Brokers With Robo Advisors
The best brokers with robo advisors offer access to low-cost automated trading tools. These algorithmic trading solutions can be used to swing trade forex, stocks and cryptos, among others. This guide will review the top brokers with robo advisors and explain how to open an account. We also cover the benefits and risks of trading with a robo advisor.
Top Brokers With Robo Advisors for United States
Robo Advisors Explained
History
The concept of the robo advisor was developed in 2005 by fintech firm, Mint. Its semi-automated finance management system essentially reduced the reliance on in-person financial consultant meetings. In 2008, these systems were made available to retail investors and swing traders. In the years that followed, numerous branded platforms entered the market, including Betterment, Wealthfront and Future Advisor. The largest financial management system is Vanguard Personal Advisor Services, with $230 billion in assets.
It was estimated that the number of assets managed by robo advisors reached almost $1 trillion in 2020, with forecasts estimating that this figure will top $3 trillion by 2025. Today, it has become a global concept, giving traders bespoke access to platforms in major trading hubs.
How Robo Advisors Work
Robo advisors are essentially digital platforms that provide algorithm-based, automated financial services. Personal details are filtered into a system to create a bespoke investment plan. Requested information includes investment goals, risk appetite, current financial position and preferred trading styles. Investing suggestions are then generated using the latest market data and forward projections. Importantly, traders are often recommended a mixture of index funds, government bonds and emerging market assets, in varied weightings.
Of course, no robo advisor has the power to predict exactly what will happen in the financial markets, but they can provide a helpful starting point. Traders can then instruct the programme to invest capital in line with its recommendations.
Once an investment plan is established, robo advisors also continue to monitor portfolios to ensure that optimal asset weightings are maintained, balancing risk with reward. Many of the top brokers with robo advisors allow traders of all capabilities and experience to start investing.
Are Broker Advisors Safe?
Robo advisors are typically as safe as your bank or broker. They do not guarantee higher returns vs traditional trading methods. They must also adhere to many of the same rules and regulations. For example, robo advisor platforms developed in the United States must register with the U.S. Securities and Exchange Commission (SEC). Many platforms are also members of FINRA, the industry’s self-regulating organization.
We recommend looking for brokers with robo advisors that offer access to insurance schemes, as this could cover your capital in the case of business insolvency. It is also worth checking your hosting broker is regulated by a top-tier agency.
The Best Robo Advisors
There are hundreds of automated wealth management platforms available worldwide. Below we outline some of the most popular services, alongside their fees, features and minimum account funding requirements.
Vanguard Personal Advisor Services
Vanguard has been providing value to investors since 1975. It is a premium robo advisor with each client matched to a bespoke investment plan. Assets include a wide range of individual funds, including ETFs, index funds and active funds. The minimum investment amount is $50,000. Typical annual charges range between 0.05% to 3% of account balances. Fees are also waived for clients over the age of 55 or for retirement plans with over $500,000 capital.
Betterment
A digital pioneer, Betterment was one of the first publicly available robo advisor platforms. The company currently has $33 billion assets under management and over 700,000 active clients. The brand offers a selection of entry-level and premium account options which can be fully personalised based on user interests and goals. These include socially responsible portfolios, fractional shares and cash or bond options.
A significant advantage of Betterment is its low fees and no minimum account balance, making it an attractive option for beginners.
SoFi
SoFi is a low-cost automated investor. It is another good option for beginners, with tailored portfolios and no annual advisory fees. SoFi has just a $1 minimum account requirement. The platform uses around 10 ETFs to create a portfolio, with generally low expense ratios. Features include goal planning, auto rebalancing and asset diversification. Member benefits also include access to exclusive events and career services.
Credentialed specialists can be reached via live chat or telephone for an added human interaction element. It is worth noting that the service is currently only available to US residents.
Choosing Robo Advisor Brokers
Automated investor platforms generally use similar technology to create portfolios and manage assets. With that in mind, we have outlined some of the key considerations below when comparing the best brokerage accounts with robo advisors.
Minimum Investment
Most brokers have a minimum deposit requirement. Beginners may want to sign up with a provider that has a low requirement while experienced investors may be able to afford more. Note, profits can also be automatically reinvested back into portfolios.
Assets
The best brokers with robo advisors offer a range of financial assets to create tailored portfolios. These can include cryptocurrencies, real estate and proprietary ETFs. But while spreading your funds across a range of asset classes can ensure a diverse portfolio, it can also lead to higher management fees.
Platform Integration
Being able to track automated investments alongside day-to-day trading activities can prove useful. Maintaining one profile with a swing trading broker that allows seamless visibility between live investment opportunities can save time. Check the broker’s ability to link external software and supported advisors before opening a live account.
