Investopedia is dedicated to providing investors with unbiased, comprehensive reviews and ratings of financial products and technology. Since 2009, when mobile apps became mainstream, robo-advisors have become an important part of the investing and financial technology ecosystem and are becoming widely used. But not all robo-advisors offer the same services or cater to the same types of customers. Some are designed for active investors, while others are targeting customers who are looking to manage their finances, savings, and family budgets. We are committed to helping users at all levels find the right robo-advisor for their needs. To that end, we’ve designed a comprehensive ranking methodology to find the best overall robo-advisors and the best robo-advisors across four key categories.
Our review team is led by Theresa W. Carey, who wrote the first ever review of online brokers in 1992, and has been an authority on online trading and investing platforms for over 27 years. James Chen is our Director of Trading and Investing Education. Luke Conway is our Associate Editor. Our team of expert reviewers includes veteran traders, financial market experts, investing educators, and researchers with decades of experience, who are all adept at using and reviewing financial technology.
The Review Process
We designed a system that rates robo-advisors based on nine key categories and 49 variables. Each category covers the critical elements users need to thoroughly evaluate a robo-advisor.
To collect the data, we sent questionnaires with 80 queries to the participating robo-advisories. We obtained or opened a live account for each platform and used the account to perform hands-on tests. We rigorously tested each platform, approaching them from the perspectives of beginner, intermediate, and advanced investors. Several of the companies we reviewed gave us in-person demonstrations of their platforms and services at our offices in New York.
From the questionnaires, the hands-on testing of the platforms, and the platform demonstrations, we scored each category and then combined the category scores into an overall rating for each broker.
The Evaluation Categories
With the individual user in mind, we took a critical look at the services and technology provided by robo-advisors. We organized our analysis into nine categories, scoring each advisor across multiple variables to rate performance in every applicable category. The score for the overall award is an average of the categories.
|Education & Security||5%||6|
Each investor has different needs. Beginners need a robo platform with an easy-to-use interface and educational resources, whereas more advanced users need risk analysis tools, trading platforms, portfolio management, and more goals-based options.
Investment Advisors vs. Broker-Dealers
We learned during our review process that there are two types of firms offering automated portfolios. For regulatory and legal reasons, their services differ considerably. Firms registered as investment advisers are allowed to help their clients determine goals and can offer specific and directed advice. Firms registered as broker-dealers are restricted from offering targeted advice, but they have more flexibility in terms of offering features such as customizable investment choices and margin lending.
A Note on Portfolio Performance
We have chosen to exclude portfolio performance from our review criteria for several reasons. The main reason is that every customer has specific, individualized goals when it comes to investing through a robo-advisor. Some look for a more conservative approach, while others seek aggressive growth. In addition, all investors have different start dates and end dates. Since these services are designed to be used over a very long period of time, ranking their performance against benchmarks like the S&P 500 or the MSCI All World Index over a time frame like a single year or even over three years misses the personalization that these platforms offer.
Another reason is that each of the providers has, on average, more than 20 portfolios available, and several providers have ways to customize portfolios so that the possibilities are endless. It’s impossible to compare apples to apples. We have chosen, instead, to focus on the overall experience of using one of these providers. As such, we hone in on how you can plan for and set goals, as well as how transparent each robo-advisory service is when presenting information to clients.
Who Are They Best For?
Since clients use robo-advisors for financial planning, investing, and tracking their goals, we also ranked the various platforms for their strengths and weaknesses across the following categories:
- Best for Goal Setting - For those robo-advisors that are more geared to personal financial goal tracking, we awarded the platforms that provided the most assistance in developing and setting goals, as well as the most user-friendly experience.
- Best for Socially Responsible Investing (SRI) - Many of the robo-advisors we reviewed offer SRI options and highlight them in their product offerings. Given the increased interest in SRI, ESG and Sustainable Investing, we awarded the platforms that offered the best options in this category, including asset selection, research, and educational material.
- Best for Beginners - We looked for the platforms that offered the most guidance along the way, including educational tools to help beginners grow into the next level. A simple way to get started along with a logical workflow are important considerations in this category.
- Best for Sophisticated Investors - Some investors want to have portions of their portfolios managed, so we looked for platforms that offer flexible, personalizable investing choices and research amenities. We also looked for advanced account services such as the ability to take out a loan backed by the investor’s portfolio balance.
This category gauges the level of simplicity in the sign-up process as well as the transparency of the firm’s offerings and fees.
In the modern age of investing, a simple and easy on-ramp is necessary to interest new and younger clients, especially for robo-advisors, who are working to break out of the status quo and existing standards.
With this in mind, we found it important to assess the following aspects of robo-advisor platforms in our account setup category:
- Online account setup
- Account minimum
- Ability to see portfolio contents prior to funding
- Customizability of portfolios
- Adjustability of portfolios based on goals
- Overall ease of the sign-up process
The goal-setting category grades the extent to which you can incorporate your investing goals.
Robo-advisors are designed to meet many different investors’ needs. While some may just want to beat the market and potentially make some money, others are looking to meet more specific needs. Robo-advisors who provide their clients with features that help set, plan for, and track goals scored well in this category.
To score robo-advisors based on these features we took into account the following features:
- Retirement: Are there resources to help clients calculate how much they will need to retire comfortably?
