Illustration by Aaron Fernandez
By Megan Leonhardt
July 9, 2018

Robo-advisors are going mainstream.

Once the domain of Silicon Valley startups, these automated investment services — which rely on computer algorithms to invest client assets — are increasingly being offered by traditional financial players like Fidelity. Last year, total assets managed by robos hit $222 billion, which was more than double from the prior year.

Yet despite this growth, robos still collectively control less than one-third of the assets of a single mutual fund — Vanguard Total Stock Market Index.

“When you say robo-advisor, people don’t necessarily understand,” says David Goldstone, a research analyst for the Robo Report, which tracks robo-advisor performance. “Often people think of accounts being traded frequently, algorithms that are driving trading strategies — and that’s not really the case.” For the most part, he says, robos offer managed accounts that consist largely of low-cost index mutual and exchange-traded funds (ETFs).

The perception of robos is likely to evolve now that a majority of the startups have faded from the scene, and traditional financial services providers such as Fidelity and Morgan Stanley are setting up their own robo-advisory platforms. More are coming, with JPMorgan Chase and Goldman Sachs expected to roll out their own robo offerings later this year.

Many services now offer comprehensive financial planning — complete with access to human advisors at times. These hybrid advisors include Vanguard Personal Advisor Services and Personal Capital.

Portfolio strategies are evolving too. Many offer tax-efficient approaches, including tax-loss harvesting, where securities that are down will be sold to offset capital gains elsewhere in your portfolio. A number of robos, including Betterment and Morgan Stanley, have introduced socially responsible investing options. Ellevest has rolled out an entire portfolio focused on stocks that positively impact women in the workplace.

Illustration by Aaron Fernandez

These services are still available for a relatively low cost. Typically, wealthy clients pay human advisors 1% to 2% of their investable assets annually for managing their portfolios (last year, the average fee for a new account with a human advisor was 1.04%, according to consultants PriceMetrix). With robo-advisors, by contrast, investors can start with as little as a dollar — and the average management fee is roughly a third of traditional human advisors, just 0.36%, according to MONEY’s analysis. Some platforms like WiseBanyan and Schwab Intelligent Portfolios don’t even charge a fee at all; they simply pass along the underlying cost of the funds used.

The low price, proliferation of companies in the space, and growing capabilities have helped push investors toward these platforms. Yet finding the right automated platform can still be difficult.

To help narrow the field, MONEY looked at roughly 50 of the best-known robo-advisors that had at least $50 million of total assets under management — analyzing each on over 30 different variables to determine which provided the highest level of service for the cost. (The winners are below, followed by a listing of all the services that met our size threshold and answered our questions.)

MONEY paid particularly close attention to the fees each robo charged (looking for lower-than-average costs where possible) and the services offered (making sure the offerings were sufficiently rich and broad to meet the needs of target clients, be they savers just starting out or high-net-worth households with more complicated finances). And where possible, we wanted to find robos that have met or exceeded the performance of the broad market.

So whether you’re looking to open a small account to test these platforms out for the first time or you’re a seasoned investor looking for comprehensive retirement strategies and advice, read on to see which robo-advisors made the cut — and which are right for you.


Best for Beginner Investors: Betterment Digital

Screenshot of Betterment
(frame) Illustration by Aaron Fernandez; (screen) courtesy of Betterment

If you’re just starting to build your retirement savings, you’ll want a robo-advisor with low minimums to open an account. You’ll also want access to essential accounts such as traditional and Roth IRAs, and auto-deposit capabilities to help you put your savings on autopilot.

Why it wins: Betterment helps newbies build a solid foundation for saving and investing. For example, the platform allows you to invest in fractional shares of stocks, so you can put every penny to work immediately, rather than having to wait until you can buy a full share of a security. This is helpful if you don’t have a lot saved upfront. Yet Betterment offers enough sophisticated services—such as tools to save on taxes or run a portfolio analysis across all your accounts, even those held at other companies—so you can stick with the platform as your financial needs mature. And to deliver financial strategies and advice to you, Betterment utilizes both technology and a human touch.

Caveats: Betterment levies a management fee on top of the fees your funds charge, making it slightly pricier than some robos. If you’re looking for the absolute cheapest basic option, check out WiseBanyan. It may not have all the bells and whistles of Betterment, but it will set you up with a balanced strategy and automatically rebalance your portfolio as the market fluctuates over time. Added services will cost you, though — in some cases more than what you’d pay at Betterment. For example, a beginning investor would pay 0.12% “all in” for WiseBanyan’s basic service. But tax-loss harvesting available via WiseBanyan’s Tax Protection Package is an added 0.24%. And the ability to create custom portfolios would add $3 per month.

