Investing > Robo-Advisors vs. Financial Advisors - Head-to-Head Comparison

Robo-Advisors vs. Financial Advisors - Head-to-Head Comparison

Robo-advisors are getting serious hype. Who doesn’t like automated investing that makes you money — without human error? Or, on the contrary, is financial planning better with human guidance? Here, we analyze both services, so you can see the result of the 21st century’s most intriguing investment battle to date: robo-advisor vs human financial advisor.

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In this guide, we’re going to take you through all of the ins and outs of both a financial advisor and a robo-advisor to help you make the best choice for your investments right now.

We’ll discuss critical times when a robo-advisor is best, as well as critical times when a financial advisor is preferred. We’ll delve into what exactly a robo-advisor is and the 2 key reasons for its popularity.

The notable, up-and-coming financial hybrid advisor will be discussed, and we’ll highlight the one not so talked about factor that might just knock the shine off its halo. Lastly, we’ll highlight some key factors about our favorite online robo-advisors that might just help you make up your mind, today.

So if you want to get your investments off to the best start, (or make sure you’re on the right path) and clear up your mind once and for all about who wins the Robo Vs Financial advisor battle, then have a read of our guide.

Robo-Advisor vs Human Financial Advisor
When it comes to a robo-advisor vs a human financial advisor, who wins?

When is a Robo-Advisor Better than a Human Financial Advisor?

Robo-advisors are popping up faster than ever, becoming more a part of our investing journey than anyone would have thought. But is this out of sheer fascination with the idea of a computer taking care of our finances, or maybe because they cost less?

When the love-goggles for emerging tech services come off will we see financial advisors for what they really are? Are there instances where a financial advisor just can’t be beaten? The simple answer is – Yes.

Human advisors offer the human element that can help make your journey more personalized; they offer answers, advice, discussions, and debate about decisions, and overall they offer more security and confidence in your decision making.

The longer answer is, it depends on a multitude of factors including your budget, experience in investing, level of need for human guidance, and whether you’re comfortable making transactions online, or not.

Here’s a quick breakdown of times when a robo-advisor is best, and times when a financial advisor is.


Robo-Advisor: Robo-advisors are a great option for those on a low budget who want to invest as much as possible without succumbing to too many fees. Financial advisors can have high minimum requirements which can make it hard for investors to enter into the industry

Financial Advisor: Go with a financial advisor if the majority of your money is a retirement plan sponsored by an employer.

Experience in Financing

Robo-advisor: You have a complete understanding of your investment fees, their impact, and your investment performance.

Financial advisor: This is the best option if you have more complex trading needs, and would like a more customized investment allocation.

Human Guidance

Robo-Advisor: You don’t have a need for too much human assistance or contact.

Human advisor: Advice or guidance from a human is high on your list and you don’t believe that you will be as successful or confident without it.

Financial Control

Robo-advisor: You are happy to take a back seat approach to your investments and would prefer a more hands-off approach

Financial Advisor: You would prefer to have more control over your portfolio and create a more customized strategy

Tech Friendly

Robo-advisor: You are confident using technology and can quickly learn and adapt to new tools and gizmos

Financial advisor: You are not comfortable with, or trusting of technology  completely with your money.

That’s the easy part over, and yeah, sure, you could take that information, make up your mind, and run. Or you could read on to learn more about the intricacies that make this decision about a bit more than just your budget and need for human contact.

What is a Robo-Advisor?

In 2014, the first robo-advisor was released upon the world by online investment company Betterment. Its aim:

To serve the average joe who wanted to enter the trading industry but didn’t meet the typical asset requirements to attract the interest or attention of professional, financial advisors. These advisors still for the most part require account minimums of between five to six figures, with a 1% plus charge in assets under management (AUM) – it can be a lot.

The solution to meeting the needs of these people lay in the hands of the growing tech industry and progressing market structure that allowed Betterment to implement no fee, efficient services with low to zero account minimums.

In terms of technology, it assisted this advancement by utilizing algorithms, phone apps, and online forms, creating a new structure whereby pages of paperwork that needed signing were no more.

The human error side of trade execution and portfolio monitoring were, essentially, eradicated and replaced with automatic, efficient, objective, and error free robots. This meant that robots were now offering capabilities that humans could never fully live up to.

