The goal of investing is to build wealth for future goals. In the past you had several investing options, do-it-yourself through a low-fee discount broker or hire a financial advisor or stockbroker.

Within the past 10 years, robo-investing or digital investment management has cropped up with scores of options for investors seeking low fee investment management. In fact, M1 Finance, a robo-advisor for DIY investors helps individuals manage their portfolios’ for free.

Robo-advisors are a new form of investment managers that use computers to create programs or computerized robo-advisor algorithms to do a lot of the investment portfolio management heavy lifting.

The benefits of robo-investing include lower management fees than those of traditional financial advisors and investment strategies grounded in research. But what you may not realize is that robo-advisors are not all alike. There are all-digital robo-advisors like Wealthfront and then there are many digital investment firms that offer access to human financial advisors, career consultants, high yield cash accounts and more.

The robo-advisor choices have become so broad that there is likely a robo-advisor that is right for every type of investor.

Following is an introduction to robo-advisors and tips to find the best robo-advisor for you.

How Does a Robo-Advisor Invest Your Money?

Before investing, most robo-advisors ask you a few questions about your goals, age, and risk comfort. Then, based upon your answers, you’re presented with a sample portfolio of stock and bond investment funds divvied up in accordance with your responses to the questionnaire.

Millennials, investing for retirement and comfortable with risk would receive a sample portfolio with a greater percentage of riskier stock funds. While older investors, closer to retirement, typically receive a portfolio with more conservative investments.

Then, when you’re ready, you transfer funds into the robo-advisor’s secure investment portal.

You can have the firm invest in the recommended mix of funds or tweak your preferences for a more conservative or aggressive investment portfolio.

The robo-advisor will then manage the investments and rebalance them back to your preferred asset percentages.

Although this is the most common trajectory for robo-investors, following is a list of other ways a robo-advisor might help with your financial and investment management.

Here is a drill down into some of the distinct robo features:

1. Some robo-advisors allow you to invest in real estate (REITs), commodities, or even individual stocks. Personal Capital, Wealthfront and M1 Finance are all robo-advisors with access to individual stocks.

2. Many robo-advisors also offer financial planners in addition to digital robo-investing. Betterment, Wealthsimple, Ellevest and Vanguard Advisor Services are a few of the robo-advisors with human advisor access.

3. Other robo-advisors are linked to large investment companies and provide their users with direct access to a wealth of financial and investment services. At present most of the large investment firms offer robo-advisors including: Schwab, Fidelity, Vanguard, JP Morgan Chase and E*Trade.

4.  Robo-advisors are becoming one-stop financial shops with lending and high yield cash management. SoFi Invest, Wealthfront and M1 Finance all offer lending options for their robo clients.

5. Other robo-advisors will manage your money, where it is, without requiring that you transfer to their platform. SigFig is a robo-advisor that manages your investments while they remain in their TD Ameritrade, Fidelity or Schwab accounts.

6. Several robo-advisors offer free money management. That means that they will set up your investment portfolio, rebalance your investments and generally keep your investments on track for free. Although there are always underlying fund management fees that are paid to the specific exchange traded fund managers. Schwab, Axos Invest, and M1 Finance all offer free robo-advisor plans.

7. It’s not uncommon for robo-advisors to provide tax-loss harvesting to their clients with taxable accounts. This is a strategy to offset investment gains with losses, thereby reducing your tax bill.

It’s quite clear that there are a variety of investment services available when investing with a robo-advisor. The best robo-advisors are the ones that match up with your preferences.

Who Benefits from Using a Robo-Advisor?

It would be cliché to suggest that anyone could benefit from using a robo-advisor. Although, with the variety of platforms from which to choose, this just might be true. So, let’s outline who is the right client for robo-investing:

1. The DIY investor who want’s a robo-advisor to handle the mundane task of rebalancing their portfolio. M1 Finance is the only robo-advisor that offers both pre-made investment portfolios and DIY investment selection and will rebalance your investments.

2. The new investor without much money who wants to get started investing has several robos available. Many platforms allow you to begin investing with very little money and for low fees or no fees such as Acorns, Ally Invest Managed Portfolios, Betterment, Ellevest and SoFi Invest.

3. Sophisticated investors seeking high level investment advice and access to financial planners and comprehensive estate and tax planning could be served by Personal Capital and Ellevest. What’s appealing about many of these digital investment advisors is that they offer tiered service levels for a variety of clients.

4. The experienced investor who wants a well-structured investment plan and doesn’t have the desire to manage their entire portfolio on their own. In fact, I have my work retirement plan managed by a robo-advisor. In this case most of the robo-advisors could fulfill the needs of this investor.

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Is Robo Investing Right for You? Wrap Up

If you’re looking for a way to simplify your financial life then a robo-advisor might be the way to go. Investors who are just starting out and not looking to study up on investing are also candidates for a robo-advisory platform. The low investment management fees of most robo-advisors are a big draw for many investors.

If you’re interested in learning more about robo-investing please stop by RoboAdvisor and take a look around. We offer reviews, a robo-advisor selection wizard and a wealth of information.

By Barbara A. Friedberg, MBA, CEO of and

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