Robo Advisors vs. Financial Advisors | Ventured (2024)

As technology progresses, so too does the way we organize our lives. In recent years, this has included the way we organize our money, with the emergence of “robo advisors” as an alternative to the traditional financial advisor.

In this article, we’re giving you a full breakdown of this emerging service. We’ll explain the basics of robo advisors and examine whether they’re right for you. Then, we’ll give you a list of the best robo advisors on offer.

What is a Robo Advisor? What is a Financial Advisor?

Robo advisors were created as an alternative to the traditional investment advisor, who helps you manage your money in exchange for a fee. A traditional advisor offers a range of services depending on what you want to receive from the experience.

Depending on your level of involvement, they can be completely hands on or simply operate in an advisory capacity. Financial advisors can be coaches, planners, or communicators, or they can take full-on control of your portfolio.

Financial advisors certainly serve a useful purpose to many investors, but their main downside has always been the expense (more on this below). In response to this, robo advisors started to gain traction in the early 2010s.

Robo advisors are online services that rely on complex computer algorithms to manage a portfolio of assets. As the name implies, it is an automated service. Robo advisors generally start with the customer setting their parameters (i.e. how much risk they want to accept, investment goals, etc.), and the robo advisor creates and manages their investment portfolio from there.

Of course, with the human element essentially eliminated, robo advisors tend to be a far cheaper option than a personalized financial advisor. This being said, robo advisor services do differ from service to service, which is why we’ll be examining some of our favorites below.

As you can see, both financial advisors and robo advisors serve a common goal, with some major differences in how they achieve that goal. The personal touch of a financial advisor is sacrificed in favor of an automated, more affordable robo advisor.

Robo Advisors vs. Financial Advisors

Robo advisors and personalized financial advisors offer advantages and drawbacks which may be more or less relevant to your personal investing strategy. Let’s break down the pros and cons of each option, and then pit them head-to-head.

Robo Advisors Pros & Cons


Low Cost – As mentioned, robo advisors generally tout cost as a main advantage of their platform. And it’s true – on average, you’ll save a lot of money with robo advisors. This being said, different financial advisors and robo advisors operate on different cost structures.

In general, robo advisors are about ¼ to ½ as expensive as a traditional financial advisor. On average, robo advisors charge fees that amount to roughly 0.25% to 0.5% of the money managed in the asset portfolio per year, while traditional advisors tend to hover around 1% of assets managed (but they can go much higher).

Traditional financial advisors might offer lower rates for bigger portfolios, but they could also have a minimum balance for accepting new clients in the first place, which can sometimes be worth hundreds of thousands of dollars.

Additionally, robo advisors often offer discounts for new clients, including free sign-ups and rate discounts for the first year. Robo advisors might also offer tiered plans, where you pay more or less depending on whether you want access to personalized financial advice on top of your online portfolio.

Basically, both robo advisors and financial advisors operate based on different fee and percentage structures, but robo advisors are almost always significantly less expensive than traditional financial advisors.

Easy to Open Account – Opening an account with a robo advisor is usually much simpler than with a financial advisor. The process is done all online, with much less paperwork to sign and detail. This is made even easier with the use of digital signatures. It’s not quite as big a consideration as the one above, but it’s definitely worth considering.

Proven Strategies – All of this would be for naught if robo advisors weren’t efficient and effective methods of managing your money. Luckily, they are. Robo advisors rely on complex algorithms and proven strategies to manage and grow portfolios of all kinds, and according to all types of risk aversion.

Robo advisors are capable of automating several proven investing strategies. One example is Modern Portfolio Theory (MPT), which is when a portfolio is balanced by asset class in response to an ideal risk tolerance. Robo advisors are capable of automatically balancing a portfolio based on MPT ideals.

What’s more is that they can do all this instantaneously, balancing your portfolio in real time by responding as the markets move. This is another advantage that over traditional investing, where human portfolio managers may take much longer to react.

Robo advisors also have tools for balancing a portfolio to minimize tax, using capital losses to offset capital gains.

Of course, robo advisors are much deeper and more complex than what we detailed here. The complex algorithms that drive their decision-making are extremely sophisticated, and their proven track record is why so many have put their faith in robo advisors.

Set it and forget it – For many, the biggest advantage of robo advisors is that it’s an ease off their mind. Traditional financial advisors tend to be a very hands-on process, in which you and your advisor work together to provide ongoing maintenance to your portfolio in response to your financial goals. Robo advisors use their algorithms to do this work for you.

So, if you’re more interested in a hands-off financial approach, while still making responsible choices with your money, then robo advisors may be exactly what you’re looking for.


