Robo-advisors are a double-edged mechanical sword. They’ve opened the world of finance to millions of people who would otherwise be locked out of it.
On the other hand, they’ve made it easier than ever to get bad investment advice. But however you look at them, robo advisors are here to stay.
Robos remain a powerful choice for first-time investors with reasonable goals and smallish amounts of cash to invest. The problem is most users don’t know which are trustworthy and which aren’t…
In this guide, let’s review the top robo-advisors around.
Table of Contents:
Our Top Pick of Robo Advisors (UK) 🇬🇧
Considering a robo advisor? Learning how to crunch your Trading Data is important when choosing a War of the Worlds strategy. These tools are supplements but probably shouldn’t be your main diet.
But a few key characteristics of robo advisors:
- Time: There are many benefits to robo advisors, but a few drawbacks too. For those short on time, robo advisors can help to get financially straight.
- 🌱 Cheap diversification: They also make it easy to diversify your investments and are a powerful option for beginners. However, they do not replace the expertise or advice of a human financial advisor.
- Guide-points: Robo advisors can only offer general guidance. That means they’re not going to help you with highly customised situations like home buying or going through a divorce.
1. Interactive Advisors Review – Overall Best Robo-Advisors System
How does Interactive Advisors work? Each user receives an avatar that represents their future self, with the benefits of hindsight and insight from today’s advisors. Interactive Advisors works by creating a digital avatar of your future self. This avatar will answer questions that you ask it. You can ask anything related to your finances and assets, at a low fee.
As the future doesn’t exist, and obsession with it leads to anxiety (just read BBC articles on the UK recession) this app automates ways to do things like preparing for retirement. Or, you can ask the app what steps should be taken to save up for your child’s education. IAR will allow you to have a conversation with your future self, without actually doing so, so you can get the information you need for your financial situation right now.
Or suppose you are saving up for your child’s education. You may be wondering how much you should be saving each month to have enough money saved up by the time they need it. You can ask your future self how much you should be saving each month to have enough saved up by the time your child is ready to go to college.
Your future self can then tell you how much you should be saving each month to have enough saved up by the time your child is ready to go to college.
Overall, if you want to get advice on your finances, or you want to know how much you should be saving for certain goals, IAR can help you answer these questions and more! Note that IAR is not a financial advisor. It is a piece of software that can give you machine-powered advice. The advice will not be perfect, but can help you make better financial decisions
2. Betterment Review – Best Robo-Advisor for Mobile 📟
Passive digital investment management is an appealing idea. It’s simple, cost-effective and undemanding.
You won’t have to spend your evenings reading through endless market reports or analysing the performance of your portfolio; instead, you can just sit back and let an algorithm do all the work for you.
Betterment is one of the most well-known robo-advisors. It’s an excellent choice if you want a digital investment service that provides all the benefits of professional advice without the high cost. Betterment does have a few drawbacks. It lacks some of the customization options offered by other robo-advisors and lacks human investment advice. However, its low fees, high level of diversification, and ease of use make it an excellent choice for most investors.
Betterment is overall a leading digital investment management service. It’s designed to provide people with a passive investment portfolio, consisting of low-cost, diversified ETFs (a popular mutual fund investment type), that can be easily monitored online. ETFs are funds that track the performance of a specific market segment - such as stocks or bonds.
It is possible to track the performance of almost any asset class with ETFs, so it’s easy to build a diversified portfolio. Betterment’s investment advice is completely digital and automated. You don’t actually speak to anyone from Betterment - everything is done through its website. You just enter your details, and it creates an investment portfolio designed to meet your risk profile and investment goals.
You’ll need to pay a fee. But it’s important to realise that this fee is not a percentage of your overall portfolio value. This means that whether your portfolio is worth £100,000 or £1,000,000, the fees will be the same. What’s more, Betterment automatically adjusts its fees based on your account balance.
3. M1 Finance Review – Best Robo-Advisors App for Millennials
Millennials are known for being cost-conscious, especially when it comes to investing. But not risk-averse. Now, more than ever before, there are a huge number of investment apps geared specifically toward millennials.
We’ve seen the rise of robo advisors that take a passive investing approach, as well as apps like Acorns and Stash that allow users to invest small amounts of money on a regular schedule with small minimums.
However, few of these services have gained the same popularity or trust as leading financial solutions like Robinhood (review) and Betterment. To help you sort through the dizzying array of investment apps available and determine which one is best suited to your needs, we’ve put together this handy guide on M1 Finance review.
