Robo advisors vs financial advisors

Automated advisers are a key player in financial portfolios — but are machines better than people?

Robo advisor vs. financial adviser: What’s the difference?

The main difference between robo-advisors and financial advisers is that the first is a fully automated computer algorithm that trades and balances your portfolio on your behalf, while the latter is a person who helps you organize your finances from investments to retirement and children’s education plans.
Robo-advisors cost less than financial advisers, mostly because they’re automated and can perform only one task: to automate investment strategies. All you have to do is set up specific parameters, such as your financial goals and risk, and the algorithm will allocate your funds accordingly.
Financial advisers, on the other hand, can provide tailored financial plans for your situation. On top of investment advice, they can provide services such as debt management, budgeting, tax management and estate planning.

Benefits and drawbacks of robo-advisors

  • Minimal human error. Forget panic selling or impulse buying — robo-advisors lack messy human emotions that could interfere with long-term financial growth.
  • Lower fees. The cost of an automated adviser is less than what you’d pay for a human one.
  • No awkwardness. If you’ve ever been in the uncomfortable situation of not getting along with your financial adviser, you’ll appreciate this benefit.
  • Automated advisers can’t get to know you. Even the most sophisticated computer algorithm can’t sit down with you and explain things to you.
  • Robo-advisors can’t handle complex portfolios. These advisers aren’t best for large, complicated portfolios. The rule of thumb is that assets of six figures or more need the human touch.

Benefits and drawbacks of financial advisors

  • Advice beyond investment. Financial advisers can help you with your debt management, budgeting, spending habits and other financial responsibilities.
  • Can save you time and money. If you’re unfamiliar with some aspects of investing or tax management, hiring the right adviser can save you time and money.
  • Create a strategy. Financial advisers can help you create a long-term financial strategy for your retirement or children’s education plans.
  • Cost. Most advisers charge a fee equal to a percentage of your portfolio each year, typically up to 1%. Some advisers, though, charge a flat fee between $2,000 and $7,500 annually for portfolio management. Consultations typically cost a flat fee per hour.
  • Can’t automatically rebalance your portfolio. Financial advisers require time and discussions to manually adjust your portfolio.

Robo-advisor vs. financial adviser: fees

Fees for using a robo-advisor or human adviser vary based on the company you go with — and even vary among human advisers.
Top-level private advisers, for example, tend to charge a lot more than beginning or standard firm advisers. Some companies charge fees that reflect a percentage of your assets, while others may impose an annual or initial investment fee.
Still, robo-advisors are typically more affordable than human advisers. Here’s what you’ll pay for automated advisers through big-name providers.

Options or portfoliosMinimum investmentAnnual percentage or fee
VanguardIncludes a personal human adviser for the best of both worlds$50,0000.30%
Charles SchwabInvestor ratio$00%
BettermentAdd-on human adviser option$100.25%
WealthfrontAdvanced Indexing for accounts of $500,000+$5000.25%
Assets management human adviserHuman management$01.25% to 1.75%
Fee-only human adviserHuman managementVaries$1,000 to $5,000

Robo-advisor vs. financial adviser: Which one should I choose?

Robo-advisors work well for basic portfolios that aren’t overly complex. They are also helpful if you’re on a budget, typically offering lower fees than human advising services.
But if you have a sizable investment, complex investment goals or simply prefer to do business face to face, a human advisor might be a better fit. Financial advisors are more flexible and adaptive than robo-advisors, and they can help you with various financial goals. So if your long-term financial goals extend beyond a diversified portfolio, consider a human advisor. Your portfolio’s size should also factor into this decision: If you’ve got assets of six figures or more, a human may be your better bet.
That said, there are situations in which using both a robo- and human advisor may be advantageous. As your portfolio grows, so will your goals. Hedging your bets and splitting your investments between an algorithm-driven service and a human advisor could help diversify your interests.

Compare robo-advisors

1 - 5 of 7
Name Product Available asset types Stock trade fee Minimum deposit Signup bonus
Vanguard Personal Advisor
Stocks, Mutual funds, ETFs
$0
$0
N/A
Financial advice powered by relationships, not commissions.
SoFi Automated
Stocks, Cryptocurrency
N/A
$0
N/A
Put your money to work. Let SoFi build and manage a portfolio for you. Pay zero SoFi management fees.
Acorns
ETFs
$0
$5
$10 bonus investment
when you open an account with at least $5

Invest your spare change. Anyone can grow wealth.
Axos Managed Portfolios
Stocks, Options, ETFs
N/A
$500
Get $150
when you open an account and deposit at least $1,000. T&Cs apply.
JPMorgan Automated Investing
ETFs
N/A
$500
N/A
Open an automated investing account with as little as $500 and pay an advisory fee of 0.35%
loading

Compare up to 4 providers

*Signup bonus information updated weekly.

Information on this page is for educational purposes only. Finder is not an advisor or brokerage service, and we don't recommend investors to trade specific stocks or other investments.

Finder is not a client of any featured partner. We may be paid a fee for referring prospective clients to a partner, though it is not a recommendation to invest in any one partner.

Bottom line

  • Robo-advisors are automated computer algorithms that allocate your funds and constantly rebalance your portfolio.
  • Financial advisers are humans who help you with your finances from investments to retirement and children’s education plans.
  • Robo-advisors are typically better suited for smaller portfolios and cost less to operate.
  • Financial advisers are typically better for larger portfolios and for complex financial planning.

Frequently asked questions

More on investing

How to buy IPO stock

How to buy IPO stock

Buying an IPO is as simple as buying any other stock, but not every trading platform offers IPO stocks.

Read more…
How do ETFs work?

How do ETFs work?

Your simple and straightforward guide to ETFs, how they work and the different types available.

Read more…
What is stock lending?

What is stock lending?

Find out how stock lending works, the extra income you could potentially earn and the risks you should be aware of. Plus, compare stock trading platforms that offer stock lending.

Read more…

More guides on Finder

Ask an Expert

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and finder.com Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site