A Guide to Robo-Advisors

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For decades, people have been turning to advisors and investment firms for financial advice on how best to grow their wealth. However, not everyone can afford the services of a personal advisor or large investment company. Fortunately, the times have changed dramatically, and the introduction of robo-advisors has helped democratize and simplify savings, investment, and retirement plans.

In today's guide, we will talk about what exactly a robo-advisors does, the benefits and drawbacks of using one, and our professional recommendations for seniors considering a robo-advisor.

What Is a Robo-Advisor?

What Is A Robo Advisor

A robo-advisor is a service that provides financial vehicles, advice, and money management solutions with little to no human involvement. Rather than having a financial advisor manage your accounts, you allow a digital service or program to do the same using different algorithms. Since most human financial advisors use mathematical formulas and predictive models in their own advisement services, you're essentially getting the same thing by using an online robo-advisor.

Pro Tip: Robo-advisors can help you invest and match market gains without having to manually invest or rely on an expensive financial advisor.

Like traditional advisors, robo-advisors offer varied services and features. Most robo-advisors include some or all of the following:

  • Online or in-app account setup
  • Goal planning advisement and management
  • Account and portfolio services (checking, savings, investment, retirement, and estate planning)
  • Customer service
  • Financial education resources

Robo-advisors can be a fast and relatively simple way to manage and grow your money based on your personal goals.

Robo-Advisor Pros and Cons

Like traditional advisors, there are various advantages and disadvantages related to robo-advisors.

What We Like About Robo-Advisors

  • Low fees: Most robo-advisors charge very low fees compared to traditional investment vehicles or personal finance advisors. This means that you can grow your wealth without needing to pay exorbitant fees. However, it's important to remember that fees vary from one robo-advisor to another, or even one account type to another under the same robo-advisor company. Nonetheless, the low overhead almost always allows for much lower fees.
  • Low minimum balances: Robo-advisors are frequently marketed as services designed for “beginners,” or those who are not familiar with different investment or retirement portfolio options. That means the barriers to entry are generally low. This includes the minimum balances on accounts. Like fees, these balances can vary between providers, but many do not require any contributions upfront to get started.
  • Automated services: While traditional advisors are beginning to automate some of their processes, nearly all of robo-advisors' offerings are automated by default. This makes it easier for services to adjust your investments based on your goals and market changes in real time. For example, many robo-advisor portfolios offer tax-loss harvesting and automatic portfolio rebalancing.
  • Quick setup: One reason that people really like robo-advisors is the ease of use. With most robo-advisors, you can open a website or download an app, provide your basic information, link a bank account, and you're all set!

Things to Keep in Mind About Robo-Advisors

  • Lack of human interaction: Many people simply prefer to deal with real people. While apps and websites can simplify financial processes, they also remove the human element. This can make money management feel somewhat stale and lifeless for some consumers.
  • Impossible to completely customize: There has yet to be a robo-advisor that is 100 percent customizable. While you can generally personalize your accounts based on your assets, goals, age, and other factors, you cannot create an entirely personalized experience. Why? Because you are using algorithm-based services that cannot factor in the highly specific details of your life. For example, you may be recently divorced and need a plan that can help you with post-divorce asset management. Most robo-advisors won't be very useful for that.
  • Quality and cost vary widely: No two robo-advisors are exactly the same, and some are vastly superior to others. Some robo-advisors are easy to use and have low fees, while others are frustrating and cost more than they are worth. For this reason, you should always shop around to find a service that is right for you.

Who Should Use a Robo-Advisor?

Who Should Use A Robo Advisor

Robo-advisors are frequently marketed to younger investors who don't have as much experience or investment knowledge. But there's no age cap on who can benefit from a robo-advisor. It all depends on your personal needs and goals. Generally, robo-advisors are best for people who want a simple, low-cost way to manage and invest their money.

If you're in the market to change banking institutions or financial advisors, you should consider a robo-advisor for the lower costs alone. Additionally, if you want access to educational resources to help you learn more about managing your money, many robo-advisors offer great solutions. Finally, if your financial goals are pretty straightforward (save for retirement, reduce tax burden, diversify assets, etc.), then a robo-advisor can be a perfect fit.

Pro Tip: Older adults who prefer the “set it and forget it” approach to investing will likely benefit from a robo-advisor.

That said, robo-advisors are not for everyone. If you feel intimidated by using apps or computer programs to manage your money, you might prefer more traditional banking methods. Additionally, if you like to speak directly with a person when dealing with money issues or getting financial guidance, then robo-advisors won't be the best fit for you. Lastly, if you have highly specific financial goals, most robo-advisors may not be equipped to help you the way you want to be helped.

How Much Does a Robo-Advisor Cost?

The average annual management fee for a robo-advisor usually lies somewhere between 0.25 percent and 0.50 percent of your managed funds. However, robo-advisors vary in their fee structures. Some charge a monthly subscription fee that can be anywhere between $3 and $20 per month. Fortunately, most robo-advisors have smaller fees, as this is one of their main selling points. In some cases, robo-advisors charge no fees and instead make money by offering affiliated financial services through third-party providers.

Pro Tip: Robo-advisors are usually less expensive than personal financial advisors, but you should always read the fine print before putting your savings into a new account.

