What is the best robo advisor?

What is a robo-advisor?

A robo-advisor is an online investment management service that uses algorithms to optimize passive indexing strategies. Active strategies, enabling specific, individual transactions, are sometimes offered too.

What should I look for in a robo advisor? 

Robo-advisors typically charge fees lower than traditional brokers and advisors. But services and features can vary, so review the following items when reviewing your options:

• The type of accounts and minimums: Check if the robo-advisor has the account type you want to open. This may sound obvious, and while many robo-advisors offer a variety of investment options, some don't offer specific kinds, like traditional tax-advantaged retirement accounts. Requirements for minimum balances can vary widely, too.

• Fees/Costs: Robo-advisors typically charge either a flat advisory fee or a commission fee, calculated as a percentage of your account's balance on an annual basis. Commission fees vary widely, ranging from 0.25% to 0.50%, and some charge additional fees for different types of investments. For example, exchange-traded funds often require a fee structure different from other kinds of investment. Altogether, robo-advisors' fees may be higher than traditional financial advisors. Review your choices closely before committing. 

• Customer Service: Some robo-advisors provide access to a human financial advisor. But for many, human customer service isn't offered at all -- or requires a premium account or extra fees. 

• Added Features: Some robo-advisors offer daily rebalancing. Others offer tax-loss harvesting to help at tax time. Make sure the account you choose matches your expectations.

How much money do I need to invest with robo-advisors? 

Many don't require a large minimum deposit to open an account, but again, requirements vary, and some can require a balance of more than $25,000. 

Which robo-advisor delivers the best returns?

Following are the top robo-advisors with details on common fees:

• Betterment offers a variety of services, from personalized retirement plans to automatic rebalancing and tax-loss harvesting. The commission fee varies between 0.25% to 0.40% for the basic version, with no minimum account balance required. The premium version, with live support seven days a week, requires  $100,000 minimum balance.
• Schwab Intelligent Portfolios is the robo alternative to Schwab's traditional advisor-based services, offering tax-loss harvesting, automatic rebalancing and unlimited customer support 24/7 at no extra cost. There is no commission fee to open an account, but it requires an account minimum balance of $5,000.
• Wealthfront provides tax-loss harvesting and automatic rebalancing., with advisory fees charged at 0.25% after an initial investment of $5,000. Some Wealthfront funds require an expense ratio fee. A minimum balance of $500 is required to open an account.
• Ellevest is primarily focused on women, though its financial planning services are available to everyone. Ellevest offers automatic rebalancing but not tax-loss harvesting. The monthly fee ranges from $1 to $9 with no requirements on account balances. 
• SoFi originally focused on student loan payments but has expended to robo-advisor investing, aiming for young beginners and offering both passive and active investing. SoFi offers free 24/7 access to financial experts, and on active investing account, there's a $75 fee for each outgoing transfer. Required minimum account balances start at $5 a month.

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Bright is a lot like these robo-advisors, offering algorithmic financial planning. Each personal Bright Plan offers a step-by-step guide to reaching your goals and automates smart payments on your credit cards.

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