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According to this statistic the Neobanking segment is expected to show a revenue growth of 42.2% in 2023. the combined asset under management of robo advisors will hit the $1 billion dollar mark in early 2022.
By 2024 it is expected to reach $2.49 billion (!)
As you can see robo-advisors are quickly becoming more and more popular. But who are the big players in this industry? Who is managing the most amount of money?
Comparison Table (Updated 2023)
Please note that this info is gathered from different online sources and I can by no means guarantee its accuracy. This should purely serve for entertainment purposes.
Here’s something to consider: in the previous year there was an estimated 50% growth in the robo-advisor’s AUM number. Industry experts predict that this this number will continue to increase dramatically.
Now let’s take a look at the 5 biggest players in the robo-advisor space so you can decide if any of these could be a good fit for you.
Vanguard is the biggest name in investments as well as the new robo-advisor industry. There are two robo-advisor options that clients can choose from:
- Vanguard Personal Advisor Services and
- Vanguard Digital Advisor.
These are the two unique options that we will take a closer look at.
Vanguard Personal Advisor Services
This option combines the human touch with a real financial advisor offering guidance and computerized investment management.
It starts with a financial expert working with a client to create the best investment portfolio. They will also manage and rebalance it as necessary to meet the individual needs and financial situation of each client. It’s important to know that this option does require a minimum account balance of $50,000. This may be a high entry barrier for some, the amount is partly justified by the excellent human advise you get with this service.
Additionally, you will get charged a 0.30% AUM fee as well as other commissions and fees. This all depends on the specific investments that you choose. If your account has less than $500,000 invested, you will have a team of advisors to work with. If you have more than that, you get your own dedicated financial planner that works closely with you.
Vanguard Digital Advisor
This options is your standard robo-advisor that offers the same rebalancing and other benefits as other platforms. Here’s what makes this option different from the others:
- Use of Vanguard’s low-fee exchange traded funds (ETFs)
- Low investment management fee of 0.15%
- Access to Vanguard, an already established and reputable investment brand.
- Other new features coming soon such as debt management assistance and emergency fund.
Another option that we like is Personal Capital. This platform has about $12.3 billion AUM as of 2021. What makes this platform great is that it is an automated investment manager that has a free option for users. Personal Capital’s free money management software gives its users a total view of your financial picture in a single, convenient location.
When looking at your dashboard, you can view all your income, debt, investments, and bills in one place. Those are only a few things that you can see all in one place. You can link your bank accounts to the website, giving a more accurate picture of your financial situation. The site will take this information and offer valuable financial advice.
With the free retirement planner, you can test out a variety of scenarios that help you see if your assets and income can hold up to those situations.
As if this wasn’t enough for you, you can get basic services completely free. You could also pay extra for the Personal Capital Advisors, a highly comprehensive automated investment advisory service staffed with dedicated financial planners. There are some stipulations to this paid service. You do need to have at least $100,000 in your account.
The approach used by Personal Capital is quite unique. It uses sector-based asset allocation as well as access to individual stocks. This platform also offers the usual tax-harvesting and rebalancing. If you have managed accounts, you also have a certified financial planner working with you.
However, PC also has a stellar robo-advisor that has been performing well. For wealthier investors, you can access a high-yield cash account and various other services. The dashboard and basic features are free, but you will have to pay .89% in fees for accounts up to $1 million. Should your portfolio grow beyond this, these fees will decline.
While Betterment offers a variety of similar benefits as other robo-advisors, what makes it really stand out is innovative approach to customer service.
First of all, you can text any questions that you have to a real human advisor whenever you need to. It’s innovative approach has led this platform to become one of the leaders in robo-investing. Not only does it offer easy access to human financial planners, you also have socially responsible investment options.
What’s better than all of that? Betterment doesn’t settle and is constantly working to improve. They consistently release new and innovative financial products. Their priority is offering better service to their clients. Some of their products include:
- Low-cost financial planning packages, a la carte
- High yield savings account
- Goldman Sachs Smart Beta portfolio
Another great reason why Betterment is a good option is because there’s no account minimum if you use the digital plan. Here is a look at their charges:
- Charge 0.25% AUM on accounts that are valued up to $2 million. (Digital Plan)
- Charges fall to 0.15% AUM on accounts valued over this amount. (Digital Plan)
- Premium plan does require over $100,000 minimum investment
- Charge 0.40% AUM on accounts under $2 million. (Premium Plan)
- Charges fall to 0.30% on accounts valued over $2 million. (Premium Plan)
When you sign up for their premium plan, you also gain access to certified financial planners.
Schwab is one of the biggest names in investment. Their robo advisor Schwab Intelligent Portfolios was among the top performers back in 2017. In 2019, this robo-advisor managed $40.7 billion in AUM.
One of the things that makes this platform stand out is there’s a portfolio option with no management fees. Their basic Schwab Intelligent Portfolios option has zero management fees, making it an ideal choice. However, you do need a minimum $5,000 balance if you want to open an account with this platform. As is standard with the big robo-advisors, you get rebalancing and tax harvesting features.