Geared to Investment Management vs. Comprehensive Financial Planning – In direct contrast to the point made above, robo advisors may not be your choice if you are looking for a hands-on portfolio. By design, robo advisors are automated, to facilitate a hands-off approach in response to your personal risk tolerance. Therefore, you shouldn’t expect the same level of personalized advice and consultation that you’d receive with a financial advisor.

This also means that robo advisors may be less suited to your personal financial planning goals. Financial advisors can tailor a plan to suit your specific needs and requirements. For example, financial advisors can help if you’re planning to buy a house, a car, save for retirement, etc. For all these reasons, it’s better to think of a robo advisor as an investment management platform rather than a financial planning platform.

Less Control – Following our above point, robo advisors also come with significantly less control than financial advisors. Financial advisors generally allow you to be as hands on or hands off as you want, while the same option is not true of robo advisors. If you’re looking for portfolio guidance, while maintaining a great deal of personal decision-making, then financial advisors are likely not for you.

No Human Contact – Robo advisors lack the benefit of personalized human contact. If you want someone you can call whenever you have an investing question, direction, or simply to talk about the state of your portfolio, you’ll be better off with a financial advisor. That being said, some robo advisors do have support lines you can call, but the people you talk to won’t have deep knowledge about your specific portfolio, and often these services come with an extra fee.

Financial Advisors Pros & Cons

Robo Advisors vs. Financial Advisors | Ventured (1)


Personalized Approach – This is perhaps the top benefit of a financial advisor over a robo advisor. A financial advisor provides a service which is highly personalized and customized to your needs. Financial advisors work with you to develop a plan that works in congruence with your financial goals and your personal level of risk aversion.

Financial Education – Financial advisors also provide educational services on top of advisory services. If you’re a newcomer to investing, a financial investor can help you understand and navigate this complicated world. As you learn, you can take a more hands-on approach to investing in response to your comfort level.


Cost – Financial advisors are quite a bit more expensive than robo-advisors, sometimes well over double the price! For more information, we provided a full breakdown of robo advisor vs. financial advisor costs in the section above.

Prone to Human Error – As noted above, robo advisors are able to instantaneously respond to shifts in the market or shifts in your portfolio, using complex algorithms and strategies. Financial advisors are not quite as adept and not nearly as instantaneous. And while many financial advisors do rely on computer programming themselves, there is still a layer of human involvement that may be prone to error.

The Bottom Line – Robo-Advisors vs. Financial Advisors

When it really comes down to it, whether you’d prefer a robo advisor or a financial advisor is going to depend on your individual preferences.

Robo advisors offer clear cost advantages, but don’t count them out in terms of performance advantages. Robo advisors are built using complex algorithms which are based on time-tested strategies.

These advisors are able to respond and adapt instantaneously to changes in the market and your portfolio, giving you real-time updates and the ability to adjust your risk tolerance as you please. Robo advisors hold the clear advantage as far as these factors are concerned.

And while many robo advisors do feature customer support lines, it’s tough to deny that traditional financial advisors have them beat as far as the “human” element is concerned. Traditional advisors are ideal if you’re looking for a more personalized approach to portfolio management, helping you meet your specific goals. They’re also ideal if you’d prefer a more “hands-on” approach to your portfolio management.

Use our guide above and compare these factors to your individual preferences. We’re confident you can make the decision that works for you.

Best Robo Advisors

Before we wrap up our comprehensive guide, we’ll take a look at the best robo advisors. These are consistently among the top rated robo advisors, and we’re confident you can find what you’re looking for among this list:


Robo Advisors vs. Financial Advisors | Ventured (2)

WealthFront is one of the most popular automated investment services out there. Based on a simple user survey, WealthFront evaluates your risk tolerance, and creates you a personalized portfolio of diverse, low-cost index funds which are designed to be resilient and to grow your money.

The automation platform also includes tax-loss harvesting capability to reduce the taxes you pay on your portfolio, helping to cover the 0.25% advisory fee (which is quite low to begin with).

It also packs more than just investing into its user-friendly platform, including banking, financial planning, and borrowing.

Our Rating – 4.75/5 Stars


Robo Advisors vs. Financial Advisors | Ventured (3)Betterment is another top player in the robo-advisor industry. You can set up an account in minutes with a simple survey about how much you want to invest, why you’re investing, and your financial timeline.

From there, Betterment custom-builds your portfolio with low-cost, diversified ETFs, automatically adjusting your portfolio as better options come available. You can also automate direct depositing into the account on your schedule, and Betterment can use dividends to rebalance your portfolio as you go.

Betterment’s charges a 0.25% fee for basic users and a 0.4% fee for Betterment Premium users.

Our Rating – 4.5/5 Stars

M1 Finance

Robo Advisors vs. Financial Advisors | Ventured (4)Not quite a traditional robo advisor, M1 Finance offers a comprehensive, intuitive platform for investors of all sorts. One of the main pillars of the platform is “M1 Invest,” which offers some automated investment services.