Key Factors

• Minimum to open account: $0
• Average all-in cost: 0.36%
• Human advice: Licensed advisors are available to answer simple questions via chat or phone.


Best for Intermediate Investors: Schwab Intelligent Advisory

Screenshot of Charles Schwab
(frame) Illustration by Aaron Fernandez; (screen) courtesy of Charles Schwab

The more complex your financial needs, the more you’re likely to need — and want — human help. That’s where a “hybrid robo-advisor” can be beneficial. The best hybrid robos will also offer both retirement and taxable accounts, complete with tax-efficient strategies and analysis of outside accounts like 401(k)s so investors can get a comprehensive picture of their total wealth.

Why it wins: Schwab seriously upped its game in the robo space when it introduced Intelligent Advisory — a major step up from its original, fully automated Intelligent Portfolios platform. The new premium service offers access to investment management and comprehensive planning delivered by certified financial planners (CFPs) who are available six days a week (customer service is available 24/7). And planner help is available from the get-go: An initial planning call or video chat generally lasts an hour and guides investors through the “onboarding” process. Follow-up meetings can easily be scheduled through the online booking system. Schwab Intelligent Advisory does require a $25,000 investment to start. But the management fee is only 0.28% of assets a year. Once you factor in the average costs for the underlying funds, the all-in cost is 0.43%. To ensure that fees remain reasonable, Schwab caps the costs at a maximum of $900 a quarter.

Caveats: If you’re looking to minimize your tax bills, you’ll need to have at least $50,000 with Schwab in order to qualify for tax-loss harvesting services. In the past, Schwab’s robo offering has also been criticized for holding more of its clients’ assets in cash, on average, than some of its peers. While that cash cushion helped Schwab’s portfolios hold up during the first-quarter market rockiness, higher cash stakes can create a drag on an investor’s portfolio, Goldstone says.

Key Factors

• Minimum to open account: $25,000
• Average all-in cost: 0.43%
• Human advice: Certified financial planners are available for initial onboarding, and investors can schedule an unlimited number of appointments via phone or web chat.


Best for Advanced Investors: Vanguard Personal Advisor Services

Screenshot of Vanguard
(frame) Illustration by Aaron Fernandez; (screen) courtesy of Vanguard

Once you’ve built substantial retirement savings, say $250,000, you’ll need to ensure you’re investing right and planning for the long term. Several advanced hybrid robo-advisors offer access to human advisors who give holistic recommendations on all your savings—no matter where the accounts are. At this point, you should also be searching for an advisor with a wide array of investment options, beyond just funds and ETFs.

Why it wins: Though it charges average all-in fees of just 0.38%, Vanguard’s hybrid platform emphasizes establishing a relationship with a human advisor. It’s also capable of handling complex investments and retirement strategies for both pre-retirees and retirees. For instance, Vanguard lets you invest in individual bonds and offers tax-free muni bond portfolios to reduce taxes. Vanguard Personal Advisor is one of the few robos capable of providing income drawdown strategies for investors already in retirement. And Vanguard offers a suite of tools for retirement planners such as Social Security optimization, which shows when to tap your benefits and how to defer — and what the tradeoffs are with each option. You can also get access to a dynamic spending tool that can analyze market trends to calculate the best time to spend. All of these outcomes are then incorporated into clients’ comprehensive financial plan.

Caveats: Vanguard’s platform is very basic, without a lot of the interactive charts and digital tools that come with technology-first robos like Betterment. For instance, tax-loss harvesting is not automated by algorithm but rather done on a client-by-client basis through the advice of the financial advisor.

Key Factors

• Minimum to open account: $50,000
• Average all-in cost: 0.38%
• Human advice: A certified financial planner is assigned to you and is available for initial onboarding and an unlimited number of ongoing appointments via phone or web chat.


Methodology

MONEY evaluated roughly 50 of the top robo-advisors, focusing on those with at least $50 million in assets or more than 1,000 investors. Robos were judged on their average “all-in” costs — including management fees and the average cost of the funds — and the breadth and depth of their services. Front-runners were also judged on their onboarding process and digital experience. MONEY also looked at performance — specifically, two-year annualized returns for each robo’s balanced strategy that includes stocks and bonds, as tracked by the Robo Report.

For beginning investors, robos had to have a low minimum ($500 or less), retirement account options, and auto-deposit. For intermediate investors, robos needed a modest minimum ($25,000 or less), a wide range of account options, tax strategies, and access to a financial advisor. For advanced investors, robos had to service accounts with $250,000 or less and offer access to a certified advisor offering personalized advice on all your holdings, including those held elsewhere, such as in a 401(k).

 

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