How do Robo-Advisors Make Money?


For those interested in long-term investments, I now wholeheartedly recommend Bitcoin as the primary option to consider.

However, it’s essential to educate yourself about this digital asset before diving in, as it can take time to fully grasp its intricacies and potential.

A fantastic starting point is the book “The Bitcoin Standard” (Amazon), which provides an in-depth look at the history, principles, and technology behind Bitcoin.

Once you’re ready to invest, most major exchanges offer similar fees and services, so choose one that best suits your needs. Personally, I use

It’s crucial to transfer your Bitcoin to a secure wallet once you’ve made your purchase, as leaving it on an exchange can pose risks.

To truly make the most of your investment in Bitcoin, take the time to study and understand its workings. Your financial journey will benefit from a well-informed approach.

I wish you the best in your endeavors.


Michael J. Peterson







It may seem confusing – you can sign up for robo-advisors for free.

On top of it, some services let you make commission-free trades.

Where is the profit for the robo-advisor then? How do they stay in business – how do robo-advisors make money?

It may seem like a mystery, especially when everything screams ‘free,’ but you may have guessed that’s not the case.

Robo-advisors make money and plenty of it or you wouldn’t see them in business or rising in popularity. 

Rob-advisors have a lot of ways to make money – here’s how they do it:

1. Charge a Percentage of Assets under Management

You may not have to pay to sign up for a robo-advisor or to trade assets, but you may have to pay a percentage of your assets under management. Just what is that?

You pay a percentage of the amount of money you have invested. The percentage covers your use of the platform and your trades. So they make it seem like you’re trading for ‘nothing,’ when in reality, you pay a flat percentage fee.

Some robo-advisors charge the same percentage of assets under management, no matter how much you have invested. Others have a tiered pricing system that they base on your portfolio size.

It may not seem like much, but if you think about it, most robo-advisors have billions of dollars that they manage. Even if they only charge a small percentage of it, the amounts add up, leaving the robo-advisor with quite a profit.

2. Robo-Advisors May Earn a Kickback

Yes, even robo-advisors get kickbacks or referral fees. Several robo-advisors operate this way, but the most commonly known is Schwab Intelligent Portfolios. They don’t charge you anything to manage your assets or even handle your tax-loss harvesting. Most services they offer are ‘free.’’

They make money when you invest in specific ETFs. The sponsor company pays a percentage of their income to Schwab for the sale. It’s like a salesperson earning a commission for selling you a car.

3. Selling Products

Many robo-advisors don’t charge an assets under management fee or get kickbacks. Instead, they work on an a la carte system. For example, Axos Invest (formerly Wise Banyan), you can sign up and invest for free. They don’t charge you anything.

However, they will try to sell you products based on your needs. They sell personalized services and more advanced investment options for a fee. Investors can pick what they want and pay for the services. This way you aren’t paying for more than you need, and you aren’t paying a blanket percentage fee for assets under management.

The good news is, though, most robo-advisors don’t sell your data to third-parties. That’s how many platforms that offer free services make their money. They sell your information and make money off of it, but robo-advisors don’t do that – just watch for the upsell in their system.

This may seem strange. Why would a company offer free services? They have good reason, though. They do it to increase your loyalty. Who would you trust more – a company that offers free services or one that charges you? When they don’t charge you, they offer you value-added services. They earn your trust. Then once you trust them and they try to sell you something, you’re more likely to buy it.

For example, you may find advisors that offer free investment advice, but then try to sell you on other services. The services may be investment-related and they may be related services, but not direct financial advisor services – such as opening a savings account with them, or offering budgeting services.

4. Charging ‘Other’ Fees

Some robo-advisors don’t charge typical advisor fees, but they get you with ‘hidden’ fees or ‘other’ fees that they aren’t quite upfront about. Some of the most common fees include:

  • Termination fees
  • Transfer fees
  • Portfolio rebalancing fee
  • IRA account opening or closing fee
  • IRA transaction fees

5. Robo-Advisors that are Part of a Larger Company

Some robo-advisors are a branch of a larger company, so they don’t have to charge robo-advisor fees. Instead, they offer the service as an add-on. They make most of their money from the ‘main business,’ but make a little money off the add-on fees or investment kickbacks they earn from other investments you make.

Schwab is a good example of this. They offer Schwab Intelligent Portfolios for no fees because they make money in other aspects of the company. However, they make money from the kickbacks from certain investments in ETFs.

Other robo-advisors offer other services aside from robo-advising. For example, some offer loans, while others offer banking services. They make money from these services, allowing them to offer their robo-advisor services for free.


How do you pay a robo-advisor?

Most robo-advisors ‘sweep’ the fees from your account. For example, if an advisor charges 0.3% of assets under management and you have $10,000 invested, you’d pay $30, which they’d sweep from your account on a predetermined date.

Are robo-advisors profitable?

Yes, robo-advisors make money or they wouldn’t be in business. Even though it seems like they charge nothing for their services – they do. You just may not see it upfront. But when you pay hidden fees or for extra services, they make money.

Are robo-advisors a good idea?

If you’re a beginning investor or you have only a small amount of assets under management, robo-advisors can be a great way to invest. They’re also great if you want a hands-off approach to investing. If you don’t enjoy making investment decisions or you just don’t want the responsibility, robo-advisors offer a great alternative.

Can you lose money with a robo-advisor?

As with any investment, you are always at risk of losing money. Robo-advisors diversify your investments and they automatically rebalance your portfolio when it goes sideways, but any investment puts your money at risk.

What happens if a robo-advisor goes out of business?

There’s always the risk that a robo-advisor will go out of business. Do your research and choose a robo-advisor that has a trusted custodian bank. The custodian bank takes over your account if a robo-advisor goes out of business. They can transfer your assets or liquidate them for you.

So while it seems like robo-advisors don’t make money – they have their ways. As with any investment, do your research. Find out what a robo-advisor charges, even if it seems like they don’t charge anything upfront.


If you are new to robo-advisors or investing in general, it makes a lot of sense to check out one of them, especially as you are not making too much of a financial commitment when just trying it out.

Not all Robo-advisors are the same however, each of the services provides a unique angle to their investment approach, so it is important to know the difference when it comes to picking the right one.

I hope this article cleared up some of your questions, if you think I may have missed something please comment below!

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