Robo-Advisors vs. Financial Advisors: Which is Right For You?

Robo-advisors have revolutionized the financial advising industry, making expert advice accessible and affordable through algorithms and investment apps.

With the rising popularity of robo-advisors, investors can now choose to work with a human advisor or have their investments managed digitally.

In the guide below, we’ll break down the biggest drawbacks and advantages of robo-advisors and traditional financial advisors so you can decide which one is best for you.

How Do Robo-Advisors Work?

Robo-advisors are digital platforms that use a computer algorithm to build and manage a diversified portfolio.

When you sign up for one of these investment accounts, you’ll answer questions to help establish your time horizon, risk tolerance, and investment goals.

From there, the robo-advisor will create a diversified portfolio with a mix of low-cost funds tailored to your goals and risk tolerance. The platform will continuously work to keep you on target, adjusting your asset allocation as needed.

Some of the best robo-advisors offer added benefits like tax-loss harvesting, which involves selling securities at a loss to minimize capital gains taxes.

A robo-advisor could be the right fit if you’re more focused on investment management and don’t need personal financial advice on other topics like retirement planning, growing a small business, or investing in real estate.

How Do Financial Advisors Work?

If you prefer human interaction and want personalized advice for a range of financial needs, a financial advisor could make sense. Human financial advisors go beyond offering automation for your investment portfolio, helping you plan for multiple areas of your financial life.

Financial advisors take stock of your finances and create a customized plan to help you reach your financial goals. That could include anything from basic budgeting to investment advice and portfolio management.

Rather than using an algorithm to manage your brokerage accounts, human advisors suggest investment strategies and manage your accounts. And some advisors utilize robo-advisors as tools to manage their clients’ portfolios.

There are several types of advisors who provide financial services. It’s important to hire a fiduciary who is certified and has your best interest at heart. You can find an advisor in your area or sign up for a digital advisory service where you communicate with your advisor online or over the phone.

Robo-Advisors vs. Financial Advisors: Cost Comparison

Cost is another major factor to keep in mind when you choose an advisor. Here’s how robo-advisors and traditional financial advisors stack up in terms of affordability.

How Much Do Robo-Advisors Cost?

One of the biggest benefits of robo-advisors is their lower cost. Some of the best robo-advisors are completely free, while others charge an account management fee that typically ranges from 0.20% to 0.50%.

In some cases, the management fee is tiered, with a higher fee for larger account balances and a lower fee for smaller ones. Alternatively, some robo-advisors like Acorns charge a monthly subscription fee to cover account management costs.

To put it in perspective, if you invest $10,000 with a robo-advisor, you can expect to pay around $25-$50 a year in fees.

Remember that mutual funds and exchange-traded funds (ETFs) charge investors an expense ratio to cover operating expenses. Robo-advisors usually invest your money in low-cost funds with expense ratios below 0.10%, which you’ll be responsible for paying.

You should also keep in mind that robo-advisors have significantly lower account minimum requirements than many traditional advisors do, and Betterment has no account minimum at all.

Some self-directed investing platforms like M1 Finance are also free, with a low investment minimum and access to custom and curated portfolios.

How Do Much Financial Advisors Cost?

On the opposite end of the spectrum, the cost is one of the biggest drawbacks of working with a traditional investment advisor.

Some financial advisors charge a percentage of your assets under management. It’s typically around 1% but can be as high as 3%. Generally, the more money they manage, the lower the fee will be.

It’s also important to remember that traditional advisors usually require a high minimum balance of around $250,000 in assets. So if your advisor is managing $250,000 and charging 1%, you’ll pay around $2,500 annually.

Some advisors, typically brokers, act as salespeople and earn a commission when they buy or sell on your behalf. In some cases, advisors earn both a fee and commissions, but many advisors only charge assets under management (AUM) or hourly fees.

Keep in mind that there are some more affordable and accessible options out there, especially if you’re open to digital advising. For example, J.P. Morgan Personal Advisors charges an annual fee of 0.40%-0.60%, with a lower account minimum of $25,000.


Pros and Cons of Robo-Advisors


  • Simplicity: Robo-advisors truly let you set and forget your investments. You don’t have to research stock market trends, pick specific investments, or stress over diversification or rebalancing your account. You can leave all the investment decisions to the algorithm.
  • Affordability: Robo-advisors can charge minimal fees because they don’t have advisors to pay or offices to fund.
  • Accessibility: Most robo-advisors have very low account minimum requirements and in some cases, no minimums at all, so you can start investing with just a few dollars.
  • Tools and resources: While you don’t get the same level of personalized advice, the best robo-advisors have a library of useful financial planning resources, with tools like retirement calculators or budgeting guides to help you plan for major purchases.


  • No human interaction: Once agan, the biggest con of robo-advisors is the lack of personalized financial planning and the ability to interact with a human advisor.
  • Volatility: If you’re subject to panicking and pulling out of the market during a crisis, a robo-advisor won’t talk you through a market downturn like a professional can.
  • Risk profile: Without the help of a professional, you may complete the online questionnaire about your goals and risk tolerance and, not knowingly, create a portfolio that is riskier or more conservative than is appropriate for you.

Pros and Cons of Financial Advisors


  • Access to a human advisor: You’ll have access to a professional who you can meet with in person (or virtually).
  • Complex financial solutions: They can help you navigate complex financial situations (or tough money conversations with family) and save you time and stress.
  • Personalized financial plan: Your advisor can create a plan to help you reach your money goals efficiently. Over time, you’ll build a relationship with them. They’ll understand your dreams and ambitions and will help you reach them.
  • Help assessing risk: Your advisor can help you avoid major money mistakes, like panicking and selling your investments when the market declines suddenly. They can also prevent you from making risky and potentially detrimental investments.


  • High account minimums: Financial advisor services usually require a high minimum balance, often between $100,000 to $250,000 in assets, to open an account.
  • Conflicts of interest: Some types of advisors may earn commissions, which can create a conflict of interest when it comes to choosing what to invest in.
  • Involved selection process: Finding the right advisor is an involved process that takes time, effort, and a lot of research.

Which Type of Advisor is Right for You?

Which type of financial advisor is right for you depends on your goals, preferences, and budget.

Whether you’re just getting started or you’re a knowledgeable investor who wants an affordable way to automate your investments on a user-friendly platform, a robo-advisor could be a great match.

However, if you want the peace of mind of having a human advisor you can contact at any time managing your investments and need more extensive wealth management services, a financial advisor could be worth the cost.

Assess your needs, weigh the pros and cons, and start researching your options to land on the right advisory service for you.

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