Financial Advisor vs Robo-Advisor

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Contributor, Benzinga
March 11, 2022

Investors are increasingly turning toward low-cost software to manage their accounts and investments. Robo advisors, also called online advisors, are the new buzzword for 21st century automated investing. What’s the difference between a robo advisor and financial advisor and how do you know which one is a better fit for your investing needs?

What is a Robo-Advisor? 

Robo-advisors vary from firm to firm. Generally, the term robo-advisor refers to an online service that provides automated investment services based on your preferences. Robo-advisors determine your preferences based on a questionnaire you fill out that assesses your risk tolerance and investment goals. A robo-advisor then uses advanced computer algorithms and software to build and maintain your investment portfolio.

Robo-advisors assist with a range of services from portfolio creation and automatic rebalancing to tax optimization. Though robo-advisors require little to no supervision, most providers have human advisors available for questions you have along the way.


  • Inexpensive: Most robo-advisors have low opening balances, transaction fees and account minimums (typically $500 or less), letting you get started investing quickly. Companies usually only charge 0.25%–0.50% for an annual management fee.
  • Quick to open: After filing out an initial questionnaire, you can open an account and begin investing in minutes.
  • Easy to manage: Robo-advisors are an automated process. You don’t even have to log into your portfolio because the robo-advisor manages it for you.
  • Impersonal and rational: A robo-advisor's sole job is to use algorithms to make rational decisions for your investment portfolio. Due to its impersonal nature, you have less risk of making investment mistakes based on emotions. 


  • One size fits all: Robo-advisors are cheaper than personal advisors because they offer a streamlined one-size-fits-all service package.
  • Less flexible: Robo-advisors rely solely on algorithms for making investment decisions, leading to less flexibility in investment choices.
  • Impersonal: Robo-advisors are designed to make rational decisions about building your investments and are not equipped to handle the emotional component of building wealth, like addressing changes to your financial situation or personal life.

What is a Financial Advisor?

A financial advisor is an umbrella term for any financial professional who helps you manage your money and investments. Advisors provide tailored advice to help you meet your financial goals. Financial planners are a popular type of financial advisor who specialize in helping you create and meet long-term financial goals.

Most financial advisors specialize in a particular area and hold a series of related licenses, which are overseen by the Financial Industry Regulatory Authority (FINRA).  Additionally, many advisors are fiduciaries. A fiduciary means your financial advisor is legally obligated to act in your best interest by the Securities and Exchange Commission (SEC).


  • Setting strategic goals: Financial advisors help you create and implement strategies to meet your long-term financial goals.
  • Working with a knowledgeable expert: Advisors possess deep knowledge about finances and keep up with current market research and trends. You can ask questions whenever you need and advisors will offer research-based strategies to help you make the better decisions.
  • Saving time and energy: For a fee, someone else invests the time and energy to research the market and manage your portfolio for you.


  • Conflicts of interest: Commission-based advisors might not always have your best interests because their income increases by selling you specific products.
  • Fees versus returns: If you don’t invest a significant amount of money, the fees you pay your advisor may impact how much you earn in returns.
  • Your role: A financial advisor acts on your behalf. However, if you like to be hands on, an online alternative where you have more input might be better for you.

Who Should Use a Robo-Advisor?

Robo-advisors and financial advisors both help manage your assets and grow your investments. How do you know whether an online advisor vs. a financial advisor is right for you? It depends on your financial goals.

Robo-advisors are an ideal tool for helping you meet a single investment goal. Services offered by a robo-advisor, such as automated portfolio rebalancing, can help you stay on track to meet individual goals at a lower cost than a personal advisor.

A robo-advisor is right for you if:

  • You don’t mind limited human interaction. Robo-advisors manage your portfolio for you online, eliminating the need for human assistance.
  • You have limited time. Automated services offered by robo-advisors reduce the time and energy you would spend managing your portfolio.
  • You have a simple investing goal. You may not need the hand-holding approach offered by a financial advisor to meet your investment needs if they are straightforward or singular.
  • You want to reduce costs. If the costs of a financial advisor are higher than you want or are able to spend, you may want to choose a robo-advisor to manage your account. You will still have expert assistance making investments via the robo-advisors algorithms but at a more affordable price.

Who Should Use a Financial Advisor? 

If your main goal is to improve your overall financial situation, a financial advisor’s services may be a good fit for you. Financial advisors help you plan for the future in many ways. They may assist you with making a budget to manage your debt, from estate planning to retirement planning and more. 

