Digital Advice in 2025: What You Need to Know About Robo-Advisors

Margaret Giles: Welcome to Investing Insights. I’m your host, Margaret Giles. While the buzz around robo-advisors has abated in recent years, digital investing platforms can be a solid entry point for young investors’ first forays into saving and investing. That’s because robo-advisors tend to be more accessible and lower cost than traditional advisors. But not all robo-advisors are created equal. Morningstar has evaluated 16 major digital advice providers and ranked the best of 2025. Manager Research analyst Lan Tran with Morningstar Research Services is here today to discuss the team’s findings.

Get the full report: Morningstar’s 2025 Robo-Advisor Report

What Is a Robo-Advisor?

So I want to start with the basics. What is a robo-advisor?

Lan Anh Tran: So you can think of a robo-advisor as a sort of automated investing service. So they use computer algorithm to generate a portfolio that tailors to your financial goals and needs, circumstance, risk tolerance. They take all of that input from you, and then they generate a portfolio with kind of a broad asset-class allocation and then select the investment, typically a low-cost ETF, in the portfolio for you and then automatically rebalance that portfolio for you, you know, treat any of your investment drift. It’s a very straightforward, typically low-cost way to get access to a sensibly constructed and diversified portfolio of investment.

What Is a Robo-Advisor?Robo-Advisors vs. Traditional Advisors

Giles: What differentiates a robo-advisor from a traditional, that is to say, human advisor?

Tran: Yeah, so, robo-advisor, I think that’s in the name, it’s a quantitative algorithm. And typically, in that sense, they are less complex than a human advisor can be. What you get is typically lower cost. A robo-advisor typically only charges, I think, an average is like 25 to 30 basis points compared to kind of the baseline for a human advisor is about a percentage point, and then lower investment minimum as well. You can go as low as zero for a lot of robo-advisor or somewhere between like 500 or a 1,000 compared to a traditional human advisor can require as high as 25,000 or 50,000 or even higher for you to be able to invest, and so you’re trading lower-cost, lower investment minimum with just a lower level of complexity and personalization.

So you’re not getting, well, you’re not working with a human, so if you ever have questions about what exactly is in your portfolio, and why are they behaving a certain way in certain market conditions, what just happened earlier this year might have a lot of concerns. There’s less hand-holding compared to a human advisor, and you might have to do a bit more digging yourself. So you have a lower level of customized support there. And if you want to personalize your investment, say, if you have a lot of employee stock options in Apple, like you, and you want to move away from that in your portfolio, you don’t have a lot of options when it comes to a robo compared to a human advisor who can kind of work around that for you.

Giles: Got it. So some trade-offs there.

Tran: Some trade-off, yes.

Who Should Use a Robo-Advisor?

Giles: OK. So is there a kind of investor that would be particularly well-served by using a robo-advisor? And then conversely, are there investors who maybe wouldn’t be well-suited for one?

Tran: Yeah, for sure. So I would say, yeah, the kind of target audiences are probably slightly different. If you are someone who has less complicated financial needs or just lower investable asset, a robo-advisor is a great place to start. You know, if you’re someone in your kind of mid-20s, you have paid off your debt, you’re starting to think about how to grow your asset for, at some point, retirement, a robo is a good place to start.

Compared to, on the other hand ‚someone who has more complicated, if you’re juggling multiple accounts, multiple debt accounts, or you’re thinking about getting advice for like inheritance or if you’re later on in your journey, and you’re thinking of like estate planning or planning for maybe your children’s financial future, that’s much more suited toward a human advisor compared to a robo service.

Benefits of Digital Investment Advice vs. a DIY Approach

Giles: OK, so I want to talk about another aspect of kind of the advice spectrum. With products like target-date funds on the market, investors don’t necessarily need to seek out investment advice to arrive at a somewhat reasonable asset allocation. What are the benefits of digital advice over the kind of do-it-yourself route?

Tran: Yeah, so I would say the first thing is probably access. So target-date funds, besides, I think, there’s one iShare ETF, a target-date series, outside of that, I think most of them are mutual funds. The easiest and the most sensible place to hold them is in your 401(k). Otherwise, if you’re holding them in a taxable account, you’re either facing a higher investment minimum, or you’re facing either sales load, commission fee, some sort of higher fee that you will be paying compared to a robo-advisor that you can hold in a taxable account.

So if you’re thinking of saving for maybe a down payment, maybe five years, seven years down the line, or even like short-term saving like a big vacation or a car purchase, you don’t have to worry about whether or not you can withdraw money from your 401(k) and so in that case, in those instances, it makes more sense to go for a robo-advisor service.

