The Wonderful World of Robo-Advisors

 Investing money is an effective way to grow your wealth, but knowing how to invest and what to invest in can be difficult when starting out. Until recently, the only options for investing were doing it on your own (a rather intimidating prospect for a newbie) or hiring an investment advisor, which comes with its own research burden to find the right advisor. Fortunately, there is now a third option available – using a robo-advisor.

Do not let the odd name throw you off, they are actually very helpful tools. A robo-advisor automates the asset allocation of your investments using a computer algorithm. In other words, it is a type of software that acts in place of a traditional investment advisor to help you make investments. Human financial advisors may assist a robo-advisor for activities like tax, retirement, and estate planning, but the bulk of the work is done by the program.

Most robo-advisors come in app form, so you can work with your investments on your phone. Convenient, right? As long as you are comfortable using and learning new forms of technology, yes. Even if using technology makes you nervous, these apps are actually quite user friendly.

Is the Option Right for You?

I cannot answer that question definitively, but most robo-advisors are geared for beginners. Depending on your net worth, investment knowledge, the complexity of your portfolio, and your confidence in your ability to handle investments independently, these can be a great way to access the world of investing and grow your own knowledge.

Features vary between platforms, although there are some common advantages to robo-advisors.

  • Ease of Use
  • Automatic Contributions
  • Flexible Contributions (Have some extra funds in your budget? Invest them!)
  • Low Fees. Most offer free trades and no transaction fees, which are both huge money savers, especially for inexperienced investors.
  • Some offer tax-loss harvesting and portfolio rebalancing
  • Low Minimum Balances are required, which makes it easy to begin investing even if you do not have a lot of funds.

The biggest potential downside to a robo-advisor is lack of personal care. While you can set goals in many robo-advisor services, you will not be able to talk in person with an advisor who knows the system and can tailor your portfolio to reflect your goals. Many robo-advisors do have call support centers, so some assistance is available. If having a person to talk with is deeply valuable to you, a robo-advisor may not be your best option.

If you have limited funds, are interested in investing, but want someone to work with you individually, consider checking out the XY Planning Network. This company works on a fee-only basis (so you pay a set amount, rather than a percentage of your investments), and also offers financial planning services beyond investing.

Choosing a Robo-Advisor

There are a variety of different robo-advisors available, so how do you know which to choose? While I cannot make that decision for you, I can offer some research to help streamline your search.


This robo-advisor is very well rated and was one of the first developed. It offers free management on the first $10,000 you invest, after which a .25% management fee is charged. The minimum balance required to use this robo-advisor is $500.00, which is higher than many, but their free management helps offset this cost. Wealthfront offers daily tax-loss harvesting, which can potentially add 2% to the annual performance of your investments. This service also offers 529 different college savings plans, which is relatively uncommon among robo-investor services.

 However, there are no human advisors or call center available for users. If that is important to you or you simply want the option of a call center for support, consider waiting to use this service until you feel more confident in your own investing skills. If you prefer a hands off approach to investing, this robo-advisor is hard to beat in terms of its cost and tax-services.


Depending on the level of service you want (and are willing to pay for), Betterment now offers three different service plans. Betterment Digital, their original service, has no minimum balance required, charges a .25% service fee, and offers digital support and advice. Their two other services, Betterment Plus and Betterment Premium, offer tiered access to financial advisors in exchange for higher fees and account balances.

The signup process will walk you through goal setting by asking for age and current annual income, after which it will suggest a variety of goals. It will estimate a safety net, retirement goals, general investing goals, but you can adjust the recommended targets and asset allocation.

The safety-net they offer is essentially an emergency fund. Because an emergency fund is generally short-term savings, you may not want to invest in it at all or only invest part of your emergency fund.

This is a viable service, and if you want human advice and meet their criteria for the more expensive service plans, this may be the service for you.


 Acorn mixes the traditional practice of saving spare change with a robo-advisor. To use this service, you link your credit or debit card to the account. When you make a purchase, Acorn automatically rounds up to the nearest dollar and invests the difference for you. You won’t make a fortune with this service, but it is a convenient way to build savings.

There is no account minimum to use Acorn. However, you must have $5.00 in order to enroll in one of their five pre-selected portfolios. Their management fee is $1.00 a month for accounts under $5,000 and .25% on accounts over $5,000.

If you are attending college, you qualify for four free years as long as you have a valid .edu email address. Because the service is automatic (and free!), a college student could find themselves with a tidy sum at the end of their four years.

Acorn also offers a cash-back service, called Found Money. Whenever you make a purchase on your linked card through one of their partners, you receive 10% cash back. If you already subscribe or use services from their partner companies, this is a lucrative offer.

If you are brand-new to investing, the website offers educational resources, including definitions that are easy to understand. They also have a chat line you can call if you need help or advice.

However, there are two downsides to Acorn.

  1. Acorn doesn’t offer tax-loss harvesting, so you will most likely end up paying capital gains taxes.
  2. They only offer individual taxable accounts.

If you are not eligible for a  401(k) or an IRA, this may still be a good option, but if you are eligible for either of those programs, you might be better off investing there.


Stash is focused on making the investing process easy to understand for beginners. Stash uses only exchange-trade funds (EFTs), and rather than managing your account directly it works to guide you through the process of building an ETF portfolio. The fee structure is almost identical to Acorn’s, with a $5.00 start fee, $1.00 a month fee for accounts under $5,000.00 and .25% for accounts over $5,000.

If learning how to invest and build a portfolio is something you are interested in, Stash is an excellent service for developing that skill with training wheels. The app will suggest different investments, including which should be the base of your portfolio, which should be complimentary, and if your portfolio needs some diversity.

It also renames ETFs to better reflect holdings and give you a clearer idea of what you are selecting. They are grouped into three categories: I Believe, I Want, and I Like. I Believe ETFs are mission driven, focusing on subjects like clean energy, social responsibility, or workplace rights. I Want focuses on investing goals, like the aggressive mix. And the I Like category includes ETFs like Retail Therapy; basically, it centers around things you, the user, might like.

Service fees are charged to a bank account, not your portfolio, and the $1.00 charge can be proportionally high compared to your investments. Their ETFs have an average expense ratio (annual fee charged to investors) of .39%, and can reach as high as .95%. This is pretty high compared to most robo-advisors offering ETFs, although paying a higher fee for something you believe in is tolerable. This robo-advisor works exclusively with ETFs; if you are not interested in ETFs, a different service would likely benefit you more.


These are only four of the many robo-advising services available. If none of these sound appealing to you, do some of your own research. NerdWallet has plenty of solid reviews for these services, and a quick Google search would help you find more.

Although robo-advisors are not for everybody, they help expand investing to those who previously lacked the funds or know-how to invest. If investing is interesting to you, these services can be an excellent way to expand your knowledge of, and experience with, investing and make some money in the process.

Written by Mckenzie Candalot, Staff Writer – Mckenzie Candalot graduated from the College of Idaho with a B.A. in English Literature. She has a passion for written language and helping other women take control of their finances. When not blogging or reading, she enjoys cooking and spending time with loved ones.