10 Best Robo Advisor Platforms for 2023

A Robo Advisor is a digital platform that provides automated financial planning and investment management advice without the use of human financial planners.

It uses algorithms, based on the user’s input regarding their financial situation and future goals, to offer advice and/or automatically invest the client’s assets.

In this article, we have grouped together the best platforms for investing through Robo Advisors.

To compile the ranking, we have taken the following factors into account:

• The quality of the robo advisor platform
• The investment possibilities offered
• The fund management fees

What are the best robo advisor platforms?

Below our curated list of the best robo advisor platforms, with details of features and characteristics.

How much money should be invested in Robo Advisors?

With the leading Robo Advisors, it is possible to invest sums of less than $100. However, the initial deposit required to activate the account may vary depending on the service.

(your money is at risk)

However, robo advisors are portfolios created to allow one to enjoy compound interest over the long term.

Therefore, more than the initial amount, it is important to minimise commissions and commit to investing a fixed amount (even a low amount) in order to get the most out of the automatic portfolios offered by the platform.

Below you will find an example table that takes into account the average annual interest (APY) of 3%, and the compound interest depending on the monthly deposit from zero.

Robo Advisor vs Copy Trading: main differences

With Robo Advisors you automate one of the fixed strategies set by the investment platform, while with Copy Trading you copy the independent strategies of other traders and investors.

Another difference is the commissions. Robo Advisory services are like investment funds, in fact, they charge annual fees based on the total amount in the account. Sometimes they also charge commissions for rebalancing portfolios.

Through copy trading services, on the other hand, you copy other people’s trades and bring them proportionally back to your own investment account. Then commissions such as spreads or commissions for connecting to stock indices will be applied, as if the person copying was trading in the financial markets themselves.

This difference can be seen very well on eToro, which offers both solutions. It allows both to invest in portfolios built by the eToro team (Smart Portfolio), and to copy the trades of other people within the trading platform.

In the first case, the portfolios are managed by eToro, in the second case it is all in the hands of the traders who invest on eToro completely independently.

Visit eToro
(77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money)

Costs and taxes on returns from Robo-Advisor

Robo-advisors generally only charge a single fee for managing the assets and the robo advisory activity.

This commission averages 1% per annum on the funds under management and is used to cover various expenses such as the work behind the rebalancing of automated portfolios and the business infrastructure.

Choosing a platform that charges low commissions on robo advisors is important, as this type of business generates low returns on average compared to other forms of investment.

If on average, a robo advisor’s return hardly exceeds 3% per annum, charging commissions shrinks the profit margin even further.

For example, a 3% annual return on 1,000$ is 30$, but by applying a 1% commission on fund management, the gain would drop to 20$.

Furthermore, one has to consider that there’s the capital gain tax which depends on your country of residence. This means that at the end of the investment path, when the user wants to liquidate and withdraw the money from the platform, he or she will have to take into account that a certain percentage of that will be taxed.

If the robo advisory platform acts as a tax withholding agent, the percentages withheld could then be even higher than 1% because within that percentage will be not only the management costs, but also the taxes that the platform will have to pay directly to the state.

Taking commissions into account is therefore very important when investing in robo advisors, as annual management costs would add up.

As they add up, they not only affect the fixed annual costs, but also affect future returns because they reduce the amount of money on which compound interest works.

If we consider a monthly deposit of $1,000 for 20 years with annual interest at 3%, at the end of the investment path we would have invested a total of $240,000, which in purely theoretical terms becomes $329,122 with compound interest.

However, the 1% annual management costs would lower the total figure to $293,081 which corresponds to $36,041 in lost earnings.

If the management costs were much lower, such as 0.3% annually, the profit margin would be much higher as with the same dynamics one would lose “only” $11,121 in fees.

Pros and cons of Robo Advisors

Pros

• No trading skills required because they are managed by the platform
• Generally low start-up costs

Cons

• Relatively low interest compared to that which can be obtained by trading in person
• High average commissions in most cases