From the market perspective, exchange-traded funds (ETFs), the typical low-cost security emerged as the go to for offering varied exposure to multiple assets classes, including stocks, bonds, commodities, treasuries, and real estate.

ETFs offered the added benefit of extremely low management fees (from 0.20% — the average index mutual fund levies fees range around 0.75%) as well as increased transparency and liquidity by trading through the day, just like stocks.

Moreover, in recent times, more brokers have introduced commission free ETF trading.

This all enables robo-advisors to offer their services, on average for only 0.25% per year of AUM, and even better, it allows you to open a robo-advisor account for a mere $5 – less than the price of your morning Starbucks coffee!

But wait. A financial advisor is an expert when it comes to financial markets — able to implement the foresight, maneuverability, and adaptability that computer generated algorithms otherwise lack. Or perhaps, do robo-advisors beat the market?

Summary & Overview

  1. Robo-advisors have automated the investing industry, automating strategies that enhance asset weight classes in portfolios taking into consideration risk preferences.
  2. Financial advisors offer more than simply managing your investments – they offer communication, advice, planning and guidance to clients.
  3. An increased number of traditional advisors are merging robo capabilities with financial advisor capabilities to offer clients a robo-service as part of the overall creation of portfolios and investment monitoring phase.

Pros and Cons of Robo-Advisors

Low cost features aside for now, robo-advisors have many other useful and beneficial qualities. Firstly, opening accounts that take a long time, or require a lot of paperwork can put you off the idea. You tell yourself you’ll do it over the weekend and next thing you know it’s 6 months later and you still haven’t gotten around to it.

Robo-advisors have completely streamlined this process, making it a more manageable, quick and easy experience, that won’t take up weeks of your life.

After reviewing the top robo-advisors over several years, it’s clear that they bring several cards to the table thanks to their reliance on emerging technology. And that’s rarely a negative. One advantage of a tech-driven service is that robo-advisors are enabled to make investing strategies, such as modern portfolio theory (MPT) increasingly more automated.

This theory optimizes the most suitable asset class weights in a portfolio for a particular risk preference and although this can be done by humans — of course it can — it is a time-consuming and laborious task that, like many things of this nature, is prone to human error.

Robots on the other-hand have the wonderful ability to optimize thousands of portfolios, one after the other, flawlessly and 100% error free. They won’t have a brain slump at 3:00pm, they won’t simultaneously day dream about watching the next episode of Billions, they’ll just be doing what they were made to do.

In addition, algorithms rebalance and monitor each one of these portfolios when markets change and asset weights require readjusting. This ensures that your portfolio stays on track to meet your goals.

Moreover, the algorithm offers tax-loss harvesting, a strategy that minimizes tax by selling off securities after they’ve been devalued and replaces them with assets of a similar nature to keep the structure of your portfolio the same, but using the capital losses to offset the capital gains in other areas.

Before these kinds of algorithms, tax-loss harvesting was complex and, more accurately, taxing; Mostly because any mistakes made could inadvertently result in illegal wash trading. Not a good look.

Though perhaps most importantly, robo-advisors offer the benefit of being a true product of the phrase set-it-and-forget-it.

Finances can be dreary, complex and even intimidating for many, and even calls with a financial advisor can be a dreaded task. People who prefer to take more control over their finances often don’t possess the patience, discipline, or knowledge to carry it out in the right way. Algorithms can remove the stress and result in a more relaxed investment experience.

Here are some more reasons why robo-advisors potentially win the Robot vs. Human war. (But don’t get too content, because we’re going to discuss why financial advisors may have the edge.)

Robots Don’t Cry

Similar to the fact mentioned that robots are not prone to mistakes, they also do not have emotions. Emotions can be the single biggest factor to trip us up when investing, causing fear, excitement, anxiousness, and fight-or-fly instincts that can result in us making the wrong decision.

Those who believe in trusting their gut almost certainly won’t be following facts, figures, and theories. This leaves them more open to making risky investment decisions.

Of course, there’s always a chance that your gut could be right and you might win big — wonderful — but it certainly isn’t the smartest concept to build your strategy around. Although we should know this, studies show that we just don’t have the objectiveness necessary to avoid making this mistake and implement investing strategies, like buying low and selling high, well.

Computers, on the other hand, won’t be clouded by their emotions, and will always make decisions based on real, tangible, facts, and credible theories. Many ask – do robo-advisors beat the market? In this way, they certainly have an advantage.

