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Compare the five top scoring robo-advisors by fee, customer service, financial advisor access and tax strategy. The "best" tax strategy score requires a provider offer direct indexing or other specialized tax strategies. A "great" score means they offer free tax-loss harvesting, "good" designates tax-loss harvesting with an additional fee or that it's only available at a certain balance, and "limited" means they have minimal tax strategy.
Fee | Customer service by phone | Financial advisor access | Tax strategy | |
|---|---|---|---|---|
Wealthfront | 0.25%* | Monday thru Friday, 8:00 to 5:00 Pacific. | None | Great |
Betterment | 0.25%** | Monday thru Friday, 9:00 to 6:00. Eastern. | Access starting at $299 | Best |
SoFi | Free | Monday thru Thursday, 5:00 a.m. to 7:00 p.m. Pacific.Friday thru Sunday, 5:00 a.m. to 5:00 p.m. | Free access to CFPs | Limited |
Schwab | Free | 24/7 | None | Good |
Vanguard | 0.15%*** | Monday thru Friday, 8:00 a.m. to 8:00 p.m. Eastern. | None | Great |
*First $5,000 managed free for NerdWallet readers. | ||||
**On balances over $20,000 or if you set up recurring monthly deposits totaling $250 or more, otherwise, $4 per month. | ||||
***Actual fee will vary depending on the specific holdings in each enrolled account. | ||||
How do you open a robo-advisor account?
Opening a robo-advisor account is very similar to opening a brokerage account or bank account: You'll provide some personal information and then link an existing account from which you can transfer money to fund the new account. The primary difference is in most cases, robo-advisors will take you through an onboarding quiz to help determine how to invest your portfolio. These quizzes generally ask about your investment goals, risk tolerance and time horizon, and the robo-advisor will use your answers to build the most optimal portfolio for you.
How does a robo-advisor work?
Robo-advisors use advanced software to handle many of the tasks that used to require expensive experts to manage. Services range from automatic rebalancing to tax optimization, and require little to no human interaction. A robo-advisor might be a good fit if you prefer to be largely hands-off with your investments and you don’t have the kind of complex financial situation that requires a direct relationship with a human financial advisor.
That said, many providers offer access to human advisors available for questions related to account management or long-term investment planning — though these services may cost more.
How do robo-advisors get paid?
Robo-advisors are paid through their account management fee. This is usually shown as a percentage, such as 0.25%. This means the fee is a percentage of the money that you invest. For example, if you put $1,000 into a robo-advisor investment account, and it charges a 0.25% fee, you'd pay $2.50 for that year's worth of investment management. If you put in $100,000 you'd pay $250. Both of those figures are significantly lower than what they would be if you worked with a traditional financial advisor.
Expense ratios are different from management fees: They are not paid to the robo-advisor, but to the people and institutions that manage the funds you're invested in.
Which robo-advisor is best?
The robo-advisors on this list all scored highly in our analysis and impressed our testers, so the best one for you will probably depend on your individual needs. However, the two robo-advisors with the top scores were Wealthfront and Betterment. Wealthfront stands out as a low-cost option with flexible, diversified investment portfolio choices. Betterment also has low fees, and we like that you can add on human advice if you need it. That being said, if cost is your bottom line, there are a few free options too.
What factors should I consider when picking the best robo-advisor for me?
Here’s what you'll want to look at:
Management fees. This is what you’ll pay annually to have an account at a robo-advisor. See our calculator below to help you analyze these.
Expense ratios. These are like management fees, only they’re paid not to the robo-advisor, but to the investments the robo-advisor uses. Mutual funds, index funds and exchange-traded funds all charge this annual fee to cover the costs of running the fund.
Account types. Investment accounts fall into two general categories: Retirement accounts, such as IRAs and 401(k)s, that offer tax advantages while adhering to certain rules; and taxable accounts, where there are no specific tax advantages but also no limits on contributions or distributions.
Investments. Most robo-advisors use low-cost index funds and ETFs.
Rebalancing. Portfolios are fluid, and market fluctuations can cause the mix of investments you hold to get out of sync with your goals. Rebalancing brings that allocation back to its original mix.
Access to human advisors. Many robo-advisors have merged computer-driven portfolio management with access to human financial advisors. Some services offer a dedicated advisor to individual clients; others offer only email or online chat with a team of advisors.
