The main way robo advisors make money is through management fees. Also, some may make money by sending investment dollars to the company’s own family of funds. For example, the no-fee Schwab Intelligent Portfolios product uses low-fee Schwab ETFs, which do charge fees.
It’s always important to understand how you’re charged so you can make the best decisions for your money.
Pros and Cons of Investing With Robo Advisors
- Little investment knowledge required
- Very low time commitment
- Low costs and fees
- Portfolios align with your investment goals
- May not have access to a human for help
- Human-provided services may require an extra fee
- May have little or no say in what funds your money is invested in