvested, or market fluctuations make it necessary.

One of the best things about Wealthfront is that it uses threshold-based rebalancing. In other words, portfolios are rebalanced each time an asset class crosses a predetermined threshold, rather than on a monthly, quarterly, or yearly schedule.

There are no options to get in touch with a human advisor. Still, given that the Wealthfront’s robo advisor software does a great job in creating and managing personalized portfolios, this isn’t a major disadvantage.

Additional Services

Tax-Loss Harvesting

As one of the best robo advisors, Wealthfront offers daily tax-loss harvesting on all taxable account types. New account holders who transfer in assets may find the company’s tax-minimized brokerage account transfer service useful. Accounts with balances of at least $100,000 are also eligible for stock-level tax-loss harvesting.

Goal Planning

What makes Wealthfront really stand out from the competition in the context of additional services is its robust set of financial planning tools. These tools come free of charge even if Wealthfront isn’t managing your assets. They can help you plan for life events such as buying a home, paying for college, retiring, and traveling.

Cash Account

In addition to multiple investment account options, Weatlhfront also offers cash accounts. Defined by the provider as a good place to earn interest on the funds you don’t want to invest, these FDIC-insured accounts come with an impressive 0.35% APY.

Line of credit

Clients with $25,000 or more in their accounts can borrow against their portfolios by opening a line of credit. Wealthfront lets you take out up to 30% of the value of your portfolio at rates that currently range from 3.9% to 5.15%. You won’t be asked to fill out an application, undergo a credit check, or pay any additional fees.

Fees and Commissions

As one of the top robo advisors, Wealthfront has a competitive and easy-to-understand fee structure. Investment account holders are charged 0.25% of their portfolios on a monthly basis. Note that larger portfolios (over $100,000) may be invested in funds that incur slightly higher fees. Exchange-traded funds make up most of the portfolios Wealthfront manages. They come with annual management fees of 0.07%-0.16%.

To open an investment account with Wealthfront, you’ll be required to deposit a minimum of $500, while the minimum for a cash account is $1.
Automatic portfolio rebalancing is free on all accounts, and so is linking your retirement and bank accounts to the company’s signature financial planning tool, Path.

Customer Support

Almost all interactions with Wealthfront customer-service agents are conducted electronically. In addition to the comprehensive library of frequently asked questions and answers, Wealthfront’s account holders can also get in touch with the customer-service team via phone and email. Support agents are available Monday through Friday from 10 a.m. to 8 p.m. Eastern time.

The Bottom Line

As one of the best-performing robo advisor companies, Wealthfront offers goal-based investing and helps its clients understand how the financial choices they make today may affect their futures. This robo advisor also provides tax-loss harvesting and automatic portfolio rebalancing.

It supports a good selection of investment account types, and the fees on its ETFs are among the market’s lowest. The company doesn’t buy fractional shares, which may prevent it from investing your entire deposit; however, it offers a good deal on an FDIC-insured cash account.

Reasons to Buy

Daily tax-loss harvesting

Low ETF expense ratios

Automatic portfolio rebalancing

Launched more than a decade ago, Betterment has set the standard for robo advisory services, and it remains one of the industry’s top players. This automated investing platform offers tax-loss harvesting, portfolio rebalancing, robust financial planning tools, and the option to buy fractional shares so that all the money in your account can be invested.

Betterment’s platform is incredibly easy to use, and it even lets you sync external accounts to receive advice on them. Customers who opt for the Premium plan get access to a human advisor too.

Account Types

Betterment offers individual and joint non-retirement accounts; traditional, rollover, SEP, and Roth IRA accounts; trusts; and cash accounts. The company also lets you link your external account for personalized advice and guidance but won’t directly manage these accounts.

Investment Strategies

Like other robo advisor firms, Betterment employs Modern Portfolio Theory to create and manage clients’ investment portfolios. What makes this type of investment strategy unique is the emphasis on diversification and asset allocation based on predetermined risk levels.

Getting Started

Opening an investment account with Betterment is quick and easy. All you have to do is provide some basic information and fill out a questionnaire that determines your time horizons, risk tolerance, and investment goals. Based on that information, a personalized portfolio will be designed for you. Depending on your risk-tolerance assessment, you’ll be offered a conservative portfolio (predominantly consisting of bonds), or an aggressive portfolio (fewer bonds, more stocks).

Portfolio Management

This automated financial advisor uses ETFs that represent about 12 asset classes for different investment goals and levels of risk tolerance. Another good thing about Betterment is that it lets its clients adjust the percentage of money invested in any particular exchange-traded fund if they want a bit more control over their investment portfolios.

In addition to the standard portfolio, there are a few more options to choose from: a “smart beta” portfolio that embraces systematic risks and seeks higher-than-average returns, a bond-heavy income portfolio, and a socially responsible portfolio.

Once your portfolio has been created, it will be fully managed by Betterment’s robo advising software. To keep each asset class in line with the target investment percentage, the company will provide periodic portfolio rebalancing. This online investment advisor will also reinvest dividends in accordance with your portfolio’s targets.

Additional Services

Tax-Loss Harvesting

Betterment performs tax-loss harvesting on all taxable accounts. In other words, the robo advisor sells off losing asset positions near the end of the year, aiming to offset gains in other asset classes.

Financial Planning Tools

The company offers multiple tools and calculators that help clients choose the right accounts, set investment goals, and make smarter money decisions.

Human Financial Advisor

Unlike most of its competitors, Betterment provides the services of certified financial advisors for account holders with balances over $100,000. Offered as a part of the robo advisor’s Premium plan, this service comes at a fraction of the 1% to 2% fee typically charged by traditional financial advising specialists.

Fees and Commissions

Betterment’s robo advising service comes in the form of two plans. If you opt for the Digital plan, you’ll be charged a 0.25% annual management fee in return for access to the company’s standard offering and the option to get in touch with an advisor via mobile messaging.

To apply for the Premium option, which comes with a 0.40% annual management fee, you’ll need to have a balance of at least $100,000. This plan comes with all the features included in the Digital option plus unlimited calls to Betterment’s team of certified financial planners.

ETF expense ratios range from 0.07% to 0.17%, assessed annually. There are no additional account charges.

Customer Support

Should you require assistance, you can get in touch with the robo adviser’s support team via phone or email from 9 a.m. to 6 p.m. Eastern time Monday through Friday. There’s also a live chat option (available on Saturdays and Sundays from 11 a.m. to 5 p.m. ET), but it’s offered only to Betterment’s current existing clients.

The Bottom Line

A clear leader among robo financial advisors, Betterment offers two service plans – the Digital option for inexperienced investors and the Premium plan for those who prefer self-directed investing combined with professional management.

The company’s goal-oriented tools and multiple portfolio options appeal to both retirement and non-retirement investors, and the human advisor offering is very affordable compared with other hybrid and traditional financial advisors.

Reasons to Buy

Multiple investment strategies

Ability to sync external accounts

Useful goal-based tools

Well-known for its lending products, SoFi is a new kid on the block when it comes to robo advising. This doesn’t mean that SoFi Automated Investing can’t compete with the industry’s top players. As one of the best robo investment advisors, the company doesn’t charge administrative or advisory fees, and it provides access to low-cost ETFs.

To top it off, SoFi’s service includes unlimited access to a team of CFPs along with complimentary career coaching.

Account Types

SoFi’s account offerings are somewhat limited compared to those offered by competitors. Options include retirement accounts such as traditional, Roth, SEP, and rollover IRAs, along with individual and joint non-retirement accounts.

Investment Strategies

SoFi Automated Investing offers an excellent platform for cost-conscious investors who are just starting out and thus favor a hands-off approach. Like other robo advisors, the company offers competitively priced diversified portfolios.

Getting Started

Setting up an account with SoFi is quick and easy. While new clients are asked to provide basic personal and asset information, there are no inquiries related to your market experience or risk tolerance.

The automated investing platform picks one of the model portfolios based on your investment objectives. However, prospective clients can override the robo advisor’s suggestion and choose their own risk profile. Getting in touch with a human advisor is also an option at this point.

Portfolio Management

Based on investment objectives and risk tolerance, SoFi’s clients can choose from a selection of 10 model portfolios. Each option comes with a diversified selection of low-cost ETFs, which mostly consist of international stocks, US stocks, and real estate, high-yield, and Treasury bonds.

Much like most other online investment advisors, SoFi Automated Investing provides automatic portfolio rebalancing. Each time money enters or leaves your investment account, the robo advisor checks to see if your portfolio has drifted away from predetermined target allocation. If it has, it rebalances your portfolio automatically.

Additional Services

Financial Planning

What makes SoFi really stand out from the competition is that in addition to automated investment tools, all of its clients have unlimited access to the company’s team of certified financial advisors at no extra charge.

Special Bonuses

As one of the best robo advisors in the financial industry, SoFi offers special bonuses to clients. These include such things as access to members-only social events and complimentary career coaching. As this company’s client, you can also get reduced rates on student loans and mortgages that are provided by SoFi. To become eligible for these special perks, all you have to do is invest at least $20 each month.

Fees and Commissions

As far as costs go, SoFi is one of the most investor-friendly providers on our list of robo advisors. Unlike its rivals, the company charges no monthly management fees. Additionally, there are no administrative charges for transferring money or closing accounts. Portfolio expense ratios are also very low, ranging from 0.03% to 0.08% of assets under management.

Customer Support

Inexperienced investors – or those simply looking to access certified professionals – will be happy to hear that there are multiple ways to get in touch with SoFi’s financial advisors. You can schedule a phone or video call between the hours of 5 a.m. and 5 p.m. Eastern time, Monday through Thursday, and from 5 a.m. until 4 p.m. on Fridays.

Should you require assistance with technical issues, the automated advisor’s customer service agents will be there to help you from 4 a.m. until 9 p.m. Pacific time Monday through Thursday and from 4 a.m. until 5 p.m. on Fridays. Support channels include phone, email, and Twitter.