Also, the other aspect besides access, easy access, is kind of the level of support. I just mentioned that robo-advisor service have a lower level of kind of customized support compared to human advisor, but they do offer more than a traditional target-date fund, right? If you’re thinking between, if we have to put out a spectrum, the target-date fund is just pure asset allocation and rebalancing and the investment aspect. A robo service can automate that process and also offer some more additional service. Then a human advisor can do the whole spectrum of holistic planning and all of that, and so it kind of stands somewhere in between a pure target-date fund and then a financial advisor.

Do Robo-Advisors Offer Retirement and Taxable Accounts?

Giles: I had one follow-up question there. So you mentioned that robo-advisors, you can have them in a taxable account. Do they work at all in some kind of retirement account or other tax-advantaged account? Is that an option?

Tran: A lot of robo-services offer IRAs and so it might depend on the specific robo-service you’re looking at, but a lot of them do offer, you can hold them in a taxable account or you can hold them in a tax-advantaged account. I guess “holding” them, it’s a—You can use them in a tax-advantaged account, and they actually have kind of different asset allocation depending on the tax status of your account. If you’re using robo service in a taxable account, they might tailor your portfolio to make it more tax-efficient compared to if you don’t have to think about that in a tax-advantaged account. Yes, that’s an option.

Limitations of Robo-Advisors

Giles: Cool. So another level of customization there. So we’ve talked about the benefits. What are the limitations of digital investment advice?

Tran: So the biggest one and we kind of have talked about it is the lower level of customization and personalization. So again, if you are someone who needs a lot of either hand-holding, you’re kind of new to investing and you do want that level of “tell me what’s happening in the market, look at all of my accounts and then give me like a holistic financial planner, holistic financial plans”—a human advisor would be more suited to that.

I would say a robo-advisor, in that sense, while they offer some level of customization, you can kind of tilt your portfolio in a certain way, they cannot fully consider all of your financial situation, things like what are your other accounts outside of the robo service, if you have, say, 401(k)s or if you have 529 plans or if you have a different other accounts, they might, they can look at it, but they cannot consider it to the same extent as a human advisor could. So just a lower level of customized support there. I would say that’s the biggest limitation for those.

And to that extent, a lot of robo services actually have a premium tier, so they have a basic tier that would just kind of be the main service at a very cheap price point, but they also, a lot of them, offer a premium service at a higher account minimum and higher fee, but for those they actually do offer—you either get access to a trained advisor or a certified financial planner, and so they recognize the lack of personalization as a drawback and offer that via access to a human advisor in their higher-tier service.

Robo-Advisor Fee Structure

Giles: So you’ve touched on this already, but robo-advisor fees tend to be cheaper than traditional advisors. How exactly do those fees stack up, and how are they charged?

Tran: Most robo-advisors charge a per-annual percentage of AUM fee. So the average is about 30 basis points, kind of averaging everyone out, but the median actually is lower at 25 basis points because there are a few robo-service that charge a lot higher and kind of skew the average up. But so if you’re investing $100,000 with a robo service, you’re paying $250 as a median per year. That’s kind of the way they typically charge fees. Some of them do charge a monthly fee or a flat fee. So depending on the service, it might differ. But most of them, similar to a human advisor, charge an annual percentage of AUM fee.

I would say the typical kind of baseline fee that we typically hear for human advisor is a percentage point, and so there’s a big gap between what a robo and a human advisor charges, but depending on your financial circumstances or your financial needs and how complex a situation is, that extra 70-75 basis points might be worth it for the extra financial advice, or it might not be, so that depends again on the person.

Giles: Got it. So it gets back to that there’s an ideal investor for a robo-advisor and then there’s maybe those that aren’t as well-served.

Tran: Yes.

How Robo-Advisors Are Taking a Hybrid Approach to Financial Advice

Giles: So despite early expectations, robo-advisors really haven’t replaced traditional advisors, and it gets at maybe the lack of customization. Humans still have a role, especially for particular investors. But instead, many robo-advisors have adopted this kind of hybrid offering where they do give access to a human. Can you explain how that works?

Tran: Yes, for sure. A lot of robo services have kind of a basic tier that either costs less and/or requires lower minimum. If you look at Fidelity, for instance, they charge no advisory fee for the basic tier, require very little investment minimum. But for the premium service, they require $25,000. Still much lower than a lot of financial advisors but higher, much higher, compared to what you can get with the basic tier. And they also charge a fee for the premium tier of their service, but in exchange, you do get access to a human advisor and additional service as well.