It's important to remember that some robo-advisors require you to have a minimum balance to maintain your accounts. Again, any minimum balance requirements tend to be on the lower side, as robo-advisors often want to target younger investors who may not have a lot of capital on hand. Thus, plenty of robo-advisors forego minimum balances entirely. There are some providers that demand a minimum balance of anywhere from $25 to $5,000. Certain providers are specifically designed for retirees or people who have accumulated larger nest eggs. This means that they require much larger sums to access the full features of the service.

Tips for Choosing a Robo-Advisor

Tips For Choosing A Robo Advisor

If you decide that a robo-advisor might be the best option for you, there are a few things that you should consider before making your choice:

  • Cost: At the end of the day, robo-advisors are supposed to help you manage and grow your wealth. If they are charging you a fortune to do this, it's taking away from your savings and investments. Always look at the fine print and make sure that the potential gains far outweigh the fees.
  • Services: You will need to evaluate your own goals to determine which services you need. You might just need a simple advisor to manage your investment portfolio, or you may prefer a provider with various cash management and retirement vehicles. Either way, make sure you know what the robo-advisor can do and how its services align with your short- and long-term goals.
  • Reviews: Like most products and services, it's always a good idea to check out the reviews! See what other people have to say about a robo-advisor to learn how real people have benefited from it. If the reviews are overwhelmingly negative, you should probably look elsewhere.
  • Ease of use: In most cases, you can start using a robo-advisor without paying an enormous fee. Most are free to use for the first week or month, even if they charge fees later on. This gives you the opportunity to see how one works and make sure that a provider is easy to use. If the interface is clunky, complicated, or confusing, it could end up doing more harm than good.
  • Security: Sadly, online scams, especially scams targeting seniors, are common, so you should always do your research before putting your money into any robo-advisor. Additionally, you need to ensure that your advisor is widely trusted and backed by security protocols that can keep your money and personal information safe.

Our Robo-Advisor Recommendations

Now that you know a bit more about what robo-advisors can do, it's time to look at a few of our top recommendations. We found that these advisors are particularly beneficial for seniors and those approaching retirement.


Betterment is an app for general cash management, guided investing, and retirement planning.

Best for: Seniors who want low fees and a wide range of account options

  • Account types: Roth IRAs, traditional IRAs, SEP IRAs, inherited IRAs, individual taxable accounts, joint taxable accounts, trust accounts, cash reserves, and checking accounts through NBKC Bank
  • Minimum required balance: $0 (though certain account types do require minimums)
  • Fees: 0.25 percent annual AUM (for assets under $2 million)
  • Additional features: Access to financial advisors


Wealthfront is a popular automated investment portfolio service focused on long-term savings and retirement plans.

Best for: Older adults who want low fees and automated features that require little manual interaction

  • Account types: High-interest cash accounts, taxable brokerage accounts, traditional IRAs, Roth IRAs, SEP IRAs, and 401(k) rollovers
  • Minimum required balance: $0 (though certain account types do require minimums)
  • Fees: 0.25 percent annual AUM
  • Additional features: Homebuyer and travel planning

Personal Capital

Personal Capital is a digital investment management robo-advisor that works in tandem with personal financial advisors.

Best for: Seniors who want access to free digital investment services, with the opportunity to combine robo-advisors and traditional financial advisors

  • Account types: Individual and joint investment accounts, Roth IRAs, traditional IRAs, SEP IRAs, rollover IRAs, and trusts
  • Minimum required balance: $0 ($100,000 for accounts managed by a personal financial advisor)
  • Fees: Free for digital account holders; 0.89 percent annual AUM for accounts with personal financial advisors or assets over $1 million
  • Additional features: Access to financial advisors and free retirement tracking tools

SoFi Automated Investing

SoFi is an automated investment service that focuses on financial guidance and portfolio management.

Best for: Those who want simple automated investment help and retirement planning with optional cash management services

  • Account types: Personal investment accounts, traditional IRAs, Roth IRAs, SEP IRAs, and traditional rollover IRAs
  • Minimum required balance: $0
  • Fees: Free
  • Additional features: Free promotions for career counseling and loan discounts with qualifying deposits

Frequently Asked Questions About Robo-Advisors

  • Can you lose money with robo-advisors?

    Any investment portfolio stands the risk of losing money; portfolios managed by robo-advisors are no exception. That said, robo-advisors use algorithms to help reduce the risk of loss and increase the chances of gain, particularly if you can keep your funds invested for the long term.

  • What is robo-investing?

    Robo-investing is the use of a company or service that utilizes algorithms to help you manage your investments and meet your financial goals. Generally, robo-investing allows you to invest with lower fees and far less human intervention.

  • Which robo-advisor has the best returns?

    Over the past few years, SoFi Automated Investing has recorded some of the best average ROIs for its account holders. However, it’s important to note that robo-advisors often replace each other as the “best” option from one year to the next. Therefore, you shouldn’t be overly concerned unless a robo-advisor consistently performs poorly.

  • Do robo-advisors beat the market?

    Most robo-advisors focus on index fund strategies for investing. This means that your returns with a robo-advisor will usually match the market but rarely (if ever) beat the market. Only robo-advisors that use unique strategies that distinguish themselves from broader indexes have the chance to outperform the market.

Written By

Jeff Hoyt

Editor in Chief

Since graduating from Harvard with an honors degree in Statistics, Jeff has been creating content in print, online, and on television. Much of his work has been dedicated to informing seniors on how to live better lives. As Editor-in-Chief of the personal… Learn More About Jeff Hoyt