Ratings Methodology for Robo-Advisors

We evaluated and tested 12 popular robo-advisors using first-person research and our comprehensive, editor-driven rubric. All robo-advisors were assessed across the same categories and rated on a scale of 1 to 5 stars, with 5 stars eing the best possible score.

12 robo-advisors reviewed

16 categories assessed

192 data points assessed

Methodology, broken down by category

NerdWallet’s overall ratings for robo-advisors are weighted averages of ratings in the following larger categories. Our ratings formula calculates a base rating for each robo-advisor overall, from 1.0 to 5.0 stars. The rating is based on core features of the robo-advisors — the factors that matter most to the average investor and directly affect how investors choose an advisor and use their accounts.

We then apply a standard adjustment to the final score to account for factors we consider table-stakes offerings. If the robo-advisor doesn’t offer these, it does not get an adjustment. For the robo-advisor’s overall score, this standardized adjustment applies if it earns four stars or higher for average expense ratios, which would mean an average expense ratio of 0.15% or lower.

5.0

Overall score

This category takes into account the following: account management fee, where no account management fee earns the highest score and a fee of 0.45% or more earns the lowest score; and investment expense ratios, where 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 (21%)

We consider level of diversification, based on the mix of U.S. and international stocks and bonds, plus commodities and REITs, where providers that offer exposure to all of the above earn the highest score and those with limited diversification earn the lowest score; availability of specialty portfolios such as smart beta, income portfolios or customization, where if a provider offers customers the ability to customize their portfolios it earns the highest rating and if it offers no specialty portfolios it earns the lowest rating; and socially responsible investing options, where if a provider offers multiple managed SRI portfolios it earns the highest rating and if it offers no SRI portfolio options it earns the lowest rating.

Customer support (18%)

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, and if we can't find any information, the provider earns the lowest rating.

Tax strategy (10%)

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.

Accounts supported (9%)

We consider the number and type of accounts the provider is able to manage, including taxable accounts, IRAs, 401(k)s, 529 plans, and trusts. Providers that offer all of the above options, or that manage accounts held by outside custodians, earn the highest rating, while those that offer only an IRA or a taxable account earn the lowest rating.

Human advisor option (4%)

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.

Account minimum (3%)

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

Data collection and review process

NerdWallet currently reviews 12 robo-advisors that together account for the majority of the robo-advisor market by 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 overall star ratings.). Ratings are rounded to the nearest tenth. These overall star ratings appear on roundup pages and the provider’s review.

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. Providers earn an overall score based on the factors and weightings detailed on this page. However, as described above, the factors considered and how heavily those factors are weighted is then adjusted to create lists that target specific types of consumers.

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 50 years of experience in writing about finance.