Robo-Advisor Performance Is Only One Piece of the Puzzle

When choosing a robo-advisor, do check investment performance — but also look at account minimums, access to human advice, fees and other factors.
Andrea Coombes
By Andrea Coombes 
Edited by Arielle O'Shea

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If you’re trying to choose a robo-advisor to invest your hard-earned money, your first instinct might be to compare investment returns. After all, you want your money to be safe — and grow.

The problem is, there’s no guarantee a robo-advisor with stellar returns last year will outperform this year.

And while it’s wise to verify that a robo-advisor’s performance isn’t way out of step with its competitors, that’s only part of the picture. Consider these eight elements when choosing the best robo-advisor for you.

» Want to compare advisors? See our analysis on the best robo-advisors.

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1. Account minimum

First, narrow the list to robo-advisors with a minimum account requirement that works with the amount you want to invest.

For example, our list of the best robo-advisors includes Schwab Intelligent Portfolios and Vanguard Digital Advisor. Both offer valuable services, but Schwab requires a $5,000 minimum investment and Vanguard requires $3,000.

At the other end of the spectrum, Betterment, Ellevest and SoFi have $0 account minimums, and Wealthfront’s is $500.

2. Availability of human advisors

Robo-advisors vary in how much access, if any, you get to a human advisor. For example, SoFi Automated Investing offers unlimited access to certified financial planners or financial advisors pursuing their CFP designation. Meanwhile, Wealthfront doesn’t offer access to live advisors, but it does have robust financial planning tools you can use on your own.

Consider how important it is to you to have a human available to field your questions.

» Looking for a human advisor? View our picks for the best financial advisors

3. Investment lineup

One plus to using a robo is you don’t have to think too deeply about investment choices. But do pay some attention.

You may need to fill out a questionnaire to get a picture of where your money will be invested. Many robos ask you questions around your investment goals and your risk tolerance to build your portfolio. Make sure the recommended portfolio makes sense for your individual circumstances.

Look for a decent fit, but don’t obsess. Getting started — even if your portfolio isn’t perfect — is what counts, because investments need time to grow and compound.


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4. Fees

Once you’ve narrowed your list, compare fees. That includes management fees and investment fees. Even seemingly small fees can have an outsize impact on long-term financial health.

We detail average investment fees in our robo-advisor reviews.

5. Portfolio rebalancing

The main reason for using an investment advisor is getting help managing your portfolio, so it makes sense to find one that offers automatic rebalancing to keep your asset mix correct over time. When your mix of stocks, bonds, etc., shifts from what you originally wanted, many robos will automatically rebalance your portfolio to your desired mix by selling and buying assets. Simple concept, but sometimes complicated in practice.

You may also want to look for additional services, such as tax-loss harvesting.

6. Account types

These days, most major robos offer taxable and retirement accounts, but maybe you’re looking for a 529 plan for your kid’s college savings. Make sure your robo-advisor offers the types of accounts you need.

7. Portfolio choice

Some robo-advisors allow you to customize your portfolio to address certain needs, such as minimizing taxes or producing income if you’re in retirement.

If you’re interested in impact investing, you might opt for a robo-advisor that offers a socially responsible investing portfolio. For example, Wealthfront allows users to choose a specific SRI portfolio, or customize another Wealthfront portfolio to include socially responsible options, such as environmental conservation, gender equality, education or health care.

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8. Investment performance

Finally we have performance: If a robo’s returns differ substantially from the competition, take note. It’s best to look at long-term returns — five years or longer — because short-term returns don’t give you a complete picture. Keep in mind, though, that some robo-advisors haven’t been around that long.

If you'd like to compare returns in depth in addition to the factors above, The Robo Report is a quarterly review of robo-advisor performance, and has data going back more than three years

Condor Capital Wealth Management. The Robo Report. Accessed Nov 21, 2023.
. The analysis is available for free on the company's website. (You'll have to hand over your email address to receive it.) The Robo Report is published by Condor Capital Wealth Management, a fee-only investment advisory.

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