In a world requiring faster-paced financial decisions than ever, it can be pretty hard to figure out your next move.
Now, I know what you’re thinking…
Has a muscular terminator-esq cyborg returned from the future to help you make money?
But robo-advisors are the next best thing.
Robo-advisors use incredible technology that could be a game-changer in your investing journey.
They have the potential to make decisions much faster (and often better) than traditional financial advisors.
So, cast aside your doubts about artificial intelligence…
Come with me if you want to live (a more financially free lifestyle).
It’s time to discuss the Best Robo Advisor 2022.
Table of Contents
What Is A Robo Advisor?
Before we dive into the nit and the grit…
We should agree on the definition of a robo-advisor.
A robo-advisor is simply an automated digital platform that provides financial planning for you. This is done with little to no human supervision (or emotion), and it’s an automated, algorithm-driven service that is provided to you, the investor.
The key selling point here is the fact that there’s not a person running your investment… Yes, I’m talking about you.
For most people, the first scent of a declining investment means “SELL”.
But a robo-advisor knows better, and can help mitigate these emotional decisions.
Additionally, Robo-advisors can be online and monitoring your investments 24/7.
Last Terminator reference, I promise…
But you get the point.
In modern life, the once daily news cycle no longer exists.
Information leaks out continually, in a perpetual drip-feed, straight to your phone.
Consequently, your investment values can also rapidly fluctuate throughout the day,
A Robo-advisor will monitor this, so you can go outside (or whatever).
- Robo-advisors are automated digital platforms that use algorithmic investment strategies to manage your investments with minimum human oversight.
- Robo-advisors often offer low fees and allow very low opening balances.
- Robo-advisors work best for portfolio based investing and should often be avoided for estate planning and other complex processes.
- Fire The Boss™ have carried out extensive testing to find you the best robo advisor 2022. All will be revealed below!
Should I Use A Robo Advisor?
We don’t all become Warren Buffet overnight.
Most of us need all the help we can get!
A Robo-advisor could be just the nudge you need to kickstart your investing.
And you’re not the only one.
New investors are rapidly moving away from financial planners and traditional banks.
They’re moving towards more modern systems with increased practicality and ease of use – like Robo-advisors!
Yet despite this, some people still shy away from robo-advisors due to not really understanding the technology.
So that’s what we’re going to debunk and define today:
Robo advisors start with a series of questions to ascertain your appetite for risk, favored investment type and ultimate goal. Declare your preference for active vs passive investments, preferred timelines and even location of the funds included.
You can also express the level of funds at your disposal (which can start at just $1).
Each robo advisor is designed using a series of highly complex algorithms. These analyse your input variables and the current market conditions to evaluate every possible outcome for your investment. They even incorporate Nobel-prize winning theory on investment behaviors.
The robo advisor can therefore suggest an investment most likely to meet your investing needs and offer an advantageous outcome.
Sounds pretty good to me!
Advantages And Disadvantages Of Robo-Advisors
A good robo-advisor will offer you easy account setup, provide goal planning, customer service, portfolio management and great security – all at a low fee.*
*Robo-advisors are able to offer low-cost options due to automation.
In 2022, robo-advisors are now also capable of more sophisticated tasks, like investment selection and retirement planning. This often includes index funds, ETFs and pre-selected portfolios.
Although online investing has been around for some time, its popularity has exploded with the ‘younger generation’ (millennials and younger). This group are not only more dependent on technology, but also more relaxed when it comes to sharing personal information online.
Good robo-advisors, much like mobile banking apps, offer incredible digital security but are nonetheless treated with cynicism by fans of “brick and mortar” banking.
So what are the disadvantages of robo advisors?
|Straightforward and speedy setup.||Reduced customization options compared to financial advisors (though they’re rapidly evolving)|
|Low fees||May not be cheaper than all financial advisors. Robo advisors don’t always make this obvious on their sites|
|Remove emotion from the equation||Often lack face-to-face appointments|
|Nobel-prize winning investment models|
How Do Robo Advisors Work?
As discussed above, typically robo-advisors will have you start by filling out an online survey.
They will collect information from you, including:
- Your financial situation and financial goals.
- Some may ask only the basic questions, while some will allow you to set up several goals.
- Other questions include how averse you are to risk, what level of return you want, and how long you are planning on keeping the money invested for.
Answer all of these preliminary questions truthfully!
Let’s say for example that you and a friend both sign up with a robo-advisor.
You’ll both take the same survey, but will be given completely different results and investment strategies based on how much risk you want to take, how much you want to invest up front, and whether you want to save or spend your investment.
Once you’ve filled out this survey, the algorithm will choose the right asset allocation just for you.