M1 Invest also allows you to build a custom portfolio, taking on as much risk as you feel comfortable and includes over 80 expert-designed portfolios to follow. Automation tools include investing schedules, dynamic rebalancing, and the opportunity to set your level of risk tolerance.

M1 offers the best of both worlds, with as much customization or as much automation as you want. Best of all, there is no fee for using M1 Invest!

Our Rating – 4.5/5 Stars

Vanguard Digital Advisor

Robo Advisors vs. Financial Advisors | Ventured (5)Vanguard offers a comprehensive automated investing platform. Not to be confused with Vanguard’s personal advisor services, which offer personalized, human planning of your portfolio. To use Vanguard’s digital advisor, all you need to do is answer a short survey about yourself, and Vanguard will build a broadly diversified portfolio based on your risk tolerance.

Our favorite feature is Vanguard’s highly useable user interface, which lets you clearly monitor your portfolio’s performance and break it down based on your progress toward certain goals (such as retirement).

Vanguard has low net advisory fees of 0.15% on average, but it might change depending on your specific plan. Also, note that Vanguard digital advisor requires a minimum $3,000 balance to enroll.

Our Rating – 4/5 Stars

SoFi Invest

Robo Advisors vs. Financial Advisors | Ventured (6)The popular SoFi has entered the robo advisory space with SoFi Invest. SoFi Invest is a comprehensive platform that offers everything from complete hands-on investing to automatic investing (or something in between). The automated investing platform allows you to tell SoFi your goals, and they’ll make a plan to tackle said goals. The platform features auto-rebalancing and is always geared toward diversification.

SoFi also features no incremental fees for using its investing platform, although there are fees if you want to join SoFi’s Member program. The Member program includes a host of additional benefits, including access to one of SoFi’s human financial advisor to help plan your portfolio.

Our Rating – 4.5/5 Stars


Thanks for reading our comprehensive guide to robo advisors and traditional financial advisors. Hopefully, we’ve helped you understand the benefits of each service offering and why more and more people are turning to automation for their portfolio management. The future is now, and we think you’ll find something you like about any of the robo advisors featured above!

As a seasoned financial expert with a deep understanding of investment strategies and portfolio management, I'm well-versed in the evolving landscape of financial services, including the rise of robo advisors. My expertise spans traditional financial advising as well as cutting-edge automated investment platforms.

The emergence of robo advisors represents a significant shift in how individuals manage their finances, offering a cost-effective and efficient alternative to traditional financial advisors. These platforms leverage sophisticated algorithms to construct and manage investment portfolios tailored to users' risk tolerance and financial goals.

Let's delve into the concepts presented in the article:

  1. Robo Advisors vs. Financial Advisors:

    • Robo advisors: Automated investment platforms that use algorithms to manage portfolios.
    • Financial advisors: Professionals who provide personalized financial advice and management services.
  2. Robo Advisors Pros & Cons:

    • Pros:
      • Cost-effectiveness: Robo advisors typically charge lower fees compared to traditional financial advisors.
      • Ease of account opening: Setting up an account with a robo advisor is usually simpler and less paperwork-intensive.
      • Proven strategies: Robo advisors employ sophisticated algorithms based on proven investment strategies such as Modern Portfolio Theory.
      • Set it and forget it: Robo advisors offer hands-off portfolio management, ideal for those who prefer a passive approach.
    • Cons:
      • Geared towards investment management: Robo advisors may not provide comprehensive financial planning services.
      • Less control: Users have limited control compared to managing their portfolios directly or with a financial advisor.
      • No human contact: Lack of personalized human interaction, though some robo advisors offer limited customer support.
  3. Financial Advisors Pros & Cons:

    • Pros:
      • Personalized approach: Financial advisors offer tailored financial planning and advisory services.
      • Financial education: Advisors provide guidance and education, particularly beneficial for novice investors.
    • Cons:
      • Cost: Financial advisors tend to charge higher fees compared to robo advisors.
      • Prone to human error: Human involvement in decision-making may introduce errors or delays compared to automated systems.
  4. Best Robo Advisors:

    • WealthFront, Betterment, M1 Finance, Vanguard Digital Advisor, and SoFi Invest are among the top-rated robo advisors highlighted in the article. Each offers unique features and fee structures to cater to different investor preferences and needs.

In conclusion, the choice between robo advisors and traditional financial advisors depends on individual preferences, financial goals, and the level of personalized service desired. While robo advisors offer cost-effective automation and proven investment strategies, traditional advisors provide tailored guidance and human interaction. Understanding the pros and cons of each option is crucial in making an informed decision about managing one's finances effectively.

Robo Advisors vs. Financial Advisors | Ventured (2024)


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