Your Guide to Getting Started With Robo-Investing

Digital investment advice is booming. As access to these services has increased, so have investors’ questions about their suitability, cost, and range of offerings.

Digital investing platforms, or robo-advisors, offer financial advice and limited human interaction. This combination of services is becoming increasingly appealing, thanks to millennials’ and Generation Z’s ability and preference to handle their finances online, the pandemic-driven shift to virtual interactions with advisors, and increasing interest in investing in novel assets like cryptocurrency.

We took a closer look at what the top robo-advisors can (and can’t) do, and the type of investors who could benefit from using one. And if robo-advisors sound like a good fit, consider our list of top providers to better understand the options that could work for you.

You can also dive deeper into the details in the full research report from Amy Arnott, portfolio strategist, and Alec Lucas, manager research strategist for Morningstar Research Services.

IN THIS ARTICLE

• What Is a Robo-Advisor?
• Are Robo-Advisors Worth It for You?
• The Drawbacks of Robo-Investing
• Who Are the Best Robo-Advisors?
• How We Analyzed Robo-Advisors

What Is a Robo-Advisor?

Robo-advisors occupy a middle ground between a wealth manager and a do-it-yourself trading platform.  

For example, robo-advisors use computer algorithms to provide low-cost asset allocation and build automated investor portfolios. They offer more specificity than the straightforward trade execution of a brokerage platform but not as much as the personalization you’d get from a living, breathing wealth manager.  

Robo-advisors also offer financial goal planning at a basic level. That means more customization than you’d see from a brokerage platform but not as much as from a live financial advisor. 

Are Robo-Advisors Worth It for You?

This semitailored approach can be a good fit for early- to midcareer investors who want to further their investment strategy but don’t have the means, need, or interest to engage a traditional financial advisor.

This group of investors would benefit from robo-advisors that offer:

• Lower fees. Perhaps the greatest appeal of robo-advisors is their substantially lower price tag for advice. Of the 20 providers we reviewed, the median advisory fee was 0.30%. Financial advisors tend to have advisory fees close to three times that amount—around 1%—which is a greater burden on individuals investing less money.
• Lower account minimums, which substantially lower the barrier of entry to investing. Four of the 20 robo-advisor platforms we reviewed have no account minimum for their most basic services, and 14 others have a minimum of $5,000 or less. On the other hand, research from Cerulli Associates shows that only 7% of financial advisors focus on serving individuals who are investing less than $100,000.
• Strategies to minimize taxes. Several robo-advisors we reviewed include the option to sell underperforming investments at a loss to offset taxes owed from other, higher-performing securities. This sophisticated strategy, known as tax-loss harvesting, speaks to the breadth of services and tax efficiency that these providers can offer at a lower price point.

The Drawbacks of Robo-Investing

If you’re still learning the basics about investing and are intimidated by making decisions independently (and looking to invest a good amount), it might be smart to work with a human advisor who can take the lead and guide you through the ins and outs of their decision-making.

Investors with larger, more complex portfolios could also benefit from the support of a traditional financial advisor. That’s especially true for complex matters like insurance and risk management, estate planning, and retirement drawdown strategies.

Other factors could also complicate a portfolio. For instance, if you have a family member with a disability, you could likely benefit from one-on-one guidance around a special-needs trust or ABLE account.

Who Are the Best Robo-Advisors?

Read on to explore our take on the leading robo-advisors.

Our assessment focused on the factors that most directly help investors reach their financial goals: fees, quality of portfolio construction and investment advice, and financial planning tools.

Fee assumes a $15,000 account balance.
Advisory Fee for Premium Customers: Starting at 0.30%.
Data as of March 31, 2022.

Vanguard Digital Advisor and its hybrid sibling Vanguard Personal Advisor Services, which combines automation with human expertise, may not be the best in every respect of the robo-advisors we surveyed, but they are the best overall. 