Support & Services
Access to human support can be important when investing significant amounts of capital. The best robo brokerage accounts provide in-person consultations. However, be aware that higher management charges or a one-time fee may apply. Other services to consider include tax-loss harvesting, auto-rebalancing and budgeting advice.
Regulation
We recommend registering with a robo advisor broker that is regulated by a top-tier agency. In the UK, for example, automated advisors are subject to the same regulatory regime as conventional human advice. You can check the compliance of a robo advisor brand on your local regulator’s website.
Fees
Fees are a key differentiator when comparing the top brokers with robo advisors. Look out for advisory charges plus fees for investing in individual ETFs, for example. Most brokers tend to offer a fixed but competitive annual management fee based on the value of assets invested. It is also worth checking the associated expense ratios as these can add up. Well-known brands, such as Fidelity and Vanguard, are popular cost-effective firms.
Advantages of Robo Advisors
- Balanced Portfolios – By distributing funds across various assets, you reduce your exposure to volatility risks
- Errors – Robo advisors not only make investment suggestions, but they also react to market movements. This hands-off-approach can reduce human error and counteract hasty reactions
- Access – Online robo advisors can be used 24 hours a day, 7 days a week with no downtime. As long as you have an internet connection, you can access systems and retrieve investment recommendations
- User-Friendly – Robo advisor platforms develop clear investment pathways for new and inexperienced traders. Simple quizzes and questionnaires can quickly determine a strategy. The best brokers with robo advisors also provide simple weighting tools so you can tweak suggested portfolios
- Low-Cost – Robo advisors are a low-cost alternative to traditional in-person support. Reducing the requirement for human interaction has enabled brokers and financial platforms to offer the same services at a fraction of the cost. Many brands charge a flat fee based on managed asset values (typically averaging 0.5%). This is significantly less than personal finance managers who generally charge up to 5%
Disadvantages of Robo Advisors
- Limited Advice – Stepping away from human interaction can be limiting, especially when portfolios go south
- Longer-Term Outlook – Portfolios are usually designed to create long-term growth in stable markets such as global index baskets and government bonds. They are less suitable for day traders looking for short-term wins
- Freedom – Using a robo advisor can take away some of the fun of investing. Not being involved in the selection of assets removes much of the research and decision-making that many investors enjoy
How to Use a Robo Advisor
Firstly, determine the type of financial advice and services required. Most platforms will automatically manage your portfolio, however, some also offer financial planning, career advice and budgeting guidance. Once you have found a broker that meets your needs, follow these steps to get started:
- Complete Questionnaire – Robo advisors usually begin by asking a selection of questions to determine your investment goals. These can include your financial commitments, risk appetite and reason for investing
- Review Investment Suggestions – Using your answers to the initial questions, the platform will curate a trading plan. It may think you are a cautious investor or an aggressive trader willing to risk more capital for higher returns
- Confirm Trading Plan – Once you are happy with the plan, it’s time to invest money. Some advisors will have minimum investment requirements. Remember, no trading plan guarantees a return so only invest what you can afford to lose
- Monitor – The robo advisor will manage your portfolio on an ongoing basis. However, customers can request regular reporting to track portfolio performance and to make tweaks and withdrawals
Bottom Line
A brokerage account with a robo advisor can be a great option if you’re looking for a hands-off approach to investing. Platforms provide tailored portfolios to meet medium to long-term financial goals. Choosing between the top brokers with robo advisors can feel complicated, however, brands with a transparent fee structure, robust licensing and low minimum account requirements are a good place to start.
FAQ
Are Robo Advisors Suitable For Beginners?
Brokers with robo advisors are a popular solution for new investors. Automated platforms can simplify the complex trading environment and provide tailored suggestions based on personal preferences and goals.
Are Robo Advisors Safe?
Robo advisors are typically as safe as your online broker. Look out for brands that are regulated by top-tier agencies such as the UK Financial Conduct Authority (FCA) or the US Securities and Exchange Commission (SEC). Remember your capital is still at risk – automated advisors do not guarantee returns.
How Can I Compare The Best Brokers With Robo Advisors?
There are many factors to consider when choosing between the top robo brokerage accounts. These include annual advisory fees, regulatory status, human interaction, minimum investment amounts and access to assets.
Do Brokers With Robo Advisors Have A Minimum Deposit Requirement?
Yes, traders using a robo advisor will likely have to comply with a minimum balance requirement. This varies by broker and provider. Remember, no automated strategy can guarantee profits so only invest what you can afford to lose.