A financial advisor is right for you if:

  • You prefer human connection. Robo-advisors are automated so there is little or no need for personal interaction. If you’re an investor who needs personal support or value having a familiar voice advising you, then a financial advisor is a better fit for you.
  • You have multiple accounts. The holistic services offered by a financial advisor are more suitable for managing multiple accounts, particularly if you need to coordinate company or retirement accounts.
  • You require a tailored approach. The one-size-fit-all services offered by a robo-advisor don’t allow for customized planning on how much to save or allocate into other accounts. You pay more for a financial advisor’s services but are guaranteed an approach specifically tailored to your financial situation and needs.

Working with a financial advisor can help you make better decisions, create strategic, long-term plans and improve your overall financial health. Before working with a financial advisor, it is important to determine what your financial goals are so you can discuss the advisor’s qualifications and experience in that area. Use this list of questions to help you decide if an advisor’s services fit your needs.

How to Find a Robo-Advisor 

Once you’ve decided that a robo-advisor is right for you, look around for robo-advisors that suit your budget, planned investment amount and personal assistance needs. 

  • securely through Titan's website
    securely through Titan's website
    Best For:
    New Investors with Limited Time
    Read Review
  • securely through M1 Finance's website
    securely through M1 Finance's website
    Best For:
    Customizable Auto Investing
    Read Review

    Brokerage products and services are offered by M1 Finance, LLC, Member FINRA/SIPC, and a wholly-owned subsidiary of M1 Holdings, Inc. ✝Your free trial (a $30 value) begins the date you enroll in the M1 Plus subscription, and ends 3 months after (“Free Trial”). Upon the expiry of the Free Trial, your account is automatically billed a monthly subscription fee of $10 unless you elect annual billing of $95 or cancel your subscription under your Membership details in the M1 Platform

  • securely through SoFi Wealth's website
    securely through SoFi Wealth's website
    Best For:
    Cost-conscious investors
    Read Review
  • securely through Betterment's website
    securely through Betterment's website
    Best For:
    ETF Investors
    Read Review
  • securely through Vanguard Digital Advisor's website
    securely through Vanguard Digital Advisor's website
    Best For:
    Buy-and-hold investors
    Read Review
  • securely through Empower's website
    securely through Empower's website
    Best For:
    High Net Worth Individuals
    Read Review
  • securely through Playbook's website
    securely through Playbook's website
    Best For:
    New Investors
  • securely through Streetbeat's website
    securely through Streetbeat's website
    Best For:
    Auto Trading

 Make sure you consider:

  1. The type of account: Most robo-advisors manage individual retirement accounts and taxable accounts, for example, when you connect your accounts to Playbook so that the platform can run calculations and help you set goals.
  2. Minimum investment requirements: Some robo-advisors require $10,000 or more as a minimum investment requirement but the majority have account minimums of $500 or less.
  3. Portfolio recommendation: Robo-advisors generally offer 5–10 portfolio choices, ranging from conservative to aggressive. The service’s algorithm recommends a portfolio based on your answers in the initial questionnaire, but you can select another option if you prefer.
  4. Investment fees: Robo-advisors typically create portfolios from low-cost exchange-traded funds (ETFs) and index funds. In addition to the robo-advisor management fees, you’ll pay the fees charged by those funds.

How to Find a Financial Advisor 

Determine whether the services provided by a robo-advisor vs. financial planner are a better fit for your investment needs.

How to Choose a Financial Advisor

  • Consider price and value. Think about what you’re paying and the services you’ll receive. You want to make sure that you’re getting the services you need.
  • Check credentials and experience. Ask your potential advisor about his or her qualifications and experience. Pay attention to licenses and prior history with clients from similar financial backgrounds as yours. Find out whether your advisor is a certified financial planner (CFP®), which means he or she has passed rigorous tests, can demonstrate work experience and is beholden to the CFP®’s Board of Standards code of professional conduct.
  • What’s your advisor’s ideal client? Ask your potential advisor to describe his or her ideal client. If the description doesn’t match your needs or portfolio, then you probably aren’t the best match for each other.
  • How is your advisor paid? Some managers charge a set rate based on your portfolio size, whereas others charge a commission. You want someone who is committed to growing your portfolio versus earning extra money.
  • Consider personality. If you work with a wealth manager, it’s critical that your personalities don’t conflict because your manager will be the sole individual responsible for managing your finances. You want someone who will be frank and honest with you but also be someone you can trust and confide in.

Know Which Advisor is Best

You’re ready to invest and both a robo-advisor and financial advisor can help you grow your investments. Yes, you might need personal loans that can help you get by—and that is understandable—but you can also take steps to plan for the future.

Before deciding who — or what software — you want to handle your investments, make sure that you have determined what your financial goals are and done research to see whether the services offered by an online advisor vs. a personal advisor are a better fit for your investing needs.