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Home>Daily Capital>Investing & Markets>Robo-Advisor vs. Financial Advisor: Which is Right For You?

Robo-Advisor vs. Financial Advisor: Which is Right For You?

It’s no longer the case that investors have to hire costly wealth managers to help them oversee their investments. Thanks to technology, there are more options available now than ever before.

So when you’re ready to start investing, is a robo-advisor or financial advisor right for you? In this article, we’ll discuss the differences between these two investing options, share the pros and cons of both robo-advisors and financial advisors, and help you decide which is right for you.

Key Takeaways

  • Working with an advisor or robo-advisor can help you build and manage a diversified investment portfolio.
  • Financial advisors can help you navigate life’s milestones beyond your investment portfolio.
  • While both financial advisors and robo-advisors have pros and cons, robo-advisors aren’t a full replacement for financial advisors, as there are some services they can’t offer.
  • Personal Capital offers fee-only fiduciary online advisors who can manage your investments and advise you on your financial steps for a fee that’s lower than many traditional advisors.

Robo-Advisor vs. Financial Advisor: What’s the Difference?

A financial advisor is a financial professional who works with individual clients to help them make investment decisions and manage their portfolios. Financial advisors also advise clients on other areas of their financial lives, helping them to prioritize and reach their financial goals, whether it be through budgeting, paying off debt, or choosing investments.

A robo-advisor is a computer algorithm that builds customized investment portfolios for customers based on their financial goals. The robo-advisor initially chooses a client’s investments based on their financial goals. Then it automatically manages the portfolio, rebalancing and adjusting along the way as needed.

Robo-advisors and financial advisors both help clients with a very important function: managing their investment portfolios. The difference is that with a financial advisor, you have a human supporting your financial decisions, and with a robo-advisor, you have a computer managing your portfolio.

Robo-Advisor vs. Financial Advisor Costs

One of the biggest considerations people take into account when choosing between a robo-advisor and a financial advisor is the cost. Financial advisors often charge a percentage of a client’s portfolio, with a normal range being roughly 1-2%. Some might instead charge a flat fee of several thousand dollars. Some advisors charge fees on a sliding scale, meaning clients with more assets under management pay a lower percentage fee for their services.

Robo-advisors are able to charge clients considerably less for their portfolio management services. Two of the largest robo-advisors, Betterment and Wealthfront, both charge a fee of 0.25% of assets under management. Some robo-advisors also offer a more premium account option with a slightly higher fee.

Is It Worth Paying a Financial Advisor?

Is it worth paying the higher management fee to have a real person managing your investments?

The short answer is: it depends. Some clients only need help building a diversified investment portfolio that they can let grow for decades to come. In that case, they may not need help or advice in any other area of their financial health. For those clients, the higher cost of a financial advisor may not be worth it.

But for other clients, the personal touch that a financial advisor offers is absolutely worth the cost. Financial advisors don’t just manage your investment portfolio. Managers also advise on other areas of your finances and can help you make other important financial decisions. For clients who need more than just a set-it-and-forget-it investment portfolio, the additional services a financial advisor provides are likely worth the additional cost.

Financial Advisor Pros and Cons


  • A financial advisor can provide professional advice on all areas of your finances, not just your investment portfolio.
  • Because a real person is managing your portfolio, it may be more customized than what a robo-advisor could provide.
  • Financial advisors can help clients through the emotional component of investing, which robo-advisors can’t do.
  • When you work with a financial advisor, you aren’t limited to a certain type of investment, which is often the case with robo-advisors.


  • Financial advisors often charge fees that are higher than the low management fees that robo-advisors charge.
  • In every profession, there are some providers who are better than others. Hiring a financial advisor doesn’t guarantee a standardized level of service.

Is It Worth Paying a Robo-Advisor?

A robo-advisor is one of the cheapest ways to outsource the management of your investment portfolio. When you sign up for a robo-advisor, the algorithm builds your portfolio based on your financial goals, risk tolerance, time horizon, and other factors. Many robo-advisors use ETF-based portfolios, which help to keep your other expenses low.

