Understanding robo-advisor performance | Vanguard (2024)

FAQs

How well do robo-advisors perform? ›

Robo-advisor performance is one way to understand the value of digital advice. Learn how fees, enhanced features, and investment options can also be key considerations. Five-year returns from most robo-advisors range from 2%–5% per year.

Do robo-advisors outperform the S&P 500? Robo-advisors can outperform the S&P 500 or they can underperform it. It depends on the timing and what they have you invested in. Many robo-advisors will put a percentage of your portfolio in an index fund or a variety of funds intended to track the S&P 500.

Schwab Intelligent Portfolios is a quality robo-advisor with very low expenses. Unlike most competitors, it doesn't charge a monthly advisory fee, making it an excellent option for cost-conscious investors.

Robo-advisors often build portfolios using a mix of various index funds. But depending on the asset class mix and the particular index funds selected, a robo-advisor may underperform or outperform a broad equity index like the S&P 500.

But according to the Robo Report, the five-year returns (2017 to 2022) from most robo-advisors range from 2% to 5% per year. And Wealthfront, one of the best robo-advisors available, also states that customers can expect about a 4% to 6% return per year, depending on their risk tolerance.

No Human Contact

This type of personal contact is relegated to the traditional financial advisory models. Most robo-advisors won't hold your hand and comfort you after a significant market drop. By contrast, a human financial advisor can be available to assuage your fears and explain how the investment markets work.

Clients who have more than one million dollars in qualifying assets at Schwab automatically get access to these benefits, including—a dedicated Financial Consultant, access to a wide range of specialists, tailored solutions, and pricing advantages.

As of April 2024, Schwab is worth $10.5 billion, according to Forbes. The Charles and Helen Schwab Foundation was formed in 1987. In 2013, it reported assets of $270 million and made $13 million in grants. He serves as its chairman; his wife is the president.

The Bottom Line. Wealthfront is the winner of Best Overall and a number of other categories in our 2024 Robo-Advisors Review. This makes Wealthfront a solid choice for any investor comfortable with an all-digital investment service. Wealthfront is also the choice for those without the $5,000 minimum required by Schwab.

Digital Advisor Use Dropped in 2022

High-net-worth investors exited robo-advisor arrangements at the highest rates. Here's how the data broke down along asset levels: $50,000 or less: A drop from 23.6% to 20.6% in 2022, which translates to a decrease of 3 percentage points.

What is the best robo-advisor worldwide? ›

According to our research, Wealthfront is the best overall robo-advisor due to its vast customization options, fee-free stock investing, low-interest rate borrowing, dynamic tax-loss harvesting, and other key features.

The generic cons of Robo Advisors are that they don't offer many options for investor flexibility. They tend to not follow traditional advisory services, since there is a lack of human interaction.

High-net-worth investors exited robo-advisor arrangements at the highest rates. Here's how the data broke down along asset levels: $50,000 or less: A drop from 23.6% to 20.6% in 2022, which translates to a decrease of 3 percentage points.

The type of advisor that is better for you depends on what your financial needs are. For core investing and planning advice, a robo-advisor is a great solution because it automates much of the work that a human advisor does. And it charges less for doing so – potential savings for you.

As with many other financial advisors, fees are paid as a percentage of your assets under the robo-advisor's care.