That’s kind of the model you see with Betterment or Vanguard or a lot of other firms with a premium service. They do offer access to a human advisor and also additional service, say, retirement planning, drawdown advice, or other kind of ancillary account service at the cost of a higher annual fee and also you have to pass a certain asset threshold. Twenty-five thousand is on the lower side, I would say. Some of them require maybe 100,000 for that, and I think the typical fee we see for premium service is anywhere between 60 to 65 basis points. Some are lower, some are higher, but just kind of markedly higher than what you would get for the basic tier.

But to that point about the hybrid approach and kind of the irreplaceableness of a human advisor, I think robo-advisor programs do recognize that certain things cannot be dealt with with a computer algorithm. That’s why they do offer access to, kind of the selling point for a lot of these programs is that access to a human advisor, a trained advisor, or CFP. It kind of fits in between you just kind of start growing your asset to a certain point and you don’t think you need a dedicated advisor yet, so you kind of graduate into this premium service. But if you’re finding yourself consistently needing a human advisor to guide you through your financial situation, you might as well retain a dedicated person who is overseeing all of your financial needs instead of meeting with them on an as-needed basis. So it fits into that niche between the pure robo and the human advisor.

Giles: Got it. So it’s taking care of that kind of transition throughout someone’s financial life, potentially.

Tran: It’s an advice spectrum, yes.

How Morningstar Rates the Best Robo-Advisors of 2025

Giles: OK, interesting. So I want to transition here and talk about your research. Morningstar recently published a report, The Best Robo-Advisors of 2025. What considerations go into the ratings?

Tran: There are four different areas that we look at to assess the different robo-advisors that we look at. The first one is price, because obviously fee is important—whatever you don’t pay, you get to keep. We look beyond how much the program costs. So obviously, the fee that I mentioned for each of the basic or premium program, we look at that. We also look at what are the underlying fee. Anything from kind of fee waivers that the program uses or if they’re using funds that are just unnecessarily expensive we also don’t like that as well. So, if you have the option of paying 2 basis points for S&P 500 tracker versus if the program is making you pay for a lot more for a proprietary fund, that’s not a great look. So we also look at that as well. So the holistic look at how much you’re paying for what you’re getting out of a robo service.

The next one is obviously a very important part is portfolio. So how the portfolio is constructed? How do they decide the asset allocation? What assumption are they making? Who is making the assumption? Is it a reliable investment team that they put resource and effort into? And then how are they determining what’s the appropriate portfolio for each investor? So things like risk tolerance questionnaire, the different risk level that they have for the portfolio and how granular or not granular they might get. So that’s an important consideration.

Two other things are also very important that might get overlooked. One is provider. So the company behind the service, do they have a long-term view into the robo service or are they kind of just jumping on the train because there’s been hype around the product? And/or are they making sensible investment decisions or are they leaning more towards kind of gimmicky trends in the product that they’re putting out. So we look at, we would like to see kind of a long-term view and then stableness from the provider.

Then the last but very much not least is the breadth of service. So that’s anything from do you consider an investor’s tax situation when you are planning the portfolio? How granular, sorry, do you offer tax-loss harvesting, account aggregation, or retirement investment options, or retirement drawdown advice? So kind of ancillary service that helps add to the quality of life of a portfolio. So those are kind of the four main areas that we look at, and then we assign a score for each of those areas. And then that comes out to the overall ranking that we give the robo-advisors.

Do Robo-Advisors Control Security Selection in Your Portfolio?

Giles: Got it. And one question here on the portfolio side of things. Is a robo-advisor completely doing the security selection, or would investors have any kind of control over that side of things?

Tran: I would say it is mostly the robo-advisor. Some might offer you maybe some degree of discretion, but for the most part, and also that kind of speaks to the point about the lack of customization, because they have to scale it and because it’s a kind of more straightforward quantitative algorithm. They have a list of ETFs, typically, that they use to slot into US equity or US small cap or whatever asset class that they might be using for the capital market assumption, and you stick with those ETFs, so there’s not a whole lot of options there. But for the most part, those tend to be cheap, broad market ETFs that don’t differ that much from one another. It might be a different question if you really want a certain strategic-beta or active or thematic ETF in your portfolio. That might be a more complicated question.

Why Betterment Is One of Morningstar’s Top 3 Robo-Advisors of 2025

Giles: Right. So let’s get into some of the rankings. I want to focus on the top three. And to keep the suspense, let’s start with third place. Who earned that spot and why?