- Large purchases (home, vehicle, etc.): Are there tools, such as real estate and vehicle prices, to help clients set their targets?
- College savings: Are there college cost databases that clients can consult to set their savings targets?
- Other goals: Does the robo-advisor only have a few pre-set options for their clients to choose from or can clients create their own goals? Are there calculators and tools to help with these goals?
Our account services category gauges the quantity and quality of the services that each platform offers.
There are a lot of robo-advisors in the industry. Some try to cover it all and some try to cover specific use cases. In this category, while it may be beneficial to have lots of features, this only really matters if the features are of high quality.
Access to the following features is how we based scores in this category:
- Automatic deposits
- Margin offerings and fees charged
- Interest paid on cash balances
- Banking services
- Borrowing against accounts
- Ease of withdrawal
- Placing trades for individual equities
This section of our methodology determines what types of asset classes that clients can invest in. Since all of the robo-advisors offer exchange-traded funds (ETFs), we considered whether clients could invest in other asset types as well.
An ever-changing landscape of financial asset classes creates pressure for brokerages and robo-advisors and forces them to consider offering these new options. As these new options come into play, such as socially responsible investing or cryptocurrencies, brokerages and robo-advisors must evaluate them and determine if they are worthwhile for their businesses and viable investments for their clients. We looked at the mutual funds and ETFs offered to determine whether each robo-advisory service was making a wide range of fund providers available, penalizing those who offer only their own proprietary funds.
For our Portfolio Contents category, we looked to see if the following asset classes were available to clients:
- Individual stocks
- Mutual funds
- Fixed income
- Socially responsible options
- Non-proprietary ETFs and mutual funds
- Other (cryptocurrency, forex, etc).
This section weighs how portfolios are managed and the features available for clients to monitor their portfolios. Two actions that affect a portfolio’s performance are rebalancing and tax management. We studied what triggers a portfolio rebalance and how frequently it happens. We also looked at whether tax loss harvesting is available and what account size is required to turn this feature on.
Understanding portfolio performance and progress towards goals is one of the key services that robo-advisors can provide, so we looked at the reports available and the advice given when progress falls short. Robo-advisors that provide built-in portfolio analysis reporting which includes assets held at other financial institutions help their clients understand their overall net worth, which is part of understanding overall performance.
To evaluate portfolio management we looked at the following features:
- Frequency of automatic rebalancing
- Availability of tax-loss harvesting
- Reports on goal progress, including ways of shoring up portfolios that may fall short
- Consolidation of external accounts for reporting and analysis
One of the most important features of robo-advisors is their ease of use. This is because robo-advisors, for the most part, are designed as an entry ramp to investing for the less experienced.
The following criteria were considered when grading user experience:
- Availability of iOS app and whether it offers all the functionality of the desktop view
- Availability of Android app and whether it offers all the functionality of the desktop view
- Desktop workflow and whether it follows a logical path
- Desktop usability and ease of finding the features needed when they are needed
- Mobile workflow and whether it follows a logical path
- Mobile usability and ease of finding the features needed when they are needed
This category assesses the process a customer must go through when something goes wrong, or when a customer needs some additional assistance. Our research associate made calls to all of the firms reviewed at different times of day, recording how long it took before a live person was available, and the quality of the answers provided.
Top marks in this category require the robo-advisor to give their clients access to the following methods of seeking help:
- Online chat for prospective clients
- Online chat for existing clients
- Low average time on hold
- Ability to speak with a real financial advisor
- Reasonably extensive customer service hours
Education & Security
This category evaluates what robo-advisors offer to educate their clients in an effort to get them more comfortable with investing and the markets as a whole. Here, we also take into account the security measures taken to keep their clients’ assets and information safe.
Top marks in this category require:
- High-quality videos helping clients understand how the service works and how it can help build wealth
- Clearly written articles and blog posts that help clients understand how the service works and how it can help build wealth
- Availability and depth of the site’s frequently asked questions
- Encryption level of platform
- Two-factor authentication for mobile access or for logging on to an unknown browser
- The availability and amount of excess SIPC Insurance
Commissions and Fees
This category evaluates the costs associated with using robo-advisors’ platforms and services.
We compared commissions for the services offered by each of the robo-advisors, giving more points for lower costs. We scaled the points awarded so that the lowest costs in the group earned the maximum number of points, with fractions (and occasional zeros) given to the more expensive robo-advisors.
To determine the score for this category we looked at the following aspects of each of the robo-advisors:
- Management fee tiers
- Termination fees
- Average underlying fees for ETFs and MFs
How We Update the Data
Our robo-advisor rankings are based on all the information available at the time we performed our reviews. We concluded our findings on Sept 1, 2019. We realize that robo-advisors continually make platform adjustments, product improvements, and pricing changes, and the data we included in our reviews may change from time to time. We are frequently in contact with all of the companies we evaluated in our rankings to stay on top of their changes so that we can update our reviews.
As we state throughout our robo-advisor reviews, each investor is unique and has different needs based on personal goals. We believe that our comprehensive review process covers those needs as thoroughly as possible given the information available to us at the time. While there will always be outliers, we are confident that we have applied the most useful methodology to review and rank robo-advisors according to the most popular use cases among users of these platforms.
We thank you for your trust.