Now you may be wondering how this service makes money without these fees. Schwab gets management fees from their own ETFs as well as other 3rd party funds that they recommend to clients. You can find investment opportunities with IRAs, 401k retirement plans, taxable accounts, trusts, and 401k rollover.
In addition to these services, investors can get more personalized services through the premium platform. The Schwab Intelligent Portfolios Premium offers users a variety of services, such as:
- Unlimited consultations with real human financial planners
- Comprehensive financial plans
- Interactive online planning tools.
To access extra services, you need to meet specific criteria like:
- $30 per month subscription
- One time $300 planning fee
- $25,000 AUM
Additionally, you can visit any physical branch to ask any questions that you may have.
One of the reasons why Wealthfront is a great option to consider is because it is considered to be the low-cost leader in the industry.
When you trust them, you get a lot of benefits such as low fees and great research. You also get index matching that is based on your individual risk profile. At Wealthfront, you will find direct indexing and daily tax-harvesting as well as automatic rebalancing. As of 2021, the AUM of Wealthfront was $21 billion.
Now, what does this mean for you? The tools that Wealthfront offers can let you see exactly what you need to save and invest for your future. These tools can also show you how any potential life changes can affect your financial situation. We like how this platform offers you a comprehensive picture for financial planning and can help you answer any financial questions without the need of actually talking to a traditional financial planner.
If you have an account that has less than $5,000, you get this service for free. For accounts that are valued over $5,000, Wealthfront does charge a 0.25% AUM.
As is common with other similar robo-advisors, this platform invests its client’s funds in various exchange-traded funds. These funds track 11 of the major asset classes and you can get access to multiple types of accounts. If you have a larger account, you can also have the opportunity to invest in various individual stocks or access direct indexing.
In addition to these services, you can also get cash management solutions and lending options with this platform. One of the best things that we love is that Wealthfront has one of the most comprehensive financial tools available that you can get today.
Which robo advisor has the most asset under management?
Vanguard. The investment giant manages a total of $161 billion (2021)
What Should I Look at When Considering Different Robo-Advisors?
Some of the most important things to consider when looking at robo-advisors include:
- Investment strategies
- Add-on services that you may be interested in, like tax-loss harvesting.
- What types of investments are available
- Whether or not you get access to human financial advisors.
- Minimum initial investments required
Everyone has their own individual needs. This means that one platform may work for someone else, but not you. You need to carefully consider what your needs are and do your research based on that.
Who Actually Benefits from a Robo-Advisor?
There are plenty of people who would benefit from using a robo-advisor over a traditional one. You may benefit from a robo-advisor if:
- You are a new investor who doesn’t have the time or interest to manage their finances, but understands the importance of building their future wealth.
- You are a DIY investor, but still want a financial planner to help manage your investments.
- You are just looking to pay a lower fee while still getting financial advice from an expert.
- You are a sophisticated investor that wants to pay lower fees and gain access to a financial planner.
As you can see, there are a lot of different types of investors that benefit from a robo-advisor.
What’s the Difference between a Robo-Advisor and a Traditional Financial Advisor?
Aside from the obvious difference, a robo-advisor and traditional advisor has their own approach to investments. A robo-advisor will have several pre-determined options for investments. By answering certain questions that are related to age and risk-tolerance, your personal investment portfolio gets decided by the advisor. These platforms usually invests in low-fee and pre-selected ETFs or mutual funds, from a limited number of options. The fees are much lower, but you also don’t get extras like tax planning or estate planning.
The traditional approach uses a human financial advisor rather than an algorithm. You get access to more investment options, but you also have a higher fee structure in most cases. But, you get the benefit of talking to a financial advisor when you have questions. They can also offer other services such as guidance on estate, tax, money, and insurance planning that you can’t get with a robo-advisor.
What Does “Rebalancing” Mean?
When you first create your portfolio, you answer questions that will determine your risk profile. The investments get allocated into different asset groups based on your risk profile, which is referred to as asset allocation. As the values of these investments change, a rebalancing occurs to go back to the original asset allocation. This is rebalancing.
What Does “Tax Loss Harvesting” Mean?
This is a strategy that is used to sell securities that have dropped its price since you purchased them. The tax loss will offset the sale of the security that as increased in price to reduce taxes.
Does the AUM really matter when picking your robo advisor?
This list contains the 5 top robo-advisors based on the metric of AUM, but that’s not the only factor that you need to consider when choosing. You have to take a close look at any option that you are considering.
Every platform has their own pros and cons that you should be aware of before you invest your money with them.
There are things that are unique to the brand, but some of the features that are similar in each include:
- Relatively lower required initial investments
- Account rebalancing
- Account management requires lower fees
- Various investment options depending on investor’s risk levels
What this means is that you need to consider what each robo-advisor offers and whether or not they meet your particular needs.
Use the following Quiz and find out which robo advisor is best for you.
If you have any questions, please comment below.
Michael is a senior writer at The Robo Investor. He earned his master’s at the Craig Newmark School of Journalism at CUNY, and is currently taking CFP courses at the University of Scranton. He has been an avid finance enthusiast ever since he started investing at the age of 23. Meet the Team