Our take on the best digital advice options for individual investors.<\/p>\n
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<\/a>What Is a Robo-Advisor?<\/p>\n
So I want to start with the basics. What is a robo-advisor?<\/p>\n
Lan Anh Tran<\/b>: 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\u2019s a very straightforward, typically low-cost way to get access to a sensibly constructed and diversified portfolio of investment.<\/p>\n
What Is a Robo-Advisor?<\/a>Robo-Advisors vs. Traditional Advisors<\/p>\n Giles<\/b>: What differentiates a robo-advisor from a traditional, that is to say, human advisor?<\/p>\n Tran<\/b>: Yeah, so, robo-advisor, I think that\u2019s in the name, it\u2019s 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\u2019re trading lower-cost, lower investment minimum with just a lower level of complexity and personalization.<\/p>\n So you\u2019re not getting, well, you\u2019re 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\u2019s 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\u2019t 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.<\/p>\n Giles<\/b>: Got it. So some trade-offs there.<\/p>\n Tran<\/b>: Some trade-off, yes.<\/p>\n 5 Questions to Ask a Financial Advisor <\/p>\n Ask about areas of expertise, compensation arrangements, and credentials before signing on for financial help.<\/p>\n Giles<\/b>: 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\u2019t be well-suited for one?<\/p>\n Tran<\/b>: 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\u2019re someone in your kind of mid-20s, you have paid off your debt, you\u2019re starting to think about how to grow your asset for, at some point, retirement, a robo is a good place to start.<\/p>\n Compared to, on the other hand \u201asomeone who has more complicated, if you\u2019re juggling multiple accounts, multiple debt accounts, or you\u2019re thinking about getting advice for like inheritance or if you\u2019re later on in your journey, and you\u2019re thinking of like estate planning or planning for maybe your children\u2019s financial future, that\u2019s much more suited toward a human advisor compared to a robo service.<\/p>\n Should You Be Using a Robo-Advisor? <\/p>\n These six questions can help you decide if robo-advice is right for you.<\/p>\n Giles<\/b>: 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\u2019t 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?<\/p>\n Tran<\/b>: Yeah, so I would say the first thing is probably access. So target-date funds, besides, I think, there\u2019s 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\u2019re holding them in a taxable account, you\u2019re either facing a higher investment minimum, or you\u2019re 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.<\/p>\n So if you\u2019re 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\u2019t 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.<\/p>\n 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\u2019re 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.<\/p>\n Do Robo-Advisors Offer Retirement and Taxable Accounts?<\/p>\n Giles<\/b>: 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?<\/p>\n Tran<\/b>: A lot of robo-services offer IRAs and so it might depend on the specific robo-service you\u2019re 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 \u201cholding\u201d them, it\u2019s a\u2014You 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\u2019re using robo service in a taxable account, they might tailor your portfolio to make it more tax-efficient compared to if you don\u2019t have to think about that in a tax-advantaged account. Yes, that\u2019s an option.<\/p>\n Limitations of Robo-Advisors<\/p>\n Giles<\/b>: Cool. So another level of customization there. So we\u2019ve talked about the benefits. What are the limitations of digital investment advice?<\/p>\n Tran<\/b>: 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\u2019re kind of new to investing and you do want that level of \u201ctell me what\u2019s happening in the market, look at all of my accounts and then give me like a holistic financial planner, holistic financial plans\u201d\u2014a human advisor would be more suited to that.<\/p>\n 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\u2019s the biggest limitation for those.<\/p>\n 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\u2014you 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.<\/p>\n Are Robo-Advisors Still Worth It? <\/p>\n Dive into what differentiates robo-advisor programs and which investors could benefit from robo-advice.<\/p>\n Giles<\/b>: So you\u2019ve 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?<\/p>\n Tran<\/b>: 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\u2019re investing $100,000 with a robo service, you\u2019re paying $250 as a median per year. That\u2019s 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.<\/p>\n I would say the typical kind of baseline fee that we typically hear for human advisor is a percentage point, and so there\u2019s 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.<\/p>\n Giles<\/b>: Got it. So it gets back to that there\u2019s an ideal investor for a robo-advisor and then there\u2019s maybe those that aren\u2019t as well-served.<\/p>\n Tran<\/b>: Yes.<\/p>\n How Robo-Advisors Are Taking a Hybrid Approach to Financial Advice<\/p>\n Giles<\/b>: So despite early expectations, robo-advisors really haven\u2019t 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?<\/p>\n Tran<\/b>: 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.<\/p>\n That\u2019s 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.<\/p>\n 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\u2019s 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\u2019t think you need a dedicated advisor yet, so you kind of graduate into this premium service. But if you\u2019re 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.<\/p>\n Giles<\/b>: Got it. So it\u2019s taking care of that kind of transition throughout someone\u2019s financial life, potentially.<\/p>\n Tran<\/b>: It\u2019s an advice spectrum, yes.<\/p>\n How Morningstar Rates the Best Robo-Advisors of 2025<\/p>\n Giles<\/b>: 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?<\/p>\n Tran<\/b>: 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\u2014whatever you don\u2019t 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\u2019re using funds that are just unnecessarily expensive we also don\u2019t 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\u2019s not a great look. So we also look at that as well. So the holistic look at how much you\u2019re paying for what you\u2019re getting out of a robo service.<\/p>\n 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\u2019s 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\u2019s an important consideration.<\/p>\n 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\u2019s 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\u2019re putting out. So we look at, we would like to see kind of a long-term view and then stableness from the provider.<\/p>\n Then the last but very much not least is the breadth of service. So that\u2019s anything from do you consider an investor\u2019s 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.<\/p>\n The Best Robo-Advisors of 2025 <\/p>\n Understand the ins and outs of digital advice and see our top picks.<\/p>\n Giles<\/b>: 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?<\/p>\n Tran<\/b>: 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\u2019s 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\u2019s not a whole lot of options there. But for the most part, those tend to be cheap, broad market ETFs that don\u2019t 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.<\/p>\n Why Betterment Is One of Morningstar\u2019s Top 3 Robo-Advisors of 2025<\/p>\n Giles<\/b>: Right. So let\u2019s get into some of the rankings. I want to focus on the top three. And to keep the suspense, let\u2019s start with third place. Who earned that spot and why?<\/p>\n Tran<\/b>: So up in third, we have Betterment. Betterment have both a basic service. There\u2019s Betterment and there\u2019s also a Betterment premium service. When we say third place, we\u2019re 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.<\/p>\n 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\u2014so 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\u2019t 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.<\/p>\n![\"Illustration](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/06\/VUKBNSNCKNCR7PMSIFWUVSOT5E.png\")
<\/a>Who Should Use a Robo-Advisor?<\/p>\n![\"Collage](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/06\/3YIUJ2VZIVFVZCYTELBZ3WB7O4.jpg\")
<\/a>Benefits of Digital Investment Advice vs. a DIY Approach<\/p>\n![\"Illustration](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/06\/QHFEMYUMBFA3HD6DXGAMCTCY5Q.png\")
<\/a>Robo-Advisor Fee Structure<\/p>\n<\/a>Do Robo-Advisors Control Security Selection in Your Portfolio?<\/p>\n
![\"Photo](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/06\/W2YV5TNNWBHRRGNTSYGTQDTOCM.png\")
<\/a>![\"Collage](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/06\/XUKTB7KCWZDUTJLTUHOOAK7JTY.png\")
<\/a>Why Fidelity Go Is 2025\u2019s Runner-Up for Top Robo-Advisor<\/p>\n