Ratings Methodology for Robo-Advisors

NerdWallet’s overall ratings for robo-advisors are weighted averages of ratings in the following larger categories:
  • Account minimum.
  • Account fees.
  • Portfolio mix.
  • Types of accounts supported.
  • Customer support options.
  • Automated services.
  • Human advisor option.
  • Data collection and review process

    NerdWallet currently reviews 18 robo-advisors that together constitute the majority of the robo-advisor market based on their assets under management.

    We collect data from providers and observe provider demonstrations as necessary. Our process starts by sending detailed questionnaires to providers. The questionnaires are structured to equally elicit both favorable and unfavorable responses. They are not designed or prepared to produce any predetermined results. The questionnaire answers, combined with product demonstrations, interviews of provider personnel and hands-on research by our specialists, make up our proprietary assessment process that scores each provider’s performance across more than 20 factors.

    The final output produces star ratings from poor (1 star) to excellent (5 stars). Ratings are rounded to the nearest half-star.

    Information updates

    Our writers and editors conduct robo-advisor reviews on an annual basis. Throughout the year, we maintain contact with providers and update any changes to their offerings.

    Factor weightings

    The weighting of each rating factor is based on our team’s assessment of which features are most important to consumers and which ones impact the consumer experience in the most meaningful way. Those factors vary depending on the category.

    The review team

    The review team comprises seasoned writers, researchers and editors who cover stocks, bonds, mutual funds, index funds, exchange-traded funds, alternative investments, socially responsible investing, financial advisors, retirement, and investment strategy. In addition to appearing on NerdWallet, the work of our team members has been published in The New York Times, The Washington Post, Forbes, USA Today, Bloomberg News, Nasdaq, MSN, MarketWatch, Yahoo Finance and other national and regional media outlets. Each writer and editor follows NerdWallet’s strict guidelines for editorial integrity.

    The combined expertise of our investing team is infused into our review process to ensure thoughtful evaluation of products and services from the customer perspective. Our writers and editors together have more than 70 years of experience in writing about finance. Their former positions range from Wall Street Journal reporter to senior financial advisor at Merrill Lynch.

    Account minimum

    We consider the minimum dollar amount (if any) required to open an account. A $0 account minimum earns the highest rating, and an account minimum of $25,000 or higher earns the lowest rating.

    Account fees

    This category takes into account the following from each provider:

  • Account management fee: A fee of 0.15% or less earns the highest score, and a fee of 0.45% or more earns the lowest score.
  • Other account fees (annual, transfer and closure): If the provider charges no account fees, it earns the highest rating. If the provider’s annual, transfer and closure fees add up to $250 or more, it earns the lowest rating.
  • Investment expense ratios: Average expense ratios of 0.10% or less earn the highest rating, and expense ratios of more than 0.30% earn the lowest rating.
  • Portfolio mix

    We consider:

  • Level of diversification, based on the mix of U.S. and international stocks and bonds, plus commodities and REITs. Providers that offer exposure to all of the above earn the highest score; those with limited diversification earn the lowest score.
  • Availability of specialty portfolios such as smart beta, income portfolios or customization. If a provider offers customers the ability to customize their portfolios, it earns the highest rating. If it offers no speciality portfolios, it earns the lowest rating.
  • Socially responsible investing options. If a provider offers multiple managed SRI portfolios, it earns the highest rating. If it offers no SRI portfolio options, it earns the lowest rating.
  • Accounts supported

    We consider the number and type of accounts the provider is able to manage, including:

  • Taxable accounts.
  • IRAs.
  • 401(k)s.
  • 529 plans.
  • Trusts.

  • Providers that offer all of the above options, or that manage accounts held by outside custodians, earn the highest rating. Those that offer only an IRA or a taxable account earn the lowest rating.

    Customer support

    We rate customer support on two factors: Phone support and website usability. If a provider offers 24/7 phone support, it earns the highest rating. If it offers no support by phone, email or chat, it earns the lowest rating. We define website usability as how easy it is for our reviewers to find key details on the site. If we can find all information in under five minutes, a provider earns the highest rating. If we can’t find any information, the provider earns the lowest rating.

    Automated services

    This takes into account whether a provider offers:

  • Tax strategy. If a provider offers direct indexing or another specialized tax strategy, it earns the highest rating. If it offers no tax strategy, it earns the lowest rating.
  • Automatic rebalancing, and if so, how often it occurs. Advisors that offer automatic rebalancing as needed earn the highest score; those that require a minimum balance or charge an additional fee for this service earn the lowest score.
  • Human advisor option

    We consider whether robo-advisors offer financial planning advice from a licensed professional, whether that advice carries an additional fee, how accessible those professionals are, and what licenses they carry. If a provider offers unlimited access to CFPs, it earns the highest rating. If it offers no human advisor option, it earns the lowest rating.

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