A higher risk asset allocation will favor things like more volatile stocks, whereas a less risky asset allocation will favor bonds and ETFs.
The majority of robo-adivsors use a variation of modern portfolio theory (MPT).
MPT is a mathematical framework that is used when putting together and balancing your portfolio. It is used to maximize your profits while minimizing your risk.
It’s really just a fancy way of saying that robo-advisors use math and AI to make better decisions than you probably could (no offense and all).
Unless you set it up differently, robo-advisors also assume that investors are risk averse -regardless of how risk tolerant they say they are.
This means that it will mix more volatile stocks (which are considered equities) with bonds, (which are considered fixed income). This will keep your portfolio balanced overall.
Likely, if you’ve ever had a financial advisor in the past, you’ve heard the same sentiment that even if you are willing to take more risk, you’re still not really taking that much risk, because your portfolio is balanced-out with high and low risk assets.
One last note on the security of these robo-advisors – they have to register with the U.S. Securities and Exchange Commission (SEC).
Although they are not insured by the Federal Deposit Insurance Corporation (FDIC) because money is held for investment purposes, this really just means that money going into these robo-advisors is very closely tracked, and extremely transparent.
You can see exactly where your money is at all times.
What Types Of Robo Advisors Exist?
There are hundreds of robo advisors available, not only in the USA, but around the world.
Luckily we’re here to recommend the best robo advisor 2022.
As with anything, with the growing number of robo-advisors, the range of services has grown as well.
You could almost say the AI is getting smarter…
Which is only slightly unsettling.
Here are some of the many types of robo advisors out there:
- Complete banking services such as asset allocation, mathematical portfolio management, in addition to having some degree of human contact.
- Robo-advisors that are more hands-off, offering a full suite of automations but offering advice, not action.
- Digital and on-call advisors for more in-person help.
- More complex portfolios, offering a wide range of stocks, ETFs, bonds, and even crypto!
- A more socially responsible route, only offering socially responsible, green assets.
Of course, it’s important to note that with added options and complexity, you are likely to pay more in fees. Likewise, the more hands-off and hassle free the platform is, the less you’ll pay.
So, the features you want (security, in-person support, more options, etc.) entirely depend on how much you want to pay.
That’s probably all you need to know on the types of robo advisor.
I’ll be back on the topic of best robo advisor 2022 now (ok, I lied, another Terminator reference).
How Much Do Robo Advisors Cost?
Like most new technologies, robo-advisors come at a cost.
However for the most part, robo-advisors are inexpensive.
They should not require a large upfront investment when opening the account.
In fact, the majority are really affordable to setup and only charge small monthly or recurring transaction fees.
As they are automated, they can typically charge around 0.25% to 0.50% on your assets per year as a management fee.
Some can be much higher, and some will be lower. It will really depend upon the services that you are looking for.
It’s important to also note that the funds your robo-investor invests your money in will charge a fee based upon your assets.
This fee can range from 0.05 up to 0.65 per asset or per transaction (usually charged on a monthly basis), though this will vary depending on the funds that you are invested in.
These fees are typically deducted on either a daily or monthly basis, making them small enough to not make a dent in your investment or savings.
Don’t worry, we take the fees into consideration below when deciding the best robo advisor of 2022.
Are Robo Advisors Right For Everyone?
To put it simply – nope.
And that’s alright!
They are really better suited to those people wanting straightforward investing. Nothing complex like estate planning or juggling individual stocks.
Robo-advisors are great for people who don’t necessarily know the ins-and-outs of investments and need a bit of guidance.
They are also great for the investor that wants to put money in as it becomes available, especially when automating this process.
Robo-investors make it possible to not have to wait to save money before you start investing. Rather, you can set up auto-withdrawals… when you get paid, you also automatically invest.
This is similar to the “set it and forget it” investing style described in our beginners guide to index funds.
Robo Advisors Vs Human Advisors
- Robo-advisors are a low-cost alternative and more accessible option compared to traditional advisors.
- Some robo-advisors require little-or-no account minimum for you to get started, meaning that they’re a great option for even the younger investors out there.
What does that mean for you? Really it means that you could sign up and get investing today!
On the flip side of that, a robo-advisor may limit the options that you can choose from as an individual investor.
- You cannot always choose which mutual funds or ETFs that you are invested in.
- So, if you’re one to be a bit pickier with your portfolio, or want a wide range of options, then you have to accept that you’ll be either paying for a better robo-advisor, or maybe a robo-advisor isn’t for you.
The best of both worlds?
There are an increasing number of financial and asset management firms that are now getting into the robo-advisor industry. They typically have higher fees and account minimums, but they are after the investors that are more ‘sophisticated’.
