Robo-advisor VS. Financial Advisor: Which Should You Choose?

The robo-advisor then uses this information to help decide how your assets should be allocated — like, should you hold more riskier assets or mostly conservative assets. As market conditions change, or as you invest more money, the robo-advisor will automatically adjust your portfolio to align with reaching your goals. This process is called rebalancing.

A financial advisor, on the other hand, is an individual who assists clients with specific, immediate financial matters — like your investments or estate planning. You can work with a financial advisor just a few times or you can choose to have an ongoing relationship with them. Generally, you’d have meetings with your financial advisor in their office but if they aren’t local, you’d have phone calls or virtual meetings with them instead.

Generally, both robo-advisors and financial advisors charge a percentage of the total assets being managed. However, the two differ in how big of a percentage they each charge. Robo-advisors usually charge anywhere from 0.25% to 0.5% of your assets managed per year, while financial advisors typically charge around 1% of your assets managed per year.

There are many financial advisors that charge a flat yearly fee or even an hourly fee. Also keep in mind that at times, both robo-advisors and financial advisors may require that clients have a specified minimum amount of total assets before they can work together. The minimum will vary but for some financial advisors, that minimum amount could be as much as $250,000. Ellevest, which is an investment platform for women, has portfolio-specific balance minimums that range from $1 to $240. Wealthfront’s minimum balance requirement, by contrast, is $500.

Really, it’s a matter of matching your financial needs with the fee structure that’s most compatible with your circumstances.

This is where robo-advisors can truly shine. They have the ability to automatically rebalance your portfolio for you so you don’t have to manually change any asset allocations — or spend time going back and forth with someone to figure out the best course of action for that.

At the same time, though, it’s important to keep in mind that a robo-advisor may have a limited view of your financial picture since it won’t know how any of your other assets, debts, or other investments come into play. A robo-advisor also may not help you develop a strategy for investing more money to reach your goals faster.

While some robo-advisor platforms may let you connect all of your financial accounts, personalized advice that takes into account the nuances of your situation may still be necessary to help you reach your goals.

Select ranked the best robo-advisors, considering factors like account minimums, fees, choice of investments and types of accounts offered (i.e. IRAs and/or taxable brokerage). Here are a few of our top choices:

Because of this, it’s valuable to have a human assist you with working out feasible next steps. Financial advisors will also, of course, take into account factors like your time horizon and risk tolerance when making investment recommendations.

Since financial advisors cannot automatically rebalance your portfolio the way a robo-advisor can, you’ll need to spend the time discussing any adjustments with your advisor so they can manually make changes to your portfolio. That’s not all that bad, though, since it gives you an opportunity to try to understand some of the changes being made.

Robo-advisors offer the convenience of a hands-off investment management strategy at a lower cost. However, if you prefer more human interaction and need recommendations based on a more nuanced view of your overall financial picture, a financial advisor could be the way to go. Either way, make sure you double check the fee structure before you agree to the services.