The two services already have numerous features associated with top robo-advisors. Vanguard Digital Advisor, for example, offers outside account aggregation, custom goal planning, debt planning, a rainy-day tool, and a next-dollar optimizer that helps investors choose between competing financial priorities. In 2022, Vanguard plans to add funds that consider environmental, social, and governance issues in their investment processes.   

Vanguard Digital Advisor’s $3,000 minimum makes the service less accessible than some. But its annual asset-based charge, which includes advisory and underlying exchange-traded fund fees, is very competitive and is not reliant on waivers that might expire.  

Vanguard Personal Advisor Services charges higher fees and requires a larger minimum investment than Vanguard Digital Advisor, but it offers further benefits. Clients receive unlimited access to a pool of certified financial planners until their assets exceed $500,000, at which point Vanguard assigns them a dedicated CFP who touches base at least twice a year. The service also offers access to holistic, tailored financial planning advice at a cheaper price than any competing offering. Vanguard plans to add tax-loss harvesting to the service in 2022. As investors’ financial lives become more complicated, the ability to transition from Vanguard Digital Advisor to the more comprehensive service is a strength.  

Fee assumes a $15,000 account balance.
Advisory Fee for Premium Customers: 0.40%.
Data as of March 31, 2022.

Betterment’s transparency and value set it apart.  

Since its May 2010 launch, it has cut fees and added investment options and features to make investing and retirement planning easier for people. These gradual improvements help explain its position as the largest and most successful stand-alone robo-advisor launched in the previous decade. 

Betterment is one of the few robo-providers that employs a glide path, which gradually adjusts the portfolio’s asset mix to become more conservative over time. Portfolio construction is sensible and well-thought-out: The main Core Portfolios series offers a mix of low-cost ETFs with exposure to several major asset classes. Betterment also offers a range of other portfolios beyond its core offering. 

Betterment has a wide range of services, especially given its below-average price tag. Advice is part of the offer, too, and investors who aggregate their outside banking and investment accounts can get holistic help with retirement investing, goal planning, and prioritizing various accounts. Although on-demand access to an investment advisor is reserved for Betterment Premium, Betterment is one of the few robo-advisors that lets clients pay hourly for advice on specific situations, such as retirement planning, general financial advice, college savings, marriage planning, and other topics. 

Fee assumes a $15,000 account balance.
Data as of March 31, 2022.

SigFig is a lean offering that doesn’t sport the same scale of resources as some of its competitors, but it checks all the right boxes for a robo-advisor. 

SigFig’s portfolio construction approach is simple but sensible. Allocations are strategic and updated periodically depending on the market environment and SigFig’s capital markets assumptions. They are generally reasonable, with equity allocations for taxable portfolios ranging from 26% to 90% of assets, depending on the risk level, and 13% to 85% for retirement portfolios. The portfolios, however, only rely on one broad index for U.S. stock exposure.  

The service has some weaknesses. It doesn’t provide advice for multiple investment goals and lacks more dedicated educational resources that could help clients make SigFig their “one-stop shop.” The privately held firm’s focus on partnering with larger corporations like UBS and Wells Fargo raises questions about whether it will remain independent. 

Fee assumes a $15,000 account balance.
Advisory Fee for Premium Customers: $300 for the first year; $360 for each following year.
Data as of March 31, 2022.

We think Schwab’s portfolios hold too much cash, which holds back Schwab's otherwise excellent robo-advisor service. 

The portfolio-construction process has several strengths. For one, it uses an extensive risk-tolerance questionnaire to match investors with portfolios from one of 12 different risk levels. Plus, the portfolios provide comprehensive asset-class exposure, including both U.S. and international large- and small-cap stocks, REITs, corporates, mortgages, high yield, muni bonds, world bonds, emerging-markets debt, Treasuries, Treasury Inflation-Protected Securities, and gold. And the underlying investments are solid, while Schwab’s approach to constructing portfolios, rebalancing to limit risk, and managing tax considerations is thoughtful. 

