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Are Robo-Advisors Worth Using? The Pros & Cons

  • Post author:Bob Haegele
  • Post last modified:June 11, 2023

A while back, I created a portfolio on Betterment.  Betterment is one of the many robo-advisors available today. I saw the ads and at the time and I figured it was a good way to get into investing. 

In general, robo-advisors vastly simplify the process and basically does all of the work for you.

I didn’t have to worry about muddying the waters of things like ETFs, S&P 500 index funds, and mutual funds. Instead, I contributed what I could and my portfolio gave me a small return.

Not too bad for a first-time investor. But how do robo-advisors actually stack up? We’ll take a look at that. But first – the basics.

Robo-Advisor Performance

Of course, robo-advisor performance is quite possibly the most important thing about them. No one wants a lackluster investment – no matter how easy it is.

The problem? Robo-advisors are very new. We humans can sometimes forgot how long an investment has to be around before we can observe real trends. Typically, you would want to see at least ten years before you can start to make sense of an investment.

But while investing is not exactly a brand new concept, robo-advisors more or less are. We are only starting to get a sense of their actual returns.

That said, one site, has data going back to 2013. At the time of writing this, rate of return on several robo-advisors ranges from 6.45% to 7.55% for that approximately six year period.

Using Macrotrends data and taking the average return from 2013-present, the current average is 12.97%.

Admittedly, there are so many variables that comparing these two is probably not that meaningful. However, SeekingAlpha also shows robo-advisor performance lags behind the S&P 500. So, there may be something to this.

Robo-Advisor Fees

Research shows that consumers are willing to pay for convenience. Robo-advisors are no exception; consumers are willing to pay fees for the simplistic approach.

But, indeed – that convenience comes at a price.

According to Value Penguin, robo-advisors fees are in the neighborhood of 0.25%-0.35%. But how much of a difference does that actually make?

Let’s say you have an initial $10,000 investment with an annual return of 7%. You contribute nothing to it in a year. If you have a fee of 0.25%, that results in a $25 difference.

On the opposite end of the spectrum, what if the investment horizon is much longer? Say, 40 years. Let’s also suppose you contribute $500 monthly to that investment with a 0.35% fee. Rate of return is the same. The result? That 0.35% fee produces a $115,007 cost over the years.

In this scenario, your investment will have grown to just over $1,180,000 with a 0.35% fee. A nice balance indeed, but your investment fee is almost 10% of that. Is convenience worth that much to you? Well, that’s for you to decide.

It’s also worth pointing out that in the above graph, the fee doesn’t start to make a noticeable difference until around year 20. That also helps illustrate the power of compounding interest.

Fees will vary widely depending on your individual investments. You may want to plug you specific numbers into an investment calculator to see what you find.

What Is The Best Robo-Advisor?

There is probably no “best” robo-advisor, but each has its strengths and weaknesses. It’s also worth noting that even though there is some variation in robo-advisor returns, those don’t mean much.

That’s because, as mentioned, six years isn’t much time in the investing world. So the best way to answer this question is to look at the features of each.


As mentioned earlier, I used Betterment back when I used a robo-advisor for all of my investing. Betterment is solid option amongst robo-advisors, particularly for new investors.

One of the best things about Betterment is that there are no minimums. So even if you have a $0 balance, you won’t be charged a fee. As mentioned above, the management fee is 0.25%. Expense ratios are 0.13%.

There are other nice features as well such as IRA rollovers. It also makes managing your portfolio easy.

Robo-Advisor Betterment Allocation
Betterment makes allocating your portfolio easy.

I had been managing a taxable account on Betterment. However, they also offer IRA, Roth IRA, and SEP accounts.

They also give you access to financial advisors. I do not typically recommend this option due to the fees, but it is available if you want to look into it.

Overall, Betterment is a nice option for beginners investors.


I used SoFi to refinance my student loans, but they offer more than just student loan refinancing.

SoFi has a $100 account minimum, but there are no management fees. No management fees is an attractive feature – particularly for automated investing. In addition, expense ratios are 0.085%, which is quite low as well.

There is also automatic rebalancing. Plus, SoFi has excellent customer support (in my experience).

They do not currently have tax-loss harvesting, which could be costly for some users.

Overall, SoFi is another good option for newer investors.


Ally has been a rather popular name in recent years and so it only makes sense that they also have automated investing of their own. But how does Ally stack up?

At 0.30%, Ally has a slightly higher management fee than Betterment. They also have a $100 minimum investment – the same as SoFi. From this perspective, one of the other two would appear better.

So, does Ally have any strengths? Yes, for sure. Their expense ratios come in at 0.08%, which is barely higher than VTSAX. They have free rebalancing, and customer support is typically rated high.

Overall, this is another decent option, particularly for existing Ally customers.


Wealthsimple is an interesting one. The previous three investment platforms are fairly similar to one another with some small differences.

The same should not be said about Wealthsimple.

So, what’s the difference?

The biggest difference is that Wealthsimple focuses on value-based investing. In particular, their portfolio offers Halal investing. If this is something that is important to you, you may want to consider Wealthsimple.

In addition, their portfolio offers socially responsible investing (SRI).

But here’s the catch: the management fees are much higher than others. Coming in at 0.40%-0.50%, their management fees are some of the highest out there.

These fees will not completely derail your investments (remember, the graphic above uses 0.35%). It all comes down to what is most important to you. And that is a decision only you can make.


Bloom is another investment service that’s different from the rest. Whereas most robo-advisers focus on individual investment accounts, Bloom is specifically for employer-sponsored plans.

This means they will help manage your 401k, 403b, or 457b. That can be a valuable service because these plans can be complex.
Some employers offer target date funds which can simplify things, but that’s no guarantee.  If you are left to fend for yourself, Bloom can be very helpful.
There is also no minimum investment, and there is a flat $10 monthly fee. The flat fee means larger portfolios will pay a lot less than they would with percentage-based fees.
Expense ratios don’t apply here because Bloom manages the funds you have available.
Depending on what your employer offers, this portfolio can be helpful – especially if you don’t have access to target date funds and index funds.

Automated Investing: Better than No Investing

All of these investment with fees in one form or another. Paying fees means your return is going to be reduced somewhat. However, every investment portfolio mentioned here has either no account minimums or little to no fee to close your account.
As a result, automated investing can be a great way to dip your toes in the investing pool. If you want to get started investing but don’t yet have a firm grasp on the concepts, this is nice way to start.
If you want to make your investments completely automated, you will need your routing number. For example, here is how to find your USAA routing number.
As you learn more, you may decide to gradually move away from automated investing. If you decide to go that route, you will almost certainly still be better off.
If you don’t invest at all or only invest what your employer requires, you will be missing your early wealth-building years. For most of us, accumulating wealth takes time.
Thus, if automated investing allows you to get started earlier, by all means do so.
Getting started earlier will pay dividends – literally.

Hey there. My name is Bob Haegele and I'm a personal finance writer who has been freelancing since 2018. Since then, I've built a six-figure career as a freelance writer. My work has been featured in Business Insider, Forbes Advisor,, USA Today, and many other outlets. Interested in starting a blog of your own? Check out my post on starting a blog.

This Post Has 5 Comments

  1. Dave

    Hello Bob:

    Is there a way for me to reach you other than the blog? I read an article you wrote about the 10 best personal finance books and I wanted to comment. How can i reach you?

    Thank you,


  2. Eelis Vatanen

    There’s one in Finland called Everest, have you seen it? Got any opinion on it?

    The trouble I have with robo-advisors is that they all converge to very similar end result: a percentage mix of ETFs, following the modern portfolio theory. It is easy to replicate that without paying the fee. As you say, convenience is valuable in itself, so I might go for robo advisor, but I feel really tempted to just create the same portfolio myself.

    It’s a great way to get started for someone who doesn’t want to manage the portfolio themselves, but it might feel discouraging when it doesn’t magically produce much higher results than a simple etf portfolio.

    1. Bob Haegele

      I haven’t heard of Everest – probably because of the geographical difference. 🙂

      As I said, I think it is best for beginners. Investing doesn’t have to be extremely complicated, but it can seem so for new investors. For someone who is just starting out, I think they can be useful as one learns.

  3. I’ve heard of all of these companies but hadn’t really looked into any of them, so thanks for the breakdown. If I decide to start investing on the small side, these could be a good place to start, I think.

    1. Bob Haegele

      Indeed. Even though you have to pay extra fees, I still think it’s better than nothing. And these are some of the most popular ones, so definitely a great place to start.

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