What To Ask Your Robo-Advisor

Online investing services are gaining fans—but some are better than others.

- Paul Schrodt

MONEY MANAGEMENT HAS LONG been a luxury available only to the wealthy. The digital age, as it tends to do, has upended that. Robo-advisors provide financial advice and investment strategies using algorithms that have gotten rapidly more advanced, providing you with virtually all the know-how of a traditional human advisor and a lot of mathematical power—plus they won’t scoff if you have less than a couple hundred thousand in the bank. They’re now common offerings among major financial institutions. And, best of all, they’re much cheaper than traditional human advisors. But that doesn’t mean they’re flawless, and they’re certainly not all created equal. We talked to experts about what to ask when considering a robo-advisor.

1 WHAT ARE THE FEES?

“Most people were shut out” of the old world of financial advisors because they didn’t meet investment minimums required to get started, says Greg McBride, Chief financial analyst for Bankrate .com. Robo-advisors have radically shifted the landscape, but it’s still important to keep in mind how much you’re giving up for their services. Wealthfront and Betterment, two popular robo-centric advisory companies, charge an annual 0.25% fee on account balances with no opening fee, whereas “under the traditional model, you generally pay 1%,” according to McBride.

2 HOW RICH DO YOU NEED TO BE?