Despite the portfolios’ strengths, they all include above-average allocations to low-yielding cash accounts. Investment money held in cash can be put to better use elsewhere, especially given today’s inflation. Schwab is using the cash portion of their assets to generate revenue: The firm receives the difference between the revenue it earns on asset balances in Schwab Bank and the yield it pays investors.  

Schwab Intelligent Portfolios Premium suffers from the same cash issue but otherwise has considerable merit. Investors with at least $25,000 have unlimited access to a financial planner holding the CFP designation. The service offers a range of online tools for advice on income, expenses, investments, college savings, retirement planning, and other issues. It is also one of the only robo-advisors to provide comprehensive retirement income advice. 

Fee assumes a $15,000 account balance.
Data as of March 31, 2022.

Wealthfront has many strengths, but some strategic shifts and questionable allocations hold it back. 

One strength is its low cost. The quality of the underlying funds is also generally strong; the majority used in Wealthfront’s portfolios receive Morningstar Analyst Ratings of Gold or Silver. The service includes a thorough questionnaire that incorporates behavioral economics research to evaluate both risk tolerance and risk capacity. 

Wealthfront slots investors into a portfolio matching one of 20 risk levels, which spans three account types: taxable, retirement, and socially responsible investing. Customers also have access to financial planning tools for spending, savings, income growth, inflation, Social Security, taxes, college planning, and home equity. 

Still, some of Wealthfront’s strategies seem driven by popular but not necessarily prudent investment trends. Many of its portfolios are on the aggressive side, and Wealthfront allows investors to put up to 10% of their assets in cryptocurrency funds. 

Fee assumes a $15,000 account balance.
Advisory Fee for Premium Customers: 0.50%.
Data as of March 31, 2022.

Fidelity Go stands out for its simple, straightforward approach that draws on Fidelity’s strong global research and asset-allocation team. 

Fidelity uses information from a risk-tolerance questionnaire to map investors to a taxable or retirement-focused portfolio, with each including seven different risk levels. The portfolios all focus on a short list of core asset classes; esoteric asset classes or ESG-focused strategies aren’t part of the offer. 

The service also offers ongoing support. Text alerts and other communications let customers know how they are progressing with their goals, as well as provide behavioral nudges to encourage long-term investing. Fidelity Go does not currently offer tax-loss harvesting. 

Fidelity’s premium Personalized Planning & Advice service (available for accounts with at least $25,000) charges an asset-based fee and offers additional financial planning services. Participants have access to unlimited advice and planning calls and can choose from a menu of coaching solutions focused on different topics, including retirement planning, budgeting, and debt management. 

Fee assumes a $15,000 account balance.
Advisory Fee for Family Plan: 0.40%.
Data as of March 31, 2022.

Acorns is a competent offering geared toward beginning investors.  

With no investment minimum and a straightforward investment approach, Acorns is accessible to a wide range of investors. The service has features that help investors round up spending on everyday purchases to build an investment balance. Acorn users can also get rebates on certain online purchases through its Acorns Earn. The program has more than 350 participating companies, from Nike to Walmart. 

The fees are generally competitive, but Acorns’ features are a bit lacking. It offers automatic rebalancing but no tax-loss harvesting. An affiliated website (Acorns Grow) includes a few financial calculators, but the service is light on planning-related features. 

Fee assumes a $15,000 account balance.
Advisory Fee for Premium Customers: Between 0.75% and 0.85%.
Data as of March 31, 2022.

Ally Invest is a solid and improving service that is especially attractive to the people who already bank with its owner, Ally Financial. But for those who don’t, it’s unclear why they would choose Ally Invest as a robo-advisor when there are better ones out there. 

