Robo-advisors have been gaining popularity as a hassle-free and simple way to invest compared to a do-it-yourself approach or the use of a traditional financial advisor. Unlike other types of investment options, a majority of robo-advisors only charge an advisory fee. This advisory fee is typically lower than advisory fees associated with traditional financial advisors. Since fees can eat into or even negate an investor’s returns, we decided to evaluate the advisory fees of 14 different robo-advisors. The robo-advisors we surveyed for our study are: Wealthfront, Betterment, FutureAdvisor, WiseBanyan, SigFig, Personal Capital, Vanguard Personal Advisory Services (VPAS), AssetBuilder, Rebalance IRA, Liftoff, Hedgeable, Schwab Intelligent Portfolios, TradeKing Advisor, and Acorns. We also looked at minimum account balance requirements for each of these robo-advisors.
- Average Account Minimums for Robo-Advisors
- Average Advisory Fees
- Robo-Advisor Fee Comparison by Account Balance
- Other Service Fees Charged
Account minimums are simply the amount of money required to open account with a brokerage. Some robo-advisors have no account minimums, meaning an investor could open an account for $1 if she wanted. Of the 14 robo-advisors we surveyed, only three did not have any minimum account requirements. They are Betterment, Hedgeable, and Acorns. The other eleven robo-advisors have minimum account requirements ranging from $500 to $100,000.
|Lowest||$0||Betterment, Hedgeable, Acorns|
|Median||$5,000||Liftoff, Schwab, TradeKing Advisors Momentum|
Many robo-advisors require a minimum account balance to adequately diversify an investor’s portfolio and to minimize trading costs, particularly if the robo-advisor does not charge a fee per trade. Other firms base the account minimum on the type of investor they would like to serve.
Most robo-advisors charge an advisory fee as a percentage of the investor’s account value. If an investor’s account is valued at $100,000 and the advisory fee is 0.30%, the fee would come to $300. This advisory fee is in addition to the required expense fee for owning a fund, which an investor pays regardless of where he or she invests. Some robo-advisors may also charge for trades (such as buying or selling an ETF), add-on services, or account maintenance. However, many robo-advisors only charge an advisory fee and use the money gained from that fee to pay for any trades and maintenance needed on an account. The average advisory fee, regardless of account size, was 0.40%.
Two of the robo-advisors we evaluated did not charge any advisory fees at all: WiseBanyan and Schwab Intelligent Portfolios. WiseBanyan instead charges for optional add-on services, and Schwab offers a variety of its own funds from which it collects an expense fee. Wealthfront and SigFig did not charge an advisory fee for investors with $10,000 or less in their account. The other robo-advisors charge advisory fees ranging from 0.15% to 0.89% based on the value of the investor’s account. Personal Capital has the highest advisory fees overall, charging 0.49% to 0.89%.
Below is a breakdown of the 14 robo-advisors we surveyed showing the associated advisory fees at different account balances and the required account minimum. All but five of the robo-advisors allow investors to open an account with as little as $5,000, with fees ranging from 0.00% to 0.75% for this amount. At the higher end, fees range from 0.00% to 0.89% for accounts with $1 million and from 0.00% to 0.59% for accounts with $10 million.
|Brokerage||Account Min.||Account Balance|
|TradeKing Advisors Core||$500||0.25%||0.25%||0.25%||0.25%||0.25%||0.25%|
|Schwab Intelligent Portfolios||$5,000||0.00%||0.00%||0.00%||0.00%||0.00%||0.00%|
|TradeKing Advisors Momentum||$5,000||0.50%||0.50%||0.50%||0.50%||0.50%||0.50%|
The advisory fee structure for robo-advisors varies greatly across the 14 that we surveyed. Some robo-advisors charge the same advisory fee regardless of the value of the investor’s account. Others may increase or decrease the fee with higher account values. Still, others may charge a flat-fee for the account. For instance, Acorns and TradeKing Advisors Core charge $1 per month for accounts under $5,000. Betterment charges $3 per month, instead of a percentage, for accounts with less than $10,000 and auto-deposits of less than $100 per month. When evaluating a robo-advisor’s advisory fees, you should consider the starting value of your account and your on-going contributions.
On top of advisory fees, some robo-advisors charge other fees for trades and transactions, account maintenance, or additional services. Five of the 14 robo-advisors in our survey charge service fees on top of the advisory fee. They are FutureAdvisor, WiseBanyan, AssetBuilder, Rebalance IRA, and TradeKing Advisors. Not all of these fees are mandatory.
|AssetBuilder||Trade fees ($20 - $49.95 per trade)|
|FutureAdvisor||Trade fees ($7.95 - $24 per trade)|
|Rebalance IRA||Trade fees ($50 - $70 per portfolio rebalance), $250 account opening fee|
|TradeKing Advisors||Fees for add-on services, $50 IRA account closing fee|
|WiseBanyan||Fees for add-on services|
FutureAdvisor, AssetBuilder, and Rebalance IRA have fees related to making trades or transactions on accounts, ranging from $7.95 to $49.95 per trade. Check out our guide on the Average Cost of Online Trading for an idea of what average trade and transaction fees are. Rebalance IRA also has an account opening fee for $250. TradeKing Advisors and WiseBanyan both offer optional add-on services with additional fees for their investors. TradeKing Advisors also charges $50 for closing an IRA account with their brokerage.
Putting It All Together
Fees can easily eat into an investor’s returns, particularly if the investor has an account with a lower monetary value. It’s important to choose a robo-advisor with fees and an account minimum that make sense for your investment contributions and goals. However, fees are only one part of the picture when choosing a robo-advisor. Investors should also consider other factors, such as stability of the brokerage firm, investment strategy, and access to a live financial advisor, when evaluating a robo-advisor.