With lower fees and hybrid services, robo-advisors reshape access to financial planning, not replace it
Robo-advisors haven’t upended the financial advisory landscape—but they’ve certainly reshaped it.
More than a decade since their emergence in the early 2010s, robo-advisors have not replaced traditional financial advisors as many initially predicted.
Instead, they’ve carved out their own space by expanding access to advice, especially for younger or less-wealthy investors, and influencing how advisory firms approach client service.
Cost remains the key attraction
For many investors, the biggest draw is price.
According to Morningstar’s 2025 Robo-Advisor Report, the median advisory fee for robo-advisors in 2024 sat at 0.25 percent—around one-quarter of the typical 1 percent charged by traditional advisors.
Some providers, like Titan and Schwab Intelligent Portfolio’s premium offering, opt for a flat monthly or annual fee. While this can benefit high-balance investors, it may result in higher proportional costs for those with smaller accounts.
Though most advisory fees held steady in the past year, a few platforms made adjustments.
Betterment Premium increased its fee by 25 basis points to 0.65 percent, citing added access to certified financial planners and expanded services.
SoFi, once free, now charges 0.25 percent and revamped its portfolio through a partnership with BlackRock.
Morningstar noted this upward trend may reflect a shift from fee competition to service differentiation as the industry matures.
Yet fees aren’t always straightforward. Investors are encouraged to look beyond headline rates.
Some robo-advisors generate additional income by sweeping uninvested cash into in-house accounts, often without sharing yield gains with clients.
Others funnel assets into proprietary funds—a practice Morningstar says is acceptable when those products are competitively priced and built on sound strategies.
Entry barriers are lower
Unlike traditional firms that often have steep minimums, robo-advisors lower the bar for investing. Of the 16 platforms reviewed, four allow users to start with as little as US$50.
Nearly all others require less than US$5,000. In contrast, only 7 percent of traditional financial advisors work with clients investing under US$100,000, according to Cerulli Associates.
This ease of entry, combined with accessible fee structures, has made robo-advisors a common first step in the financial journey.
Many investors begin with automated platforms and transition to human advisors once their financial situations grow more complex.
Hybrid advice is becoming standard
Rather than displacing human advisors, robo-platforms are incorporating them—especially for higher-tier clients.
Many providers now offer a hybrid approach, giving users access to certified financial planners (CFPs) as their needs evolve. SoFi, for example, allows even basic-tier clients to consult a CFP free of charge.
These professionals help fill gaps that automation can’t reach—especially in areas like retirement withdrawal strategies, estate planning, and tax advice.
Vanguard and Schwab are currently the only robo-advisors offering built-in retirement drawdown guidance, a feature that will likely grow in relevance as their user base ages.
Portfolio construction: simple but effective
Most robo-advisors rely on low-cost, passive investments like mutual funds and exchange-traded funds (ETFs), with automated rebalancing baked in.
While there’s no universally optimal strategy, Morningstar encourages investors to look for long-term planning, credible research, and strong investment teams.
Some platforms, like Betterment and Vanguard, add nuance by offering glide paths—portfolios that gradually shift from aggressive to conservative allocations as clients near their goals.
This is similar to the structure of target-date funds.
Investors with more complex taxable accounts may seek greater portfolio intricacy.
Betterment, for instance, subdivides large asset classes into smaller segments (like large-, mid-, and small-cap US stocks) to support tax-loss harvesting strategies.
While a few robo-advisors offer niche asset classes like cryptocurrencies or emerging-market bonds, these are only suitable if investors have a long enough time horizon to absorb the volatility.
Municipal bonds are also commonly used in taxable accounts to reduce distributions, but they may not be ideal for every tax bracket.
Services beyond investing
Although price and portfolio design remain the most visible factors, added services set leading robo-advisors apart.
Some platforms provide account aggregation, allowing clients to link and track external financial accounts in one place.
While most don’t yet include these external assets in financial planning, the added visibility can offer more accurate and holistic advice.
Tax efficiency is another feature gaining traction. Several platforms incorporate tax-loss harvesting to help investors offset gains by strategically selling underperforming assets.
These tactics, once exclusive to high-net-worth clients, are now more widely available at a fraction of the cost.
Where robo-advisors may fall short
Still, robo-advisors aren’t a one-size-fits-all solution.
Investors just starting out or dealing with large sums might benefit from personal advice.
Complex financial needs—such as special-needs trusts, insurance strategies, or legacy planning—often require one-on-one guidance that algorithms can’t replicate.
And despite their growing presence, robo-advisors vary widely in quality. Investors are advised to do their homework.
Price and portfolio design are good starting points, but additional features—like access to human advice, retirement support, and tax planning—can be critical depending on the situation.
For early- to midcareer investors looking for a low-cost, accessible way to build wealth, robo-advisors offer a compelling path forward. But as with any financial service, it pays to look closely before choosing where to place your trust—and your money.