Ally’s experienced investment team has put together a suite of 32 portfolios that relies on inexpensive Vanguard and iShares ETFs and come in two basic types: Market Focused (2% cash allocation) with an annual advisory fee and Cash Enhanced (30% cash allocation), which has no advisory fee. A premium offering is set to launch in 2022. 

But Ally has a few weaknesses to address. Tax-loss harvesting isn’t yet an option. Investors are defaulted into the Cash Enhanced portfolios, whose 30% cash allocation may earn a competitive rate relative to other high-yield savings accounts but won’t keep up with inflation.  

Fee assumes a $15,000 account balance.
Data as of March 31, 2022.

Despite Goldman’s ambitions for its Marcus platform, Marcus Invest doesn’t stand out.  

Marcus Invest offers clients a satisfactory suite of diversified target risk portfolios, but it lacks features like financial planning advice and tax-loss harvesting that come with top robo-advisors, leaving users with a straightforward target-risk portfolio and only educational materials to consult. 

Clients can choose from three investment styles: Core, ESG, and Smart Beta. Each style has the same asset-class allocations but differs in the ETFs chosen to populate the portfolios. Marcus’ lack of subsequent guidance and financial planning tools following the signup process renders the service even more costly than its headline advisory fee suggests. Investors are in effect paying for the initial allocation to Goldman-designed portfolios but get little otherwise.  

Fee assumes a $15,000 account balance.
Data as of March 31, 2022.

SoFi Wealth’s access to financial planning and advice is appealing, but the service’s potential shortcomings are cause for concern. 

SoFi Wealth includes taxable or tax-advantaged fixed-income allocations that can be blended with an equity allocation according to five standard risk tiers. The service, however, seems as much designed for monetization through cross-selling as for serving investment needs. The company’s strategy emphasizes increasing product adoption to spur firm profitability.  

SoFi clients can access financial advisors by phone, virtual meetings, and electronic messages at no extra charge. SoFi provides a broad range of advice, including advice on goals, saving, investing, budgeting, debt repayment, home buying, and insurance. SoFi’s advice comes with potential hidden costs, however, as the business model is based on cross-selling other services that generate additional revenue. 

Fee assumes a $15,000 account balance.
Data as of March 31, 2022.

Wells Fargo Intuitive Investor is not compelling. It has uncompetitive fees, limited disclosure on underlying portfolio holdings, and an average breadth of services. 

Wells Fargo uses the proprietary portfolio management algorithm from SigFig for ongoing monitoring, rebalancing, and tax-loss harvesting. Investors can choose from Wells Fargo’s nine investment portfolios based on their answers to a risk-tolerance questionnaire. Portfolio allocations look reasonable, with minimal cash allocations and adequate exposure to major asset classes. 

Access to a financial advisor at no cost seems to be the only feature that’s a clear advantage. Although information provided about the service’s approach to portfolio construction has improved, the service remains anything but intuitive, with no information available on the underlying funds or holdings prior to enrolling. 

Fee assumes a $15,000 account balance.
Advisory Fee for Premium Customers: Between 0.70% and 0.85%.
Data as of March 31, 2022.

Merrill Edge Guided Investing offers a limited feature set, and there are cheaper and better options elsewhere. 

Portfolio construction appears fairly standard, but there are a few sticking points. The firm offers five levels of risk tolerance, with tax-aware and tax-free options as well as an ESG suite for each of these risk levels. However, the firm’s risk-tolerance questionnaire is less detailed than most. Merrill Edge tilts its portfolios—composed almost exclusively of low-cost ETFs—toward certain asset classes, such as value stocks, and away from others based on firmwide capital market assumptions. These active asset-class decisions add uncertainty as they could help or hurt in any given year.  

Service breadth is also an issue. While Merrill Edge’s broader brokerage platform allows for integrating external accounts for portfolio analysis, this data isn’t aggregated into the robo-advisor itself and must be manually inputted. More-complicated features like tax-loss harvesting aren’t available, and access to an advisor is locked behind a significantly more expensive premium tier. 

