Robo-advisors: Efficient, affordable, and beginner-friendly
Robo-advisors are automated digital platforms that build and manage investment portfolios based on your preferences and risk tolerance. According to Investor.gov, they offer a low-cost solution for investors who are in the early stages of building wealth. In 2024, the median fee for robo-advisors was just 0.25% of assets under management — significantly lower than the 1% typically charged by human financial advisors, as reported by Morningstar.
These platforms are ideal during the “accumulation phase” — when life is still financially simple, and you’re focused on saving and growing assets. They also have low entry barriers: one in four robo-advisors reviewed by Morningstar require only $50 or less to open a basic account. Nearly all others have a minimum of $5,000 or below, making them accessible to most retail investors.
When human advice becomes essential
However, as life becomes more complex, you may outgrow a robo-advisor. Dennis Morton, CFP and founder of Morton Brown Family Wealth, describes this moment as hitting a “ceiling of complexity.” At that point, a human advisor becomes valuable — not just for managing investments, but also for offering estate planning, insurance analysis, and advanced tax strategies.
Zach Teutsch, CFP and founder of Values Added Financial, warns that robo-advisors often don’t address these deeper financial needs. When facing major life changes, such as retirement planning, inheritance issues, or starting a business, a personal advisor can craft tailored strategies that automated tools cannot.
Cost vs. value: Making the right choice
It’s important to consider the scope of your needs. If your main goal is simple investment management, a robo-advisor offers efficient, low-cost service. But if you’re dealing with more nuanced financial challenges, the additional cost of a human advisor may be well worth it.
For instance, if you’ve already built your emergency fund and have $10,000 to invest, using a robo-advisor can be an ideal way to learn about investing and compounding returns. As Melissa Caro, CFP and founder of My Retirement Network, notes, “You don’t need to, nor should you, pay a percentage fee on that amount for full-service advice.”
Hybrid models and informed decisions
Some investors choose a hybrid model — using robo-advisors for investment management while consulting human advisors for occasional planning. This blended approach can offer cost-efficiency while still providing personalized guidance when needed.
Whatever your choice, experts stress the importance of researching providers. Compare what services are included and what fees apply, because as Morton explains, “There’s a lack of uniformity in what you can get.”