Solely, or even partly basing decisions off emotions is far from the best way to become successful at trading – trying to time the market has consistently proven to be a bad strategy for success.

As opposed to becoming derailed by emotion, robo-advisors pick the best investments for your needs and goals, and leave it at that.

Those prone to panicking, and quickly selling off assets during a market downturn, make the worst decisions of all. Those with the patience to hold tight will reap the benefits when the market starts recovering again. Robo-advisors already know this, they’re already programmed with in depth knowledge about market patterns and market volatility.

As a result, robo-advisors simply ‘buy right and sit tight’ (sounds easier than it is) through the storm, allowing you to generate wealth in equity.

Quality Portfolio of Investments

Financial advisors, like most of us, have egos. Egos tend to make us think that the knowledge we have is right, and our own experience and education is highly valuable.

And don’t get us wrong. It is. But, it is not always the best solution, nor is it always applied in the right way.

For example, large financial firms base their investment guidance on a couple of quality portfolios that have been put together by investment pros, after carefully and meticulously following guidelines that cover investor scenarios in various forms.

Robo-advisors remove the risk of having smaller investment managers, and the middle man from bigger ones, from the equation. More traditional investment managers might move your funds more towards single stock funds, or those that may not have your best interests at heart, and you’ll pay steep fees for the privilege of this.

Financial advisors, for example, who are fiduciary should always make investment decisions that are profitable for you and are the best choice for your needs.

However, as humans, they may have fallen behind on up-to-date investment theories and therefore are using out of date ones. Not to mention, with multiple clients to look after per day, advisors can only spend so much time researching options for you.

Robo-advisors offer immedediate and unquestionable access to high-quality portfolios that have been created with someone like you at its core. Betterment, for example, uses Vanguard most of the time and similar low-fee ETF baskets with strong performance histories.

Low-Fee Funds Only, Please

Robo-advisors use low-fee funds only – a very sound and charming feature, we must say.

Wealthfront for example, takes funds mostly from Vanguard, Schwab and State Street when building client portfolios. Most funds used by the online robo-advisor come with fees of less than 0.10%, and absolutely none are more than 0.23%.

As robo-advisors choose to invest purely in low-cost ETFs, your investing fees will stay low, and your portfolio will have a high liquidity.

Low and Transparent Management Fees

Financial advisors usually charge based on how much assets they hold for you. In other words, they take a percentage of your assets under management (AUM), some also charge a flat fee. People do benefit greatly from fee-only advisors but when computers are looking after your investment, fees come to much less, again.

The fee-free reigning champion is no doubt Schwab Intelligent Portfolios. This robo-advisor has a $0 charge for its service. As a whole, you will be charged fees from the low-cost funds that your dollar ends up in, but Schwab itself charges no fees.

When averaging it out, robo-advisors tend to charge about 0.25% to 0.35%. This depends on how much you have in your account, and which services you use. To compare, human advisors generally charge about 1% for fees. This means that human advisors are around 4 times higher than those for robo-advisors like Wealthfront and Betterment.

Tax loss Harvesting Automation

This is a big one. Let us explain: The market as we know it is volatile. It has its ups, and equally, it has its downs.

The current election campaign in the US, for example, is currently affecting the stock market. The best investors use fluctuations like this to their advantage through tax loss harvesting.

Tax loss harvesting allows you to sell and investment that has decreased in value and buy a similar investment right away, keeping the structure of your portfolio the same. This lets you keep the tax loss without needing to sell yourself out of the asset class. An example of this would be if you were to sell VOO and purchase IVV on a bad market day, both of which expose you to the S&P 500 index.

People can’t stay on top of these fluctuations in the same way that a computer can deal with tax loss harvesting.

Robot vs Human for financial investing
Both robo and human advisors can benefit investors in their own specific way.

Robo-Advisors Are the Way Forward for Investors

Okay, so let’s finish this one on a high. Robo-advisors’ portfolios are based on current Nobel research and investment strategies created by those with PhDs in economics and finance, making them the best, most informed portfolios available.

In addition, each robo-advisor brings its own offering to the table, with providers like Wealthfront and Betterment providing high-quality investments customized to meet your individual needs and goals.

We’re not saying that a robo-advisor’s portfolio will necessarily perform any better than a financial advisor, because it shouldn’t, but truth is a lot of the time it does, because not every financial advisor is the best at their job. And even the great ones aren’t great everyday, all the time.

If you still haven’t conceded to the idea that robo-advisors are the way forward for money management then you might just have to try it for yourself. Low-fees, automated services, objective decisions, and high-quality portfolios might just be your ticket to success.

But let’s not discount financial advisors so quickly, either. If it were that easy then there wouldn’t be so much discussion on the topic. Here are the benefits of using a financial advisor.

What We Love About Financial Advisors

The crucial and significant aspect that robo-advisors simply can’t beat right now is the human element. In fact, the thought of robots one day being able to mimic humans completely is scary, and who really wants to live in that world?

Financial advisors are not simply money managers. They offer communication, education, advice, accountability, and can thoughtfully consider real life goals that might impact your investing strategy. You can build a strong relationship with financial advisors that can make you feel safer and more secure in your decisions.

With that, although robo-advisors save you a lot in fees, they won’t sit around discussing, or debating potential net moves with you, send you a get well soon text, or christmas card.

Robo-advisors have completely streamlined the sign up process, making everything quick and automated. Financial advisors will start off by chatting to you, getting to know you, your desires and goals.

A financial advisor tries to understand who you are as a person, what brought you to this stage, and where you want to go next. You can discuss your risk tolerance in detail with a financial advisor, where your boundaries begin and end, as well as creating goals that they will hold you accountable to, and developing a personal, ambitious yet achievable plan.

The advisor will then offer some advice on investments and strategies that will hopefully mesh well with your goals.

Offering customized advice, taking calls to discuss any investment worries that might pop up or pick their brain – from estate planning to tax queries – financial advisors are far more well rounded. This human element is what costs more, but sometimes it can be invaluable.

Financial-Advisor Hybrid

Sometimes referred to as a robo-advisor hybrid, this service merges robo capabilities with human ones. You’ve probably already heard about them, they are the up-and-coming way forward for investing.

The catch here that no one really discusses is that unlike financial advisors who work in traditional brokers, those hired by robo advisors are not always as qualified to offer specific investment advice or make changes to clients portfolio weights – an algorithm governs these.

On the other side, traditional advisors are increasingly offering robo advisors-as-a-service as an integral piece of portfolio creation and monitoring investments. Providers such as E*Trade and Betterment offer this hybrid service.

When Should You Use a Robo Advisor?

We discussed this briefly at the beginning of our robo-advisor vs financial advisor guide by giving some straightforward scenarios and how each one would work in those given scenarios. Here’s the guts of it.

Robo-advisors will definitely benefit you if some of these apply to your financial circumstance.

Those who really understand the impact that investment fees have on your overall returns and performance. The more that comes out of your pocket in fees, the more it will directly affect your financial performance, especially year by year and over longer periods.

Traditional financial advisers can charge from 1% up 3% based on your assets under management. Robo-advisors on the other hand charge 1% at most. Some robo-advisors charge as little as 0.15% per year. This is a dramatic shift and can have a huge impact on increasing your investment performance.

Those who do not need too much direct, human contact. There’s two kinds of people in this world. Those who need to be regularly in touch with a professional about their finances, and those who don’t. Those who do not, and prefer to let someone else keep their investments wheel in motion, then robo-advisors could be ideal.

That is, so long as you are a-okay with not having a professional to offer advice or answer questions when something more serious happens. This can be a critical point in your journey, and you might regret not having that security blanket there when you need it. Kind of like insurance; you don’t need it until you do.

If you’re not an emotional investor and trust yourself not to panic during a market crash, then look for a robo-advisor. If however, you still have some doubt, give Betterment a try. This service will give you both the automation capabilities in addition to that human touch when you need it.

Those whose budget doesn’t yet cover the minimum requirements asked for by traditional advisors. Minimum account balances can be a real pain in the a**. You generally need to have a solid $200,00 before you’re even taken seriously by a traditional advisor. Others might ask for even more, with some reaching $500,000 up to $1 million.

Of course, this lack of inclusivity is why robo-advisors were created in the first place. Robo-advisors will offer their services to portfolio that hold only $5,000.

Others will let you go ahead and open an account with a $0 minimum account balance; a feature that has really opened up the playing field for a lot more investors to begin investing and it is a huge part of the reason why they are so popular with new and younger investors.