Fee assumes a $15,000 account balance.
Data as of March 31, 2022.

E-Trade Core Portfolios meets industry standards in some respects, but it lacks transparency. 

The service’s advisory fee is in line with most competitors’, but it does not include the underlying ETFs’ expense ratios. Because the firm doesn’t divulge which ones it uses or their relative weightings, it is impossible to calculate total costs. Those could add another 5 to 25 basis points of fees, depending on whether investors choose a standard, sustainable, or smart-beta portfolio. 

Insight into portfolio construction could be better. There is little public information about what the service invests in or the rationale for the portfolios’ allocations and investment selections. The service offers both retirement-focused portfolios and tax-sensitive portfolios that invest in municipal-bond ETFs.   

Its breadth of services is lacking. Investors can only invest toward a single goal, and there is no tax-loss harvesting feature or tax location guidance. Investors also do not have access to advisors or benefit from account aggregation. Proactive client communication seems to be limited to monthly email updates, though clients do have access to other E-Trade communications and educational materials. 

Fee assumes a $15,000 account balance.
Data as of March 31, 2022.

Morgan Stanley Access Investing is a complicated service with an uncertain future. 

At first glance, the service looks reasonable enough. The investment advisory fee is in line with its typical rival, but the firm tarnishes its offering by providing access to high-cost mutual funds without waiving their underlying fees.  

The service’s portfolio options may also be too complex for investors to use effectively. The firm provides three different types: Market Tracking portfolios, made up of low-cost, passively managed ETFs; Impact, composed of slightly more expensive ESG-branded ETFs and funds; and Performance Seeking, consisting of a mix of active and passive funds across sectors. Investors who opt for the Impact and Performance Seeking portfolios can choose niche funds focusing on certain themes, such as data, artificial intelligence, and clean water. Such funds have been in vogue lately but have questionable utility for long-term investors. 

Morgan Stanley purchased E-Trade in February 2020, and it has its own suite of brokerage and robo-advisor services. It’s not clear how this service may change as the two firms continue to integrate their operations. 

Fee assumes a $15,000 account balance.
Data as of March 31, 2022.

Hefty costs, steep account minimums, and poor transparency are significant negatives for UBS Advice Advantage. 

The service’s annual fee makes this offering among the priciest robo-advisors we evaluated. Those fees are in addition to expense ratios for the underlying funds used in the service, which are difficult to determine because UBS does not disclose which funds are used in the portfolios. In addition, high account minimums make this service less accessible to entry-level investors. 

Like Wells Fargo, UBS Advice Advantage leverages SigFig’s algorithm and offers investment advice, custody, trading/execution, and performance reporting. Investors can choose from five different portfolio risk levels based on a standard risk-tolerance questionnaire. Unfortunately, UBS does not publicly disclose which asset classes and underlying funds are used in the service. 

On the positive side, UBS Advice Advantage includes access to financial advisors as well as portfolio diagnostics that incorporate outside holdings. However, it serves partly as a funnel for higher-cost advisory services. With UBS Group’s early 2022 agreement to acquire the well-respected robo-advisor Wealthfront, the future of this service is uncertain. 

Fee assumes a $15,000 account balance.
Data as of March 31, 2022.

Titan’s aggressive investment platform, narrow focus, and relatively unproven management render it the least attractive robo-advisor among those we surveyed. 

Titan is defined as much by what it isn’t as by what it is. It is not a holistic financial planner, nor does it intend to be. It does not provide tax advice, nor does it typically manage its portfolios with regard for tax consequences, which means rebalancing portfolio allocations among its volatile equity and crypto strategies can result in big tax bills for clients investing in taxable accounts. It offers little more than aggressive, concentrated portfolios, which tend to be difficult to use well. 

