The Robo Ranking

Highlights

• Fidelity Go wins Best Overall Robo, offering stellar performance, competitive fees, no minimum investment, and robust features.
• The winners of Best Robo for Digital Financial Planning, Empower and Wealthfront, serve as an example of simple yet effective online planning.
• SoFi won Best Robo for First-Time Investors because of its low fees, and its ability to manage many areas of one’s financial life on a single platform including debt consolidation, career coaching, and live financial planning.

Best Overall Robo Advisor

• Winner: Fidelity Go
• Runner up: Merrill Guided Investing

Fidelity Go is our winner for Best Overall Robo in this year’s Robo Ranking Summer Edition. Fidelity Go stands out for its competitive fees and robust features. The platform charges a management fee of just 0.35%, with no minimum investment requirement at the base level and $25,000 for accessing live advisors. This cost efficiency makes it an attractive option for investors seeking a low-cost robo advisor. Fidelity Go also offers access to live operational support and licensed advisors (series 66 or 65), providing significant advantages to users. While Certified Financial Planners (CFPs) and dedicated advisors are not available at the base tier, the platform excels in financial planning, offering tools to build single and multi-goal financial plans, model various “what-if” scenarios, and determine retirement spending needs. The inclusion of Social Security estimates and the ability to incorporate pension income further enhance its comprehensive approach to retirement planning. Additionally, Fidelity Go delivers a superior customer experience with educational materials, a fully integrated digital advice portal, a mobile app, chat support, and account aggregation for a holistic financial picture.

Fidelity Go achieved exceptional performance scores, making it one of the top performers in our tracked universe. The platform’s significant allocation to municipal bonds and its positioning with a bias towards large caps have contributed to its strong returns relative to benchmarks and good risk-adjusted performance. The lack of a cash allocation ensures that the portfolio is fully invested, maximizing potential returns. Over the trailing 3-year period, Fidelity Go’s portfolio managed to outperform its normalized benchmark by 0.75%, showcasing its effective investment strategy. Despite the challenges faced by equities and fixed income in 2022, Fidelity Go’s strategic asset allocation mitigated the effects of the broader market sell-off, resulting in solid performance. Overall, Fidelity Go is an excellent choice for investors, offering a blend of low fees, robust financial planning tools, strong performance, and a user-friendly experience.

Merrill Guided Investing is our Runner-up for Best Overall Robo in this year’s Robo Ranking Summer Edition. Merrill offers two tiers of service, a digital only tier, Merrill Edge Guided investing, available to those with $1,000 or more to invest, and a hybrid tier, Merrill Edge Guided Investing with an Advisor, available to those with $20,000 or more to invest. It is fairly standard in its offerings at the base tier, with access to live operational support, an ESG themed investment portfolio option, and a single goal per account planning tool that can help you project your future account value and likelihood of achieving your goal. At the hybrid level, investors will get access to live advisors to help with more complex planning.

Performance was another driver of their ranking, with Merrill scoring in the top half of our tracked universe thanks in part to its relatively large allocation to municipal bonds on the fixed income side of the portfolio, as well as its bias towards large caps on the equity side. Over the trailing 3- and 5-year periods, the Russell 1000 Index has returned 8.73% and 14.57% annually on average versus returns of -2.62% and 6.90% for the Russell 2000 Index. Merrill is one of the more active portfolio managers and is a good choice for those seeking a more active approach to portfolio construction.

Best Robo for Performance at a Low Cost

• Winner: Fidelity Go
• Runner-up: Wealthfront

The Best Robo for Performance at a Low Cost category is designed investors seeking the best performing portfolio. We measure performance based on total portfolio performance compared to the Normalized Benchmark and the portfolios Sharpe Ratio. For the three-year period ending June 30, 2024, Fidelity Go and Wealthfront emerged as top performers. This period encompassed some of the post-Covid recovery, as well as elevated inflation, rising geopolitical tensions, and rapidly increasing interest rates.

Fidelity Go’s equity positioning is typically market-neutral concerning its growth and value split. However, they allocate more to large caps on average, at 76% of the equity portfolio, compared to about 69% on average across all tracked robos over the trailing three-year period. This allocation greatly benefited performance as large caps were the best-performing size among equities over this period.

