List of Robo Advisor Firms. Compare Robo Investment Fees and Account Minimums.

List of Robo Advisor Companies

Just a few years ago, when investors wanted to hire a professional money manager, they would hand over at least 1% of a portfolio's value to a human being who would try to beat the market. Today, the investment advisory scene is very different and changing rapidly.

Enter the Robot

While the human advisor still exists and is trusted by countless investors who are willing to pay for him, the new advisor on the scene is a computer program that begins with a battery of questions. These cover a variety of topics, such as the investor's beginning capital, long-term goals, when withdrawals will begin, risk tolerance, age, trading experience, and investment psychology.

After analyzing answers to these questions, the software then recommends a specific portfolio for the investor. Keep in mind that there is no actual human financial advisor at work here, other than the people who wrote the program. The software itself recommends a portfolio based on the client's answers.

Obviously, there has to be a level of trust on the part of the investor when selecting the robo-advisory method. There is no actual person in the equation who has been through years of financial study. No one checks the recommended portfolio to verify that it is in the best interest of the investor.

List of Robo Advisors: Betterment

Why the Robot?

Simply put, the robo-advisory model has become popular in recent years because the technology now exists, and it is cheaper than the old fashioned method. Most computerized investment services cost less than 0.50%, and some are cheaper than that. Human advisors typically charge two to six times as much.

The robo-advisory model is part of the drive in recent years for brokerage houses to lower their fees. In 2001, Fidelity charged $20 for equity trades in a small account. Today, the same transactions cost just $7.95 each. The broker recently launched an automated advisory service, too.

Cons of the Robo Advisor

Fears of robots often appear in sci-fi movies. Concerns over computerized investing also have been expressed. For example, some investors worry that their accounts aren't being monitored as they would be by a human advisor. Some brokers have responded by offering automatic periodic reviews and portfolio rebalancing, either for free or for an additional charge.

Other investors simply like the ability to pick up the phone and call an actual living broker to ask questions and hopefully get answers. With a computer program, there is no one to talk to when the market goes haywire, as happens. The robo-advisory method seems to have less accountability than the traditional method of portfolio management.

Some investors have shunned the new automated investment model in favor of the human advisor because they believe the latter can produce above-average returns over the long term, compared to the newer trading system. It is too early to know for sure if this will be the case. Financial research in the future will undoubtedly be conducted on this issue, which will help to shed light on the topic.

Retirement savers are accustomed to sitting down with a financial planner face-to-face and working out a roadmap that will help create a successful life after work. This human process is lost with the on-line computerized investment method. While some programs do ask about retirement and educational goals, they don't seem as comprehensive as the work a human advisor normally does.

Most robo-advisor firms from the list above only buy and sell passively-managed ETF's. Investors who want mutual funds, stocks, or other assets, have to hire a human advisor.

List of Automated Investing Firms: Wealthfront

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Advantages of the Robo Advisors

Despite the hazards that seem to be inherent in the computerized investment model, there are certain advantages that are attracting a lot of attention. As already mentioned, there is a significant cost savings over the traditional method. This price difference has allowed small investors who otherwise would not have the funds to hire a more expensive money manager to utilize an robo-advisory service.

Robo-advisory services also usually charge no commissions for the trades they place. This could save a single account hundreds or even thousands of dollars over its lifetime.

The computer algorithms that make investment decisions can be programmed to learn from market movements and trading choices. Over time, these learning experiences can make the programs more accurate and better predictors of securities markets.

The pricing schedule of most robo-advisors is typically much simpler than the fee schedule that the majority of traditional advisors use. The ease and simplicity of the computerized system will definitely appeal to many investors.

The Robot Against the Human

Raymond James is a traditional full-service brokerage firm that has actual people who manage accounts and assist clients plan for retirement and education expenses. The firm charges 1.0% to 2.25% just for portfolio management. Commissions are extra, as are financial planning and general consulting.

One rare middle ground between the new and old methods of portfolio management is a service offered by Ally Managed Portfolios. The company charges a very low 0.25% for its investment advisory service, which is in line with what most robo-advisors charge. However, Ally Invest doesn't use a computer program to manage accounts. Remarkably, it uses human money managers to buy and sell low-cost ETF's.

Robo Advisors List: Schwab

Robo Advisor Examples

Schwab offers robot-managed accounts called Intelligent Portfolios. Amazingly, the broker charges nothing for the service. Schwab and non-Schwab ETF's are traded, which compensates the company. Schwab also makes money through order routing and keeping a large cash balance in each robo account.

E*Trade also has a computerized account management service. It's called Adaptive Portfolio and costs 0.30% per year. A $10,000 minimum deposit is required to begin the service with a regular brokerage account, or $5,000 for a retirement account.

Robo Advisor Firms List: Etrade

Robo Advisor Companies List Summary

While many investors still don't trust a computerized trading system enough to hand over their life savings, the low cost of the service is certainly attractive. Many customers are happy with their investments in the best robo advisor companies listed above.