You could choose to manage your investment portfolio yourself to save the 0.25% robo-advisor fee, and many investors do. However, this option may be less desirable for some investors. First, you’ll have to do the hands-on work to research investments and choose those that best fit your financial goals. You’ll also have to take care of many of the tasks robo-advisors do behind the scenes, which include rebalancing, tax-loss harvesting, and more.

Another thing to consider with a robo-advisor is the cost of the investments. As mentioned, robo-advisors often build ETF-based portfolios to keep expense ratios low. If you manage your own portfolio but select investments with higher expense ratios and other fees, you could wipe out the savings you experienced from choosing your own investments.

In other words, while some investors may find the savings worth the additional work of managing their own investment portfolio, paying a robo-advisor is worth the cost for most people.

Robo-Advisor Pros and Cons


  • A robo-advisor can manage your investment portfolio at a fraction of the cost of a traditional financial advisor.
  • Most robo-advisors build ETF-based portfolios, which help to keep expense ratios and trading costs low.
  • Robo-advisors usually have no minimum balance requirement, which isn’t always the case with financial advisors.
  • When you work with a robo-advisor, you automatically get services like rebalancing and tax-loss harvesting.


  • A robo-advisor can build your investment portfolio, but can’t help you with other areas of your financial health as a financial advisor would.
  • While a robo-advisor does use your financial goals and other personal factors to build your portfolio, it may not be as customized as it would be with a financial advisor.
  • Clients who prefer the personal touch of working directly with a human being may not appreciate the automated element of a robo-advisor.

Can Robo-Advisors Replace Financial Advisors?

Some people might look at robo-advisors as a replacement for financial advisors. That’s not the case for everyone. After all, while a robo-advisor can build a diversified investment portfolio, there are several things it can’t do.

First, a robo-advisor can’t advise clients on other areas of their financial health. Sure, it can build your investment portfolio. But if you have questions about taxes, estate planning, or paying off debt, you’ll have to seek help elsewhere. A financial advisor, on the other hand, can serve clients in many of those areas. In fact, many financial advisors are comprehensive financial planners whose job is to provide clients with a comprehensive financial plan that addresses every area of their finances.

Another area where robo-advisors simply can’t replace financial advisors is by helping clients through the emotions that often come up with investing. There’s no doubt that investing can bring up many feelings in an individual, especially if they’re experiencing market volatility or a recession for the first time.

When these feelings of panic come up for a client working with a robo-advisor, it would be far too easy to simply log in to their account and transfer their money out of the account to escape the market volatility. But when someone is working with a financial advisor, that professional can talk them through those emotions, as well as guide them in a more rational direction that better serves their future self.

How to Decide

Robo-advisors can’t fully replace financial advisors, but they may be the right choice for some customers. Here are a few situations where a robo-advisor might be right for you:

  • You’re just getting started and may not have enough money invested to meet the minimum requirements of a financial advisor.
  • You don’t need to work directly with a human and are happy to trust a computer algorithm to choose your investments.
  • You don’t want to pay the higher management fees that financial advisors often charge.

On the other hand, some people will find that a financial advisor is a better fit for their situation. Here are a few situations where a financial advisor might be right for you:

  • You prefer human interaction to help you manage your money.
  • You have a complex financial situation and want more services and advice than simply someone to build your investment portfolio.
  • You want a more customized investment portfolio and advice than a robo-advisor can provide.

The Bottom Line

Robo-advisors and financial advisors can both help you start investing and can build a diversified investment portfolio on your behalf.

At Personal Capital, you can work with a fee-only fiduciary advisor who can provide a higher level of service. Personal Capital’s advisors offer a hands-on approach to your finances. Not only can they help you build your diversified portfolio, but they can provide unlimited advice on other areas of your financial health, all at a lower cost than a traditional financial advisor. Sign up for Personal Capital’s free financial tools to connect with your personal financial advisor.

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Author is not a client of Personal Capital Advisors Corporation and is compensated as a freelance writer. The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. Compensation not to exceed $500. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.
Erin Gobler is a money coach who helps people pay off debt and reach their big financial goals without giving up spending on the things they love.
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