But don’t just conflate higher cost with higher quality.
If you find a robo advisor plan with the option of also having a human advisor, you may end up paying significant fees.
Perhaps it would have been better to just pitch for a good financial advisor. Always do your research before diving in headfirst!
How Do You Pick A Robo Advisor?
Don’t worry, we’ve picked some of the best robo advisors for you below.
But how should you then make up your mind?
- Check which features you need and make sure your chosen robo advisor offers them*
- Compare the fees associated with the accounts. Don’t accidentally pay more than you would a traditional financial advisor (unless you know what you’re doing).
- Ensure the account in question doesn’t clash with your ethical/social beliefs.
*If automatic rebalancing of your portfolio and tax-loss harvesting are important to you, make sure your robo-advisor offers those as well.
What does that even mean?
Tax-loss harvesting is simply taking advantage of changes in the market that will help you reduce your tax bill, while giving you more money to invest.
Rebalancing your portfolio simply means that your robo-advisor is evaluating, and then buying or selling one or more assets in order to stay in-line with your financial goals.
These are both benefits of having a robo-advisor.
Again… Make sure you do your homework and look at several different sites before making your final decision.
Robo Advisor Returns
The best robo advisor might simply be the one offering you the best returns.
But can robo-advisors out-perform other means of investment?
We’ve taken a look at the typical investment returns to expect on your own, investing in ETFs or with brokers.
Lets put robo-advisors to the test.
Robo Advisors vs DIY
For those that don’t want robots and AI managing their money, the best option (and, usually the most cost-effective option) could be to just invest your money yourself.
Download an app, take care of the trades and manage your own portfolio.
Many are flocking to this option nowadays!
The only kicker here is that managing your own portfolio and investment takes a lot of time to learn and manage.
And a hell of a lot of effort. Trust me!
But if all goes well, how do DIY returns compare to robo advisor returns?
Most robo-advisors (depending on the platform) can average between around 4% to 6% returns every year—around the same as a seasoned equity fund investor or trader.
Generally, a lot of DIY investors will make less than 2-3% per year, with most actually losing money, or making less than 1% returns in their first couple years.
Depending who you ask, up to 90% of investors will actually lose money when “doing it yourself”.
Not sure I like those odds!
If aiming for steady returns is more important, then the robo-advisor might be the way to go.
Robo Advisor vs ETF
An ETF, for those who are just getting into investing, is an Exchange Traded Fund.
Unlike a stock (representing just one company) an ETF tracks an index fund, a commodity, a bond, or a portfolio of securities.
ETFs are bought on an exchange like stocks, unlike index funds, – which do share many similarities.
It’s important to note that a robo-advisor is the actual technology platform, not the asset. Most robo advisors do actually invest in a few ETFs.
The only difference here is that the robo-advisor will do the work and invest in the ETF for you!
Investing in ETFs on your own is typically less user friendly, and doesn’t yield a huge amount – typically in the ballpark of 3% to 6% annually.
To invest on your own, you need to do your own research and then set up an account with a broker. Then, you may find that you need to save up in order to buy even one unit. Then the same thing over time to buy your next.
A robo-advisor, on the other hand, allows this to happen all in the background – and can combine ETFs with other assets to improve your return.
Robo Advisor vs Brokers
Many choose robo advisors over brokers for one reason.
Most robo-advisors charge an annual flat fee of 0.2% to 0.5%. Brokers, on the other hand, may charge between 1% and 3%! When you start looking at your investments and their growth, this can really add up over time.
Let’s say that you have an investment of $10,000…
A robo-advisor would likely only charge you $20 on that investment. A broker, on the other hand, would charge hundreds of dollars.
You’re an introvert!
Robo advisors will never ring you out of the blue or start asking unrelated questions. An introverts nightmare!
In addition, your robo-advisor is available 24/7. A broker on the other hand, however friendly, probably wouldn’t appreciate that late-night call. They may also take longer to process your requests.
However – If you have a complex financial situation, or are heading that way, you will likely still want a broker to guide you through the process. The fees are unfortunately something that you’ll just have to accept as part of that.
In terms of robo advisor returns, I mentioned above that most brokers and professional traders average around the same level of returns as a robo-advisor… So the fees really are the deciding factor here.
What's The Best Robo Advisor 2022?
The part you’ve all been waiting for – declaring the best robo advisor 2022.
If you skipped ahead to this section, welcome!
Choosing the best robo advisor really depends on what you are looking for.
There are so many variables that there isn’t really a “one size fits all”.
