Comparing 10 major robo advisors
ACORNS
This robo is advised by some mighty financial oaks, including Nobelists Harry Markowitz and Richard Thaler.
Acorns is best known for its debit card that rounds up clients’ purchases and sweeps the change into robo-created portfolios of low-cost ETFs from firms such as BlackRock and Vanguard. Its strength is helping young people save and invest. Acorns has no minimum investment requirement. It charges $3 a month for a one-person account and $5 a month for a family account that creates additional investment accounts for kids.
Funds in Acorns’ core portfolio have an average expense ratio of 0.04%, according to Robo Report. (Acorns did not provide expense information.) The core portfolio tracked by Robo Report notched a five-year annualized return of 2.5%, below the 3.1% average for the core portfolios of the robos included in this article
BETTERMENT DIGITAL
One of the first robo advisors, Betterment recruits beginners by requiring only $10 for a minimum initial investment. Fees for the basic robo account for investors with less than $20,000 were recently converted to a subscription model that might seem a little steep to small investors — $4 a month. That $48 a year equates to about 1% of a $5,000 portfolio. Once your balance hits $20,000, you’ll switch to an annual fee of 0.25% of assets. Those with at least $100,000 can upgrade to a premium tier.
It charges a higher fee of 0.4% but gives you unlimited access to certified financial planners. The underlying funds in Betterment’s basic portfolio have an average expense ratio of 0.09%.
Betterment also provides extra services to those with big tax bills and people in retirement. It automatically harvests tax losses (selling losing investments to offset gains or income at tax time) and has services to help retirees turn their investments into steady income in tax-smart ways. Besides the standard broad-market indexes, Betterment provides choices including an “innovative technology” portfolio that invests heavily in growth-oriented stocks, a Goldman Sachs-designed “smart beta” portfolio that overweights sectors Goldman managers think will outperform, and portfolios that focus on the environment or minority empowerment.
Unfortunately, Betterment’s basic portfolio tracked by Robo Report has lagged lately, earning a 2.5% annualized return in the five years ending September 30, below the average for the robos on this list.
SOFI AUTOMATED INVESTING
SoFi offers many free services to its robo advisor clients. There’s no minimum investment. It manages your portfolio for free. Expenses for the underlying ETFs in its core portfolio average just 0.03%. And you get free extras such as financial and career coaching. The firm gives investors five different mixes of stock and bond ETFs to choose from.
Robo Report says its SoFi portfolio has returned an annualized 3.5% over the past five years, above the average for this list. But SoFi does not offer much personalization or an ESG option. And both Condor’s Goldstone and Morningstar’s Arnott warn that SoFi, which has lost money for several years, may at some point either hike fees or ramp up marketing to push customers toward its more-profitable services, such as loans.
WEALTHFRONT
As one of the last pure robo services, Wealthfront boasts a low minimum investment of $500 and low fees (a management fee of 0.25% and underlying core portfolio funds with an average expense ratio of 0.08%).
It relies almost entirely on technology to manage its nearly 500,000 accounts. Wealthfront has only 12 human customer service representatives. “Wealthfront does not offer access to human advisers because from day one our clients have told us, ‘I pay you not to talk to me,’ ” says Alex Michalka, director of investments.
For those who want more than a basic index offering, Wealthfront allows investors to personalize their portfolio with hundreds of ETF choices. The service also automatically harvests tax losses daily.
Robo Report tracks three Wealthfront test portfolios and says that as of September 30, its original core portfolio notched a 4.4% annualized return over the past five years, which puts it at the top of robos we looked at for that time period. Newer Wealthfront portfolios — which have less energy exposure, for example — have posted lower returns.
Thanks to fierce competition among robo advisor firms, even beginning and small investors can now get top-notch portfolio advice and management at vanishingly low prices — in some cases, for free.