The differences among robo-advisors might seem minor to the casual reader, but in reality, they’re not. You have a choice when it comes to:
- Minimum Deposit: With some firms, you can start out with nothing, while others require sizable amounts to invest.
- Annual Fees: Be aware of hidden costs and fees for the ETF a robo-advisor purchases on your behalf.
- Asset Allocation: Asset allocation can vary quite a bit based on your age and how you answer the service’s risk assessment questions.
- Account Type Support: Does the robo-advisor offer individual or joint accounts, IRAs, etc.? Similarly, can it assist with your 401(k) plan?
- Automation: Some services are 100% automated vs. human-assisted advice.
- Tax Optimization: Services such as tax-loss harvesting can help at tax time.
- Custody of Funds: Managed either by you, in which case the robo-advisor gives trading advice, or directly by the firm.
- Management of Assets: Manage all your assets or just a portion.
- End Goal: Retirement-only or other goals (e.g., college education).