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

The robo-advisor then uses this information to decide how to allocate your wealth — for example, whether you should hold riskier assets or mostly conservative assets. As market conditions change or you invest more money, the robo-advisor will automatically adjust your portfolio to meet your goals. This process is called rebalancing.

A financial advisor, on the other hand, is a person who assists clients with specific, immediate financial matters – like your investments or your estate planning. You can work with a financial advisor just a few times or decide to have a lasting relationship with them. Generally, you would meet with your financial adviser at their office, but if they are not there, you would have phone calls or virtual meetings with them instead.

In general, both robo advisors and financial advisors charge a percentage of total assets under management. However, the two differ in what percentage they each charge. Robo-advisors typically charge between 0.25% and 0.5% of your assets under management per year, while financial advisors typically charge around 1% of your assets under management per year.

There are many financial advisors who charge a flat annual fee or even an hourly rate. Also keep in mind that both robo advisors and financial advisors sometimes require clients to have a certain minimum amount of total assets before they can work together. The minimum amount varies, but for some financial advisors, that minimum could be as high as $250,000. Ellevest, an investment platform for women, has portfolio-specific minimum balances that range from $1 to $240. Wealthfront’s minimum balance requirement, on the other hand, is $500.

It’s really about balancing your financial needs with the fee structure that best suits your circumstances.

This is where robo advisors can really shine. They have the ability to automatically rebalance your portfolio for you, so you don’t have to manually change asset allocations — or spend time going back and forth with someone to figure out the best way to do it.

At the same time, however, it’s important to remember that a robo-advisor may have a limited view of your financial standing as they don’t know how your other assets, debt, or other investments come into play. Also, a robo advisor may not help you strategize to invest more money to reach your goals faster.

While some robo-advisor platforms allow you to connect all of your financial accounts, personalized advice that addresses the nuances of your situation may still be necessary to help you achieve your goals.

Select ranked the best robo-advisors based on factors such as account minimums, fees, choice of investments, and types of accounts offered (ie, IRAs and/or taxable brokerage fees). Here are some of our top picks:

That’s why it’s valuable to have someone to help you work out possible next steps. Of course, financial advisors also take into account factors such as your time horizon and risk tolerance when making investment recommendations.

Because financial advisors cannot automatically rebalance your portfolio like a robo-advisor can, you must spend the time discussing any adjustments with your advisor so that they can manually make changes to your portfolio. That’s not too bad though, as it gives you a chance to try and understand some of the changes that were made.

Robo-advisors offer the convenience of an automated 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. In any case, check the fee structure before agreeing to the services.