Robo-advisors offer a quick, cheap route into passive investing. Here are 6 of the best, according to a new report

  • Robo-advisors use computer algorithms to build and manage an investment portfolio.
  • They typically charge fees of just 0.3%, offering a cheaper route into investing.
  • Morningstar listed the six best robo-advisors in the US in a recent research report.

Some retail investors spend hours scouring r/WallStreetBets in search of the next Tesla, or buy obscure cryptocurrencies hoping for thousand-percent returns.

But others are happy with steady gains at a low cost – and that’s what draws them to robo-advisors.

Robo-advisors are automated investment platforms that build and manage an investment portfolio using computer algorithms. These companies offer investors a quicker and cheaper route into the stock market.

The median advisory fee for major US robo-advisors is just 0.3% of assets, according to Morningstar. That’s a significant discount from traditional (human) financial advisors, who typically charge around 1%.

“The industry is just now maturing… services are adding new, valuable features each year, if not each quarter, and competing on cost,” Morningstar strategist Amy Arnott, who was the report’s lead author, said. “Given their low required account balances, modest costs, and ease of use, robo-advisors are a compelling option for young investors with less complicated financial situations.”

US robo-advisors managed $440 billion as of the end of 2020, according to Morningstar. Arnott’s team analyzed 20 major players in the field to determine which digital advice platforms offer the best services to retail investors.

Morningstar assessed the robo-advisors using four criteria: price, the investment process, breadth of services offered, and the advisor’s parent organization. Analysts highlighted six companies offering an above-average product to investors.

“Two stand out across the board for the quality of their portfolio construction and extensive planning tools,” Arnott said, highlighting the robo-advisor platforms offered by Vanguard and Betterment.

Here are the six robo-advisors that Morningstar recommended: