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A robo-advisor is an automated online application that uses complex computer algorithms to offer financial advice with minimal human intervention. This automated financial advice is focused on portfolio and wealth management.Introduction to Robo-Advisors

What is a Robo-Advisor?

A robo-advisor is an automated online application that uses complex computer algorithms to offer financial advice with minimal human intervention. This automated financial advice is focused on portfolio and wealth management.

Robo-Advisors combine ETFs and Government Bonds to suggest low-risk portfolios. Unfortunately, at the moment, most Robo Advisor services are applicable only to US investors. Nevertheless, at the end of this article, you can find Robo-Advisors for the UK, and other European investors.

 

What Robo-Advisors Offer?

Robo-advisors offer financial advice by applying modern economic theories, and of course, several diversification techniques. The whole process creates an automated investment service which is able to provide:

  • Portfolio Management (i.e. by combining ETFs and Bonds)

  • Multi-Level Portfolio Diversification

  • Wealth Management (reinvesting dividends, controlling tax, tax harvesting, etc.)

  • Improving Investment Decision-making (making decisions easier, and speeding up processes)

  • Making Online Platforms easier and more efficient for users

  • Enhancing the general investor satisfaction throughout the levels of the advisory process

 

Robo-Advisors and Specifications

These are some key parameters when choosing a robo-advisor service:

  • Applicable Investors (most services are available only for US investors)

  • Account Types (Some robo-advisors are designed specifically for wealth management, others not)

  • Minimum Deposit (usually between $2,000 and $5,000)

  • Investment Selection (Offering wide selection of ETFs, Bonds, etc)

  • Cost of using the Automated Investing Service (The fee is usually between 10 and 50 basis points of the managed assets)

  • Funds Custody (Allowing, or not, to maintain your funds in your own brokerage or require transferring funds to their custodian)

  • Tools Available (Tax harvesting, reinvesting dividends, etc.)

 



(a) US-Based Robo-Advisors

Ranking US Robo Advisors by their Assets

These are the top US Robo-advisors (ranked by asset size).

Robo-Advisors

Under-Management Assets

(in USD)

Betterment

$4.2 billion

Charles Schwab

$4.1 billion

Wealthfront

$2.8 billion

Personal Capital

$2.1 billion

FutureAdvisor

$0.6 billion

Matif Investing

$0.12 billion

Data: 2016

Automated investment services (Robo-advisors) situated in the US

 

(1) Betterment Robo-Advisor (Alexa=12,000)

Betterment has served more that 170,000 customers and has invested more than $4 billion. The only thing you have to do is to define how much you want to invest in stock ETFs and how much in bond ETFs. These are some key points of Betterment's robo-advisor services:

  • Betterment Robot AdvisorOnly for US investors (requires permanent US address, social Security Number, and US bank account)

  • Charges fees from 0.15% (for accounts over $100,000) to 0.25% (accounts over $10,000) and up to 0.35%

  • The minimum account is just $10

  • Offers Low-Cost ETFs (bonds and equities)

  • Tax harvesting tools (accounts of $50,000, or more)

Contact Robo Advisor: (855) 381-5956 or This email address is being protected from spambots. You need JavaScript enabled to view it.

Situated: New York, United States

Link to Robo Advisor: https://www.betterment.com/



(2) Schwab Intelligent Portfolios (Alexa=1,130)

Schwab Intelligent Portfolios is another online Robo Advisor that suggests ETF portfolios. Deposit and lending products are offered via the Charles Schwab Bank, Member FDIC. Schwab builds your ETF portfolio with up to 20 different asset classes. These are some key points of Schwab's robo advisor services:

  • Schwab Robot AdvisorMinimum Account is 5,000 USD

  • No advisory fees or commissions charged, the only fees you pay are the operating expenses of the ETFs

  • Monitors and continuously rebalances your portfolio

  • 24/7 customer support

Contact Robo Advisor: 855-694-5208

Situated: United States

Link to Robo Advisor: https://intelligent.schwab.com/



(3) WealthFront Robo-Advisor (Alexa=18,000)

WealthFront offers equity-ETFs and avoids government bond ETFs. WealthFront helps investors to create their own portfolios in a few clicks, by using easy-to-use built-in financial tools. These are some key points of WealthFront's robo advisor services:

  • WealthFront Robot AdvisorCurrently only for US investors (requires US social security number or Tax ID Number)

  • Charges 0.25% advisory fee

  • The first $10,000 managed for free

  • The minimum deposit amount is $500

  • Fund methods include Bank Wire and Account Transfer (ACAT)

  • Tax harvesting tools (accounts of $100,000, or more)

Contact Robo Advisor: 650.249.4250

Situated: Redwood City, United States

Link to Robo Advisor: https://www.wealthfront.com/


 

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