Lastly, those comfortable letting someone else look after everything  might prefer a robo-advisor. Investing in a robo-advisor means that you are handing your investments over to a computer to allow them to conduct all of your investment activities on your behalf. If this is what you’re looking for, go ahead and sign up with a robo-advisor.

As you can see, there are many pros and cons of robo-advisors. But if you decide to go the robo-advisor route — who should you sign up with? Here are the very best robo-advisors to get the job done:

Our Top Picks For Robo-Advisors

1. Betterment

The best choice for those starting out, younger investors, and retirees.

2. Wealthfront

Go with Wealthfront if you’re starting out or at an intermediate level. They are also a good choice for goal orientated investors.

3. Personal Capital

Best for high-net-worth investors, in addition to those saving for retirement, and expense trackers.

4. M1 Finance

Best for intermediate level investors and more experienced investors. Also a great choice for IRA investors and theme investors.

When You Should Use a Financial Advisor

Although robo-advisors have taken off tremendously well and are still in their early stages of development, lots of investors would still choose a traditional financial investor to take sweet care of their money. Here are some signs to look off for to help you decide if this is you.

You are not comfortable using technology or making business transactions online.

Younger generations who grew up with technology have more of an understanding and are more comfortable using it to make transactions online. But this might not be you. If not, there’s no need to worry because that’s what financial advisors are here for.

Illustration of a human financial advisor
Some people find a one-on-one personal relationship with their financial advisor more efficient and trustworthy.

You value direct human contact. If speaking to someone one to one, and building a personal relationship is important to you then financial advisors are definitely your way forward. Not only do financial advisors play a portfolio management role, they also talk things out with you, and help keep you on track of your goals.

While robo-advisors do generally have customer support, they won’t know all the ins and outs of your goals and needs. They can only usually help with more general questions about their tools and services. This exemplifies one of the risks of robo-advisors.

You want more control over your investments. Anyone considering a robo-advisor should be aware that they are only suitable for investors who want to take a more hands off approach.

When signing up you will fill out a questionnaire which will gather information about your experience, goals and risk tolerance, and a portfolio will be designed based on this. There is no customization, or swapping stock around. And in fact, most robo-advisors don’t offer the ability to buy individual stocks.

You are not happy with how robo-advisors allocate investments. Beyond having a lack of control over your investments that we discussed above, you probably won’t be happy using a robo-advisor if you don’t agree with how it has allocated your portfolio.

Unlike financial advisors, robo-advisors are not flexible with their investments because they are fully automated. This automation — though it can be greatly beneficial — also demonstrates one of the potential risks of robo-advisors.

Your money mostly comes from an employer-sponsored retirement plan. Financial advisors are better for you in this case because employer-sponsored retirement plans are directly managed by an investment trustee.

At most, a robo-advisor will offer advice on investment allocation and you may not be able to extend this to a 401(k). If you currently hold the majority of your investment funds in a retirement place then a robo-advisor won’t really be much help.

Who Wins the Battle of Robo-Advisor vs Financial Advisor?

So, who wins the battle for high returns? Should you trust a robo-advisor due to its objectivity and up-to-date theories? As you may have discovered by now, the answer is totally and utterly dependent on a plethora of factors.

Younger and newer investors who don’t want to take out a loan to start investing, and would prefer to start slow, should take advantage of a robo-advisors low-fees.

Anyone who has grown up using technology for practically everything will not be phased by the lack of human contact, and might even feel slight relief by this.

Those with more experience, wealth, or who are not so trusting of, or familiar with technology, should go with a financial advisors personalized service, and begin building up a strong relationship with your assigned advisor.

Sure, financial advisors are more expensive, require a larger minimum account to work with, and of course, are prone to bias and human error, but nonetheless, these costs, and even downfalls could still bring more value, confidence, and peace of mind to your journey.

If you are still unsure, but want to get started, we recommend you consider a robo-hybrid – this will give you a happy medium and at the least, help you figure out where you need to go next.

All reviews, research, news and assessments of any kind on The Tokenist are compiled using a strict editorial review process by our editorial team. Neither our writers nor our editors receive direct compensation of any kind to publish information on Our company, Tokenist Media LLC, is community supported and may receive a small commission when you purchase products or services through links on our website. Click here for a full list of our partners and an in-depth explanation on how we get paid.

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