To the extent Titan proffers advice, it is in using client information to place them in aggressive, moderate, or conservative stock portfolios, distinguished only by the percentage of assets each hedges. It is not clear how Titan differentiates a hedge-worthy downturn from normal volatility or avoids selling at a low to increase the hedge when it should be buying. The notorious challenge of market-timing—an approach that often fails—only raises further questions. 

Fee assumes a $15,000 account balance.
Data as of March 31, 2022.

Capital One acquired United Income, a robo-advisor designed for retirees and those approaching retirement, in 2019. In 2021, United Income was rebranded as Capital One Investing. Capital One then agreed in December 2021 to transfer its Capital One Investing portfolios and employees to SageView Advisory Group, a Registered Investment Advisor that focuses on retirement plans. 

Capital One Investing’s portfolios offer broad global exposure to stocks and bonds that seek to outperform their underlying benchmarks. The platform also offers services like retirement income advice and tax-loss harvesting. 

Morningstar did not assess Capital One Investing because Morningstar was previously a minority owner of United Income. 

Fee assumes a $15,000 account balance.
Data as of March 31, 2022.

Ellevest’s platform caters primarily to women, using a gender-based investing approach that factors in issues like income level, earnings curve, and life expectancy. The platform also offers educational materials on a range of investing and career topics. 

Its basic offering, Ellevest Essential, gives users an individual taxable account. Ellevest also offers two other service tiers that have additional features, including retirement accounts and planning. Ellevest portfolios are made up of a mix of mostly low-cost ETFs that cover 16 asset classes. Clients can also choose to invest in Ellevest’s Impact Portfolios, which invest in ESG and impact funds. 

Morningstar did not assess Ellevest because of Morningstar’s ownership stake in the firm. 

Fee assumes a $15,000 account balance.
Data as of March 31, 2022.

J.P. Morgan Automated Investing uses a questionnaire to assess users’ risk tolerance, goals, and time horizon. Its portfolios are composed of J.P. Morgan ETFs that cover eight asset classes. Despite charging account management fees on the higher end of the robo-advisor spectrum, J.P. Morgan Automated Investing doesn’t offer additional services like tax-loss harvesting or financial planning tools. 

The platform’s integrated app may appeal to Chase users–it allows customers to access their bank, credit card, and investment information in one place. 

Morningstar did not assess J.P. Morgan Automated Investing because the majority of the funds in which it invests track Morningstar indexes. 

How We Analyzed Robo-Advisors

Our report on the digital advice landscape was designed to provide useful information to consumers before they sign up for a robo-advisor.

In the assessments, Morningstar’s analysts prioritized low, transparent fees; a robust risk tolerance questionnaire; logical mapping to portfolios; sound portfolio diversification that steers clear of questionable asset classes and investment tactics; and a broad range of planning-related features.

Morningstar scored robo-advisors on a five-point scale (High, Above Average, Average, Below Average, and Low) along with four dimensions: total price (30% weighting); the process used to select investments, construct portfolios, and match portfolios with investors (30%); the organization behind the digital platform (20%); and the breadth of services (20%). Morningstar weighted each category score and then summed it to arrive at an overall score, which was then used to rank the robo-advisors.

In our evaluation of each provider, we assumed a $15,000 account balance for ease of comparison and have noted providers whose fees increase or decrease for higher investment amounts.

About the Authors

Emelia Fredlick is an editor for Morningstar.
Margaret Giles is a data journalist for Morningstar.

Contributors

Research authors: Amy C. Arnott, CFA; Alec Lucas, Ph.D.
Research contributors: Bobby Blue, Gabriel Denis, Ben Johnson, Elizabeth Templeton.
Design editors: Nura Husseini, Alex Skoirchet.
Editors: Ann Sanner King, Marissa Monson.

These research authors and research contributors are employees of Morningstar Research Services LLC.

This content is not intended to be individualized investment advice, but rather to illustrate possible factors that can impact financial decisions. Investors should consider this information in the full context of their own financial decisions.

Read our editorial policy to learn more about our process.