Robo Advisers Give You Decent Financial Advice On The Cheap

Some key features are available through almost any robo-advisor, while other interesting perks aren't quite as common. Here are the main features you should pay attention to as you search for the best robo-advisor for your financial goals.

Low fees

Robo-advisors are generally far cheaper than their human counterparts, but they aren't all equally cheap. There's quite a bit of variation in management fees and expense ratios.

A quick look at our best robo-advisor picks shows management fees ranging from 0% to 0.35%. Many offer tiered pricing, so you can opt into a no-frills version or a premium product, depending on what you want to pay and which features you need.

Minimum deposit requirements

A deposit requirement could be a major limiting factor if you're just getting started or have limited funds available to invest.

Most robo-advisors come with far lower minimum deposit requirements than traditional brokerages, but the requirements vary a lot. Some let you open an account with as little as $1, and some require a minimum opening deposit of $500 or more.

Generally, the minimum deposit requirement aligns with the investment goals the app is designed to help you achieve.

If you just want to play in the stock market to see what it's all about, a micro investment app can help you get started for $5. If you want to seriously stash away money to diversify your retirement savings, a more advanced robo-advisor with a $500 minimum is more likely to offer the features you need.

Automatic rebalancing

When you set up an investment portfolio through a robo-advisor, your initial investment allocations will be aligned with your risk tolerance and investment goals. For a simplified example, your robo-advisor might determine that your ideal allocation is 70% invested in stocks and 30% in bonds.

Over time, those stocks and bonds shift in value, so your allocation shifts, too. A strong year for the stock market could push your portfolio to 80% stocks -- which puts it at a higher risk in case of a down year.

Automatic rebalancing solves this problem by periodically reviewing your portfolio and moving money into different types of investments to maintain your target balance between risk and reward.

Automatic rebalancing is a fairly standard feature among robo-advisors, but the frequency varies among platforms.

Tax-loss harvesting

Some robo-advisors incorporate strategies to reduce your tax bill into their portfolios, and the most important to know about is tax-loss harvesting.

Here's the short version of how tax-loss harvesting works with a robo-advisor: Let's say that your robo-advisor constructed your portfolio using five investment funds. We'll also say that over the next few months, four of the funds perform very well, and one declines in value. In the course of rebalancing, your robo-advisor will likely sell some of the high-performing funds.

This can create a taxable capital gain. Some robo-advisors actively combat this by strategically selling investments that have declined in value. That offsets your capital gains (because they sell at a loss), and they can re-invest the remaining capital.

Tax-loss harvesting is most important if you invest large amounts or you're already in a high tax bracket. It's only a concern if you're investing in a taxable account, not tax-advantaged accounts like retirement plans.

Access to human financial advisors

By definition, the purpose of a robo-advisor is to take the human element mostly out of the equation. And most of what a human investment advisor can do can be automated rather easily. Plus, robo-advisors remove the hassle of finding a financial advisor.

However, there are some instances where it can be valuable to have access to a human financial advisor. For example, if you're planning to buy a home in a few years or you want to start saving for college, a financial advisor can point you in the right direction.

Some robo-advisors eschew human advisors altogether, but some give you access with a premium membership or for a set fee per consultation.

Customer support

All robo-advisors offer some type of account support, though the level varies a lot. You might only be able to chat with customer service through messages in the app, on their website, or through email. Some hold customer service hours with agents available via phone. Look into those details before choosing an advisor if one-on-one support is important to you.

Unique features that appeal to you

It's not practical to list every possible feature a robo-advisor could offer or that might matter to you in particular. But it's worth noting that some of our favorite robo-advisors offer features that go beyond the standard list we've discussed. To name a few:

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