Robo-Advisors vs. Financial Advisors

Robo-advisors are a low-cost alternative to full-service financial advisors. However, the services provided by these algorithm-based tools are comparatively limited. Learn more about the distinction and which makes the most sense for you.

Thomas Brock, CFA, CPA, expert contributor to
  • Written By
    Thomas J. Brock, CFA®, CPA

    Thomas J. Brock, CFA®, CPA

    Expert Contributor

    Thomas Brock, CFA®, CPA, is a financial professional with over 20 years of experience in investments, corporate finance and accounting. He currently oversees the investment operation for a $4 billion super-regional insurance carrier.

    Read More
  • Edited By
    Savannah Hanson
    Savannah Hanson, financial editor for

    Savannah Hanson

    Senior Financial Editor

    Savannah Hanson is an accomplished writer, editor and content marketer. She joined as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.

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  • Financially Reviewed By
    Stephen Kates, CFP®
    Stephen Kates, CFP® Headshot

    Stephen Kates, CFP®

    Expert Contributor

    Stephen Kates is a Certified Financial Planner™ and personal finance expert specializing in financial planning and education. Stephen has expertise in wealth management, personal finance, investing and retirement planning.

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  • Updated: February 22, 2023
  • 5 min read time
  • This page features 2 Cited Research Articles
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APA Brock, T. J. (2023, February 22). Robo-Advisors vs. Financial Advisors. Retrieved April 1, 2023, from

MLA Brock, Thomas J. "Robo-Advisors vs. Financial Advisors.", 22 Feb 2023,

Chicago Brock, Thomas J. "Robo-Advisors vs. Financial Advisors." Last modified February 22, 2023.

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Key Takeaways:
  • Robo-advisors are less expensive than financial advisors, but their service offering is more limited.
  • Robo-advisors are best for people with relatively simplistic situations and no need for guidance beyond investment management.
  • Full-service financial advisors are best for people seeking more comprehensive guidance. They can help with budgeting, banking, managing debt, optimizing insurance coverages, minimizing tax burdens, planning for retirement — and managing investments.
  • Many traditional financial advisors have incorporated robo-advisory technology into their business models. This has enabled them to offer low-cost investment management services while enhancing the delivery of harder-to-commoditize services.

What Is a Robo-Advisor?

A robo-advisor is an automated, low-cost alternative to a human financial advisor. Essentially, it’s a bot that leverages sophisticated computer algorithms to manage your investments.

It does so by gathering foundational information from you via an online questionnaire. This informs the robo-advisor of your investment objectives and tolerance for risk.

Then, it uses the information to establish a customized investment strategy for you. Typically, the strategy will reflect one of many predefined asset allocation profiles, which are based on an assortment of passive, fund-style investment vehicles.

For individuals who aren’t comfortable or don’t have time to manage their money, robo-advisors can be a simple approach to proper asset allocation. What they lack, however, are the benefits that come with a comprehensive financial plan offered and supported by a human advisor. As your life becomes more complex, utilizing a human financial advisor can offer a foundation for navigating your financial life — even when your assets could remain managed by a robot.

Benefits and Drawbacks of Robo-Advisors

Robo-advisors can be a great way to manage your investments in a passive, low-cost and highly automated manner. However, investment management is currently the extent of the robo-advisory service offering.

Conversely, the best human financial advisors offer a full gamut of financial services, including guidance on budgeting, banking, managing debt, optimizing insurance coverages, minimizing tax burdens, planning for retirement, managing investments and structuring appropriate legal frameworks or estate plans.

Benefits of Robo-Advisors
  • Very low account minimums
  • Easy and fast account setup
  • Relatively inexpensive
  • No potential for human errors
Drawbacks of Robo-Advisors
  • Limited service offerings beyond investment management
  • No human interaction
  • No potential for market outperformance, given passive investment management
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When Is a Robo-Advisor Right for You?