What is M1 Finance? M1 Finance is a financial technology company that offers a “hands-off” investment approach through a fully automated online investment platform. This means you don’t have to actively manage your account or make any specific investment decisions. Instead, you choose your investment portfolio based on your goals, risk tolerance, and time horizon and M1 Finance will create a portfolio of exchange traded funds (ETFs) that matches your selected investment strategy.
How M1 Finance works: it allows you to create a diversified investment portfolio with as little as £5. To begin, you’ll first select your investment objective, which includes your desired risk tolerance, expected time horizon, and goals. Based on your investment selection, M1 Finance will recommend a diversified investment portfolio of ETFs.
Next, you’ll be able to select your trading frequency, whether that’s daily, weekly, or monthly. You’ll also be required to set up two-factor authentication and fund your account with at least £5. Once your account is funded, M1 Finance will create a diversified investment portfolio based on your risk tolerance and investment objective.
Overall, its automated investment approach, M1 Finance also offers users a fully transparent fee structure, including no management or maintenance fees. Users can invest with as little as £5 without needing to have a minimum account balance.
4. e*TRADE Core Portfolios Review – Best Robo-Advisors App for Less Risk
There are so many different ways to invest, which can make it difficult to know where the best place for your money is. Even if you’re already working with a financial advisor who can help you manage your assets, investing can still be overwhelming.
But what if there was a simple way to invest that didn’t involve spending hours reading through pages of fine print and enrolling in numerous different programs?
One of the best things about investing in a core portfolio is that it helps you to diversify your investments across different asset types. This arguably helps to reduce your risk in case one of your investments goes belly-up. With ETFs becoming more and more popular among investors, there is an increasing number of companies who want to offer their customers the opportunity to invest in them as part of their core investment portfolio.
Rester Corp, the company behind the e*TRADE Core Portfolios program has made this possible by creating a single platform that allows users to access up to 20 different companies simultaneously as part of an all-inclusive package deal. Their portfolios are made up of several different ETFs designed to help investors achieve balance and diversification across different types of assets. These include stocks, bonds, commodities, and foreign currencies. By investing in different types of ETFs, you can spread your money across different sectors and minimise risk while maximising your return.
These portfolios are supposedly among the best robo-advisors on the market, as they offer investors a way to diversify their investments with a single click. Purchase a single portfolio that contains ETFs from different sectors, like stocks, bonds, energy, and real estate, spreading your money across different types of investments.
When you sign up for e*TRADE Core Portfolios, the program will assess your risk tolerance and suggest one of their eight pre-built portfolios. You can then choose which one you want to invest in, or you can customise your own portfolio to meet your unique investment needs.
5. Wealthfront Review – Ideal Robo-Advisors Service for Wealth
If you understand that investing in financial markets is always a risk, which you are fine with, then this tool can be useful. Like using supplements however, it probably shouldn’t be your main diet.
It’s the first robo advisor with certified financial advisors on staff, Wealthfront takes its service a step further than competitors like Betterment or Acorns. Wealthfront is the first robo advisor to partner with a certified financial advisor. The partnership with the certified financial advisors allows clients to get a more thorough financial plan, including a retirement plan and tax advice. This certified financial advisor is also available to clients who invest more than £75,000.
Clients who are investing less than this can still take advantage of the Wealthfront certified financial advisors. You’ll begin your experience with Wealthfront by taking a short online risk questionnaire that asks about your current financial situation, risk tolerance, and investment time horizon. A certified financial advisor reviews your answers and uses this information to build an investment portfolio and financial plan that will help you meet your long-term financial goals.
Wealthfront’s investment strategy is rooted in Modern Portfolio Theory (MPT). MPT is an investment strategy that aims to optimise risk and return through diversification. Wealthfront uses MPT to build a diversified investment portfolio based on your current financial situation and risk tolerance. Once a certified financial advisor has built your investment portfolio, you can log into the Wealthfront dashboard to view your portfolio and make changes if necessary.
Wealthfront charges a 0.25% annual fee for all accounts. This annual fee is relatively competitive, but keep in mind that Wealthfront charges a £5/month minimum account balance fee if you have less than £7,500 in your account. But you’ll also get access to financial advice and a diversified investment portfolio that is tailored to your current financial situation and risk tolerance. You can also create a retirement savings plan and get help with taxes. Plus, Wealthfront offers the first £3,500 managed free.
Best Robo Advisors – Buying Guide 🦾
The main attraction of robo advisors is that they promise to ‘automate’ the investment process. This is especially useful for people with relatively small amounts of saved capital who can’t afford to hire a high-priced human advisor.