The Bottom Line

A relative newcomer to the robo advisor industry, SoFi Automated Investing stands out from the crowd for its incredibly investor-friendly service. To help you reach your financial objectives, the automated advisor offers robust goal-based planning tools and automatic portfolio rebalancing – everything you need except perhaps tax-loss harvesting.

In addition to automated investment services, SoFi’s clients get access to a financial advisor, discounts on other financial products offered by the company, and fee-free career advice.

 

Reasons to Buy

Wide range of low-cost investment options

Access to a team of certified financial planners

Free account management

Operating since 2015, M1 Finance can be described as a hybrid between a robo advisor and a traditional brokerage. With this provider, clients get all the benefits of automated portfolio management without having to give up on the control they would have with a traditional brokerage account.

If you don’t mind a hands-off approach – but would still like to be more involved in the decision-making process – M1 Finance may be a perfect fit.

Account Types

With M1 Finance, you can open an individual or joint taxable account; a retirement account such as a traditional, Roth, or SEP IRA; or a trust.

Investment Strategies

Getting Started

The Pie, M1 Finance’s unique approach to building and managing clients’ portfolios, is essentially a simple, transparent way to look at asset allocation. Here’s how it works. First of all, you’ll be asked to choose individual investments and add them to your pie (one stock equals one “slice” of the pie).

Then you’ll need to define how much of your portfolio you want to be dedicated to each slice (expressed in percentages). Next, you’ll fund your account. From there, you’ll be able to follow the performance of your portfolio and see it rebalance automatically. One of the best things about this robo advisor app is that it’ll also let you add, remove, and edit your slices.

Portfolio Management

M1 Finance has a huge selection of ETFs and stocks to choose from – nearly 2,000 ETFs and any individual stocks available on the Nasdaq or the York Stock Exchange. Considering that you can opt for any investment traded on these major exchanges, you are left with an almost endless supply of options.

One of the nicest things about working with this robo advisor platform is that the company lets you use fractional shares so that every single penny in your account can be invested.

Additional Services

Automation

One of M1 Finance’s biggest selling points is that it’s big on automating all the things that most investors don’t enjoy doing on their own. For example, this robo advisor lets you set up recurring investments, it rebalances your portfolio automatically, it offers built-in tax efficiency, and it controls your cash balance.

M1 Borrow

One of the newest features available to M1 Finance clients, M1 Borrow is a program that lets you borrow up to 35% of the value of your portfolio at a competitive 3.75% interest rate. To put it simply – if you have $100,000 in your account, you can take out a loan up to $35,000 at a very low rate. Note that you’ll need to have a margin brokerage account with a minimum of $25,000 in it to be eligible for this service.

Fees and Commissions

As one of the cheapest robo advisors, M1 Finance doesn’t charge trading or monthly management fees. There are charges for deposits or withdrawals to a linked bank account, however. And regulatory and additional service fees (such as IRA conversion fees) may apply.

Stock-only accounts do not incur any asset management fees. However, portfolios with ETF holdings can incur management costs on the underlying funds that range between 0.06% and 0.20%.

If you like the idea of a second daily trading window and a discount on interest rates when borrowing against the value of your portfolio, you can sign up for the robo advisor’s Plus account. This service will cost $100 in the first year and $125 per year thereafter.

Customer Support

Should you have any burning questions or run into any problems with your accounts, the options to get your answers include exploring the site’s comprehensive library of FAQs and requesting help from a customer-service agent by submitting a contact form. Customer support representatives are available from 9:30 a.m. until 4 p.m. Eastern time.

The Bottom Line

M1 Finance may not offer mutual fund investing or tax-loss harvesting, and it is not the best choice for active traders. However, it’s still one of the best robo financial advisors we’ve come across. It charges no commissions, its fees are low, and the platform is incredibly easy to use.

Reasons to Buy

Options to trade fractional shares

No asset management fees

Flexible portfolio building

FAQ

Are robo advisors a good idea?

Given their ease of use and low fees, robo advisors are an excellent option for entry-level investors, especially when compared with traditional brokerage firms. These online investment management companies provide a good starting point for working toward your financial goals and building wealth, especially if you are starting with less than $25,000 to invest.

Do robo advisors beat the market?

Most robo advisors employ an index fund investing strategy, which means that they are able to closely match market performance – but this doesn’t necessarily mean that they can beat it. No matter how sophisticated your robo advisor’s algorithm may be, chances are that it won’t be able to beat the stock market consistently.

Can you trust robo advisors?

Absolutely. Using robo advisors instead of working with a traditional broker is completely safe, and it comes with many advantages. Some of the most important benefits of computerized investing services include low asset-management and trading fees, low minimum balances, Nobel Prize-winning investment models, access to human financial advisors, and market expansion for younger investors.

How do I choose a robo advisor?

Start by defining your goals. Make sure that you understand fees, commissions, and investment minimums. Check each platform’s ease of use. Review support team credentials. Compare the offerings of multiple providers. After doing in-depth research we’ve come to the conclusion that Wealthfront, Betterment, SoFi, and M1 Finance are among the best robo advisors out there.