We’ve therefore awarded the best robo advisor within a series of broader categories:
- Our Overall Best Robo Advisor 2022
- The Best Robo Advisor For A 401K
- The Best Robo Advisor For Beginners
- The Best Ethical Robo Advisor
- The Best Low-Cost Robo Advisor
- The Best Robo Advisor For HNWI
Best Robo Advisor 2022 - Our Overall Pick
Lets start with the best robo advisor on the market today (in our not-so-humble opinion).
This was selected based not only on returns, but the ease of use, offering, and fees.
We picked this robo-advisor not because it’s one of the largest in the U.S. but because it excels in automated investment management.
Wealthfront are also great at adapting your investment portfolio based on your needs and goals.
Not to mention their impressive historical returns, averaging more than 8% return on investment since its inception. Plus over 15% in the last year in some moderate-to-high risk accounts.
They also offer very reasonable fees and free advice on a bunch of different account types and funds. This includes college savings, trust accounts and even IRAs.
They’re therefore great for all demographics.
Wealthfront has Autopilot, which monitors your bank accounts and moves spare money above your monthly spending needs.
This creates cash flow from your current account into either a high-yield savings account or an investing account. Your money is therefore always growing!
This robo advisor also has crypto offerings, and allows you to add or exclude ETFs accordingly to your preferences. By facilitating increased customization, Wealthfront also allow for socially responsible investing.
Wealthfront also include tax-loss harvesting (as discussed previously).
What about the fees?
Wealthfront charge just 0.25% on your account balance – for most of their accounts.
They do require a minimum of $500 in your account to start.
Still, they’ve done enough to earn the title of our overall Best Robo Advisor 2022.
BUT there are still better robo advisors for specific circumstances.
Keep reading as this might be relevant to you!
Best Robo Advisor For A 401k
An important and evergreen topic – the 401K.
Most people are looking for ways to maximize the return on their 401K.
Good. You should be too!
For many, a robo-advisor could be just the solution their 401K needs…
But it needs to be the right advisor.
Which is why we’ve chosen one for you…
Here’s our best robo advisor for a 401k.
Blooom is the best robo advisor for a 401k on the market today.
They are a Registered Investment Advisor (RIA), meaning that they are held to higher standards when it comes to taking care of your retirement needs.
In other words, Blooom is a robo-advisor that has been built specifically for 401Ks, and it provides investment services that are best suited for 401Ks.
401ks may not always be the easiest to understand, but Blooom robo-advisors can help you.
They will also match up their fund research to your personal strategy to help you reach your goals.
If you’ve read any of my earlier blogs about early retirement, then you’ll know this is something that myself (and many others) are interested in.
Knowing that there’s now a robo-advisor out there to help is great!
Blooom can also help you to eliminate funds that aren’t doing you or your investments any favors. In place, pick ones that are more closely aligned with your goals.
Blooom are one of few robo-advisors that whilst being fully automated, also offer consultation with humans.
They do have other investment and retirement account types, but it’s important to know that they will take care of your 401k.
Their fees range from $45-250/year, depending on the level of service you want, or the number of accounts that you have. They also offer a no-account minimum.
So, if a 401K is your biggest goal, and you’re not sure how to start or where to start, Blooom might be your best bet.
Now for the best robo advisor for beginners!
Best Beginners Robo Advisor
We all start somewhere.
Whether its with investing, money management, financial independence… No one became an investment pro overnight.
Whilst the best robo advisors can make investing really simple, the technology in of itself can be tricky to learn.
That’s why it’s good to start with our best robo advisor for beginners.
This robo-advisor is known for being extremely user friendly.
Betterment is simple to set up, but still offers a bunch of features at a competitive price.
Betterment has also been optimized for mobile devices… which is really where we spend a lot of our time.
Betterment allows you the option to complete your setup and then simply let it do its thing. Of course, if you are looking for DIY investments… this probably won’t be for you.
Betterment also offers you the opportunity to buy fractional shares. This means you don’t have to wait until you have enough money to buy a full share.
As time goes by, this robo-advisor allows you to change your plan, adding features in, or switching strategies once you have more money in your portfolio.
Betterment also offer:
- Tax-loss harvesting.
- Fees of about 0.25-0.3% on your account balance
- No minimum amount to start.
Now… I can feel your social conscience practically leaping through the screen.
So let’s talk about the best robo advisor for our more socially responsible reader.
Best Ethical Robo Advisor
With social responsibility becoming a big topic nowadays, it’s started to affect the way we invest.
And rightfully so.
That’s why specifically looking at ethical advisors is important, because more and more people want their portfolios to reflect their own personal values.
Luckily, there’s a robo-advisor for that.