Tran: So up in third, we have Betterment. Betterment have both a basic service. There’s Betterment and there’s also a Betterment premium service. When we say third place, we’re referring to both of those programs. They stand out because of the breadth of service. They do offer a lot of ancillary service, additional service to help investors navigate their financial situation and navigate their portfolio and their goals. If they have multiple goals, the program can also handle that.

Then also the glide path that they offer, which is, unfortunately, a rare feature in kind of the robo-advisor space, which is very necessary. If you are familiar with target-date funds, glide paths are essentially—so an asset manager would slowly kind of derisk your portfolio, dial down the equity stake, typically, as you approach closer to either your target retirement, your target goal date, and a lot of robo-advisors don’t have that, and so we like to see service with a glide path and (suspense), there is another one that do have them, but Betterment does have glide path and so we do like them very much for that and also the amount of additional service that they offer is great also so they do earn the top spot, one of the top three spots.

Why Fidelity Go Is 2025’s Runner-Up for Top Robo-Advisor

Giles: OK, so what about the runner-up?

Tran: The runner-up is Fidelity. Again, Fidelity Go and Fidelity Go Premium. They have a premium version of their service. And so Fidelity is kind of a difficult to beat competitor because the basic service charged no fee. So you can pay zero up until, I think, your account has to be 25,000 for the premium service but still that encapsulates a very big range of investors who are typically starting out on their journey, and it’s a very appealing option to not have to pay a fee to have a sensibly constructed portfolio—and the portfolio are very sensibly constructed. They have zero-cost Fidelity index fund. Just a sensibly constructed portfolio with low-cost options, diversified portfolio with a lot of different granular options depending on your situation. And so, all around hard to beat, very good option for people, especially people who are kind of starting out on their journey.

Why Vanguard Remains the Best Robo-Advisor in 2025

Giles: OK. And to break the suspense, Vanguard kept the top spot again this year. What has made it stand out?

Tran: Yes, so I mentioned earlier the glide path. So Vanguard does offer a glide path in their allocation. Again, a feature that we really do like and we really would like to see more in the robo space. They derisk your portfolio as you get closer to your target goal date. They also, what also stands out about Vanguard is just the comprehensiveness of their service and the thoughtfulness with which they approach it. They really think about the investor journey from starting to invest to through retirement. To that end, you have support anywhere from when you’re starting out investing to the point that you’re retiring. They do offer retirement withdrawal advice. They offer CFP access for their premium service, which Fidelity and Betterment also does. They offer a lot of tools to calculate your withdrawal rates and a lot of other needs that you might have along the way.

They really do consider your whole investing life trajectory in the way that they’re structuring their service. You can gradually go from the basic tier of Vanguard service and graduate up and have a perfectly kind of encapsulated experience within the ecosystem. So we do like that. Obviously, goes without saying, for Vanguard and also for the other three that we mentioned, too, sensibly constructed portfolio, reasonably priced investment, and just overall, we cannot go wrong with those three.

Giles: Great. And really quick, CFP: certified financial planner?

Tran: Yes.

The Worst Robo-Advisor of 2025

Giles: OK. And to wrap up, I want to talk about the opposite end of the spectrum. Who has the bottom spot and why?

Tran: This year the bottom spot is Titan Investor. Unfortunately, they have been making changes but not for the better. The issue is A) with the fee. They charge a very high fee, but you’re not getting a whole lot for the fee that you’re paying. The portfolio tends to have very expensive underlying investment and also tends to be on the gimmickier side of things, and I would not recommend that to an investor who is not familiar with what they’re getting into. Even people who kind of fully know the risk, it is a lot of risk to be taking for someone who might not have the support of a traditional advisor who can guide them through volatile markets such as what we’re going through right now. Some of the features, new features they’re adding does not add to the investing experience. It’s more so a sort of lifestyle service. And so it’s detracting from resources they could be putting towards bettering their investment experience. Unfortunately, they are in the bottom spot in our ranking this year.

Giles: All right. Well, Lan, thank you for your insight and context on what robo-advisors do, who they work for, and the rankings.

Tran: For sure. Always happy to chat.

Giles: That wraps up this week’s episode. Subscribe to Morningstar’s YouTube channel to see new videos about investment ideas, market trends, and analyst insights. Thanks to senior video producer Jake VanKersen, lead multimedia editor Ivanna Hampton, and associate multimedia editor Jessica Bebel. And thank you for watching Investing Insights. I’m Margaret Giles, senior content development editor at Morningstar.

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