How Robo Advisors Work
Recent years have seen the emergence of a new breed of online investment management services known as ‘robo-advisors’.
These websites offer automated financial advice and management services with minimal human involvement, usually at a reduced cost compared to traditional advisors.
While passive trading via mobile phones is not recommended, passive trading is another kettle of fish and is closer to something like eToro’s copy trading.
It works something like this:
⚙️ When you sign up for an online investment account, you’ll be asked a series of questions about your financial situation, goals, and risk tolerance.
⚙️ Based on your answers, the robo advisor will recommend a portfolio of stocks, bonds, ETFs, and other assets that presumably meets your needs.
You’ll then be given instructions on how to make the investment. The whole process is designed to take only a few minutes of your time. And the hope is that it’ll be much cheaper than hiring a human advisor.
Things to Consider When Choosing a Robo Advisor
There are a number of factors to consider when choosing a robo advisor - and the right choice is different for everyone.
Investment strategy is the most important factor by a wide margin. Going with the most top-rated robo-advisor in 2023 is useless if the investing strategy isn’t right for you.
The top firms all use similar strategies - but they differ slightly in execution. There are two main types of investment strategy:
- ☑️ Passive. This type of investment strategy tries to mimic the performance of one or more big stock indices such as the Dow Jones or S&P 500.
- ☑️ Active. This investment strategy is more customised and relies on the skill of the investment manager to outperform the market.
Today’s best robo advisors are those with the highest customer satisfaction and the strongest track record of consistent returns in both bull and bear markets. They are also stable and trustworthy, with clear investment strategies and plans.
A top-performing robo advisor will have low and transparent fees. The vast majority charge a fixed percentage of assets under management. There are a few that charge a fixed fee per month - but these are less common and generally a worse deal for investors.
Many robo advisors also offer a free trial period. During this period, you can see how the service works in practice and decide if it’s a good fit for you.
The best robo advisors offer low investment minimums. These typically range from around £400 to £4,000. Note, however, that this is the minimum investment needed to open an account and start receiving advice. You’ll need to invest significantly more to actually see any real returns.
Investment flexibility refers to the variety of options that are available to you. Most robo advisors offer dozens of different investment options. Some, however, offer next to nothing. In these cases, the robo advisor might be a good fit if you’re an extremely conservative investor. But it probably isn’t a good fit for someone who wants some level of diversification.
The best robo advisors have transparent investment strategies. You should be able to login and see exactly what you’re investing in. You should also be able to change your investment allocations online at any time.
Investment stability refers to the stability of the robo advisor’s parent company. This is important because if the company folds, you may lose all or part of your money. You can gauge the stability of a company by checking its financial health and reputation.
Services and extras
The best robo advisors in 2023 offer a wide range of free and paid services and extras. You should, at the very least, be able to get financial advice, investment guidance, and portfolio rebalancing free of charge. Many firms also offer free financial planning, free asset allocation, and free tax-loss harvesting. Some firms also offer premium services such as access to a private investing club and special investment insights from expert investors.
The most popular robo advisors have helpful and friendly customer service. You can tell this by reading reviews and checking out online forums such as Reddit. You should expect to wait a few hours to talk to someone - but this is normal for all firms, not just robo advisors.
Trustworthiness and financial health
Only the best robo advisors in 2023 could be called trustworthy and financially healthy. This can’t be stated strongly enough. You don’t want to be caught up in another Madoff scandal or some other type of financial fraud.
The easiest way to check this is to go to the Securities and Exchange Commission’s website and look for any complaints against the robo advisor in question. The SEC has been tracking complaints and grievances since the late 2000s and publishing them online.
Today, the SEC has a much more robust online database that includes information about financial advisors and robo advisors. So if you can’t find a complaint against the firm you’re considering, you may simply be able to go online and type in the name.
The best robo advisors have a good reputation among investors. This is something that’s impossible to quantify in any meaningful way. It’s also something that can change over time - as the best firms of today are not necessarily the best firms of tomorrow.
Are Robo-Advisors a Good Idea?
Robo-advisors are a powerful choice for beginners because of their low prices, minimum investment amount and easy to use interface. If you have £20,000 or less to invest in stocks, robo-advisors may be a viable way for you to start.
What Robo Advisors Have the Best Returns?
According to NerdWallet’s 2.5-year annualised return figures:
- TIAA (4.20%)
- SoFi (4.03%)
- TD Ameritrade (3.62%)
- Vanguard (3.42%)