Our best ethical robo advisor is…
Interactive has specific categories like clean energy and clean tech. They even feature some green crypto and NFT projects!
Interactive Advisors has certainly put emphasis on being socially responsible. They offer their investors a wide range of ethical and sustainable assets to choose from.
Their portfolio names include the better planet portfolio, social justice, and the LGBTQ inclusion fund – just to name a few.
You can also set up your own portfolio based upon your own personal preferences, excluding companies that do not share your values.
This means that you can be hyper-selective in who you invest in and do your part to contribute to more socially and environmentally sustainable business.
Interactive Advisors have management fees that range from 0.08% to 1.5% per year and has a minimum investment of $100 – making it not only sustainable and ethical, but affordable too.
Maybe the best robo advisor for you is also the best robo advisor for the planet?
Best Low Cost Robo Advisor
We don’t all start with thousands of dollars to invest…
Robo-advisors make it easy to start even if you just have a few hundred dollars.
Our best low cost robo advisor takes this theme even further. This one lets you build your nest egg, starting with less than $10!
Acorns is about as low cost as they come…
According to their site, you can start by investing as little as $5 a month.
If even that’s a struggle, then we need to work on budgeting!
Try our guide on how to do a money makeover.
Or, more simply, aim to drink two fewer Starbucks (or beers) a month. You can actually turn that into a profitable investment, and even into an investment that benefits your family.
Acorn’s low cost package will give you an investment account, a checking account as well as a retirement account.
Talk about bang for your buck!
Like seriously… Three accounts for less than the cost of lunch.
Acorns also take the spare change from your daily purchases and invest that for you. Whether it be from your checking account, debit or credit card.
When it comes to setting up your accounts, simply fill out your profile and they will match you to the right investment portfolio.
Acorns also offer automatic portfolio balancing, giving your money the best chance to grow.
Now, we don’t love the user interface as much as our “overall best robo advisor”, Wealthfront.
But at the end of the day, you can’t go wrong when all of these great offers (and the ability to start investing early) costs you peanuts…
Well, acorns actually….
Best Robo Advisor For HNWI
On the flip side of our low-cost robo-advisors, what about the best robo advisor for those with a bit more to spend?
Let’s take a peek at the best robo advisor for high net-worth individuals.
(Which we all hope to someday qualify for).
So, Elon… This one’s for you.
This robo advisor specifically tailors its product to benefit a group of individuals called High Net Worth Individuals (HWNI).
These are those people who earn a lot of money…
If you are a high net-worth investor, you are probably looking for a few more perks when it comes to robo-advisors.
This is because you typically have a million or more dollars sitting around as cash or assets. You need bulletproof security and the highest quality algorithms.
Luckily, with robo-investors becoming increasingly advanced, there are some great options for the HNWI.
The best robo advisor for high net-worth individuals who still want the hands-off approach while maximizing returns, is… Personal Capital.
They offer you various forms of wealth management and can even set you up as a Private Client.
Personal Capital offer other strategies, as well as cash management and advanced financial tools.
Whether it be figuring out your net worth, your savings, budgeting or planning – they have the tool for you.
Of course, this robo advisor also offers you their tax-loss harvesting strategy as well as personal advisors and increased security.
Since their minimum requirement is $100,000 and you are charged a management fee between 0.49 to 0.89%, this is certainly the robo-adivsor for the HNWI.
The key benefit of this advisor over others with lower fees is the added security and intimacy of the app.
Each client has a secure and tailored experience that benefits them, and works much more closely with them, while giving them peace of mind over their… substantial investments.
Full disclosure: we researched this one through reviews, articles and a test account. We unfortunately just don’t quite (ahem) meet the criteria of HWNI just yet. Once we get there, maybe we’ll do an even more in-depth test for you all!
How We Picked Our Best Robo Advisors
After taking in all of this information, you may ask… where the hell did you get it all from?
Well… We didn’t pull it out of thin air.
We were so determined to figure out the best robo advisor of 2022 that we carried out some vigorous, in-house testing.
- Moving a portion of our investment profile into each robo advisor (including ones that didn’t even make the list). We then thoroughly tested them over a 4-week period.
- Examination and comparison of the features offered by different robo-advisors
- Researching public forums, platform and third-party review sites.
- Used the above to score each Robo-advisor from 0-5 across 11 domains, resulting in an overall “star rating” out of 5.
This took a very, very, (very) long time. We really hope it has been helpful!
We’re not taking any kickbacks from any one of the robo-advisors listed on this blog, so we really don’t have any particular business or group to help out.
The recommendations that have been made here are therefore simply based on honest, hard work.
I hope we found the best robo advisor that aligns with… well, you!
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Hasta la vista, baby!