Generally, a robo-advisor is best for individuals that are comfortable with non-human interactions and have minimal need for financial guidance beyond investment management. Oftentimes, this relates to younger individuals with minimal wealth and fairly uncomplicated lifestyles. It also relates to financially savvy individuals that want some low-cost help with their investments.

What To Look For

When shopping for a good robo-advisor, look for well-established firms with substantial assets under management (AUM) and low management fees. Generally, this means AUM of at least $20 billion and a baseline management fee of approximately 0.20% to 0.45%.

When To Speak to a Financial Advisor Instead

A full-service financial advisor is superior to a robo-advisor when you want human involvement or need guidance for more complicated situations.

Financial advisors can help with:
  • Banking
  • Budgeting
  • Managing debt
  • Managing investments
  • Minimizing tax burdens
  • Optimizing insurance coverages
  • Planning for retirement
  • Structuring appropriate legal frameworks and estate plans

Full-service advisors are more expensive than robo-advisors, but the diversity of their service offerings can help you significantly improve your financial position. A competent financial advisor can help you establish a comprehensive financial plan that reflects consideration for your current situation and your retirement goals.

The key is to choose a highly trusted and competent advisor.

Pro Tip
If you like the low-cost nature of a robo-advisor but would like periodic access to a real-life financial advisor, many brokerage firms offer hybrid solutions.

What To Look For

There are lots of competent financial advisors in the market, but there are also many unscrupulous ones. A great way to sift through the landscape is via the CFP® Board, a non-profit organization that sets and enforces standards for the widely respected Certified Financial Planner™ (CFP®) professional certification. Unlike some financial advisors, all CFP® professionals are held to a strict standard of fiduciary duty.

It’s best to find a few CFP® professionals nearby and interview them. In doing so, be sure to focus on those that charge a competitive fee. Usually, this takes the form of a “fee-only arrangement” based on the percentage of assets under advisory. As a general rule-of-thumb, you can anticipate an advisory fee of 1% on assets of $1 million or less, but you should expect an increasingly favorable rate for larger portfolios.

Did You Know?
Sometimes, a flat-dollar, piecemeal charge for financial advisory work is sensible. That said, be skeptical of any commission-based arrangements. These are not characteristic of fiduciary advisors and are prone to conflicts of interest.

Beyond the fee structure, be sure to consider the demeanor of the financial advisors you meet. The best advisors are patient and empathetic with an inclination to explain and teach. They exude passion and are truly concerned about their clients.

Ultimately, your assessment should be based on as much objective information as possible, but the value of “going with your gut” cannot be understated. Your instincts matter, and an advisory relationship should feel right. You’ve worked way too hard to accumulate your money, and anyone you trust with it needs to make you feel understood, well-informed and confident. Be sure to find an advisor that makes you feel comfortable.

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Frequently Asked Questions About Robo-Advisors vs. Financial Advisors

Are robo-advisors less expensive than financial advisors?
Fees can vary widely from one advisor to the next, and this holds true amongst robo-advisors and financial advisors. That said, robo-advisory fees are generally much lower than human financial advisory fees. The most competitive robo-advisors charge approximately 0.20% to 0.45% of assets under management, while human advisors usually charge 0.80% to 1.20%. To be more competitive, some human financial advisors have implemented gain-sharing structures, whereby their compensation is partially tied to your financial success. This “skin-in-game” approach is rare, but it has the potential to become more common.
Can financial advisors do anything robo-advisors can’t do?
Yes. Generally, robo-advisors only provide investment strategy implementation and management services. Conversely, the best financial advisors provide guidance on budgeting, banking, managing debt, optimizing insurance coverages, minimizing tax burdens, planning for retirement, managing investments and structuring appropriate legal frameworks and estate plans.

Editor Samantha Connell contributed to this article.


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Last Modified: February 22, 2023

2 Cited Research Articles writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. Robo-Advisor Pros. (2022, October 31). Robo-Advisors With the Most Assets Under Management — 2022. Retrieved from
  2. Certified Financial Planner Board of Standards, Inc. (n.d.). Find a CFP Professional. Retrieved from