Investopedia 2019 Best Robo-Advisors Awards (2024)

FAQs

Which robo-advisor has the best return? ›

According to our research, Wealthfront is the best overall robo-advisor due to its vast customization options, fee-free stock investing, low-interest rate borrowing, dynamic tax-loss harvesting, and other key features.

Do robo-advisors outperform the S&P 500? Robo-advisors can outperform the S&P 500 or they can underperform it. It depends on the timing and what they have you invested in. Many robo-advisors will put a percentage of your portfolio in an index fund or a variety of funds intended to track the S&P 500.

While a robo-advisor can be efficient in managing your investing decisions, a human advisor may be best for more complex decisions like helping you choose the right student loan repayment plan or comparing compensation packages for a new job. Cost: If cost is a factor, robo-advisors typically win out here.

Since portfolio management is handled by software rather than a human financial advisor, robo-advisors charge lower fees, which can translate to higher long-term returns for investors.

According to the research, robo ownership was found to be most common among households with $50,000 to $500,000 and younger generations. Nearly 7 in 10 Millennial millionaires have some money in robos or automated portfolios.

Robo-advisors in the U.S. have faced three main challenges: high client acquisition costs, ongoing costs of servicing clients, and low revenue yield on client assets.

Robo-advisor performance is one way to understand the value of digital advice. Learn how fees, enhanced features, and investment options can also be key considerations. Five-year returns from most robo-advisors range from 2%–5% per year.

The generic cons of Robo Advisors are that they don't offer many options for investor flexibility. They tend to not follow traditional advisory services, since there is a lack of human interaction.

The bottom line: Betterment is a clear leader among robo-advisors, offering two service options: Betterment Digital provides automated portfolio management at $10 to start an account; Betterment Premium provides unlimited phone access to certified financial planners for a $100,000 account minimum.

The amount you need to save to retire with $1 million depends on how old you are when you start saving. If you get a 10% annual return, it ranges from $116 per month for 20-year-olds to $2,623 per month for 50-year-olds. You can save more by using tax-advantaged retirement accounts, such as 401(k)s and IRAs.

What are the cons of using Wealthfront? ›

The main con of Wealthfront is that its required $500 minimum deposit is higher than other free robo-advisors like SoFi Invest and Betterment Investing.

The latest MagnifyMoney study of nearly 1,600 Americans finds that 63% of consumers are open to using a robo-advisor to manage their investments, with millennials being the most open (75%). That said, only 41% of Americans with investments use a financial advisor — and just 1% say they use a robo-advisor.

Robo-advisors are much quicker to respond to changes in your assets, but they are not able to predict market outcomes. It is just as possible to lose money using a robo-advisor as it is using a human advisor.

A robo-advisor can help ease the burden of managing your portfolio as you transition to retirement—and help you figure out how to tap your assets in tax-smart ways.

Wells Fargo Intuitive Investor offers the core robo-advisor features (portfolio management and rebalancing) and then kicks it up with tax-loss harvesting. If you're already a Wells customer, it could make extra sense to check out this robo-advisor.

On an after-tax basis, Wealthfront Smart Beta may have relatively better performance due to tax benefits than an index (for example, the S&P 500) or a fund that does not include tax-loss harvesting. Detailed tax-loss harvesting results are in the next section “Realized Results: Tax-Loss Harvesting”.