On the fixed income side, Fidelity Go allocates all fixed income holdings to municipal bonds, one of the better-performing fixed income classes over the past three years. Wealthfront also maintains holdings in municipal bonds and TIPS, which have performed well relative to other fixed income classes over the past three years.

Wealthfront benefited significantly from its dedicated energy holding, which was advantageous during the prolonged inflation period and amid the disruption of energy markets following the Russian invasion of Ukraine. From the start of 2021 through the end of 2022, the energy sector, represented by the Vanguard Energy ETF, posted an average annual return of nearly 60%, compared to just 2.6% annualized for the S&P 500 during the same period. The outperformance of the value-tilted energy sector tracked the overall trend of value outperforming growth during that time. More recently, however, growth stocks have significantly outpaced value stocks. For the trailing three-year period ending June 30, 2024, the Russell 3000 Growth Index outperformed the Russell 3000 Value Index by over 5% per year on average.

Best Robo for First-Time Investors

• Winner: SoFi
• Runner-up: Fidelity Go

SoFi remains our top pick for first-time investors. For many, the true start of one’s investing journey begins with paying down student loans, or some other form of debt. SoFi provides users a platform to explore options such as consolidating debt as a first step to their goals of saving for the long-term. They also have many tools available to first time investors outside of debt consolidation, such as access to career coaches and live financial planners. They also offer a strong budgeting tool in the form of SoFi Relay, which allows outside financial accounts to be tracked within SoFi’s platform, helping to give a holistic view of one’s budgeting. These abilities combined with SoFi’s low fees make SoFi a top option for first time investors.

Fidelity Go earns the distinction of runner-up in this category due to a combination of low costs, an accessible digital platform, and impressive long-term returns. Fidelity Go users will benefit from low fees through a combination of no-cost Fidelity Flex funds, as well as no management fee on the first $25,000 invested, making it especially attractive for investors with smaller amounts of money to start with. This combined with strong long-term performance due, in part, to their bias towards large cap equities makes them a great option for first-time investors.

Best Robo for Digital Financial Planning

• Winner: Empower
• Runner-up: Wealthfront

The most significant effect that robo advisors have exerted on the financial advice industry is the democratization of expertly managed portfolios. Robo advisors have not just facilitated widespread access to advised accounts, but they have also enabled high-caliber financial planning to become available to anyone equipped with an internet connection and the readiness to invest the time into building a plan. The winners of this category offer the best digital planners among the robos we track. The two winners of this category, Empower (formerly known as Personal Capital) and Wealthfront, offer their digital plans to anyone without the need to open an account. These platforms offer the ability to build a holistic financial plan by combining multiple goals into a single plan, while also aggregating outside accounts so investors can get a view of their full financial picture. They make planning for the future easy by enabling users to model future life events, such as Social Security and other retirement income, as well as life events such as windfalls and other custom inputs, all while presenting it in an easy-to-use manner and offering it in the standard, free versions of their services.

Empower remains at the top of our list when it comes to financial planning tools. The robo enables users to plan for retirement, home purchase, education, and general saving among other goals with a plethora of in-depth tools. The retirement fee analyzer looks at your portfolio’s holdings and estimates what portion of your portfolio will be lost to expense ratios, while the planner allows you to set up multiple spending goals along with projected future income and calculates a probability of success in the stated goals. The planner also allows you to map out a plan to pay down debt alongside your current savings, as well as an emergency fund. It will aggregate outside accounts and present you with a consolidated display of your monthly cash flows, overall net worth, and other views of your finances in a single dashboard. The robo offers a feature called Investment Checkup that explains how and why you should be rebalancing your portfolio, while taking into account your age, risk tolerance, and portfolio composition. Through its ability to aggregate outside accounts, it is also able to analyze positions held elsewhere. Overall, Empower continues to be our top pick for robos related to financial planning due to its in-depth planning tools offerings, including a multi-goal financial plan and the ability to customize inputs specific to the investor. Wealthfront’s digital planning tools are representative of their digital-first philosophy, eliminating the need for human advisors and the higher fees attached to them. The planning tool allows for goals specific to retirement, education, home buying, and travel, with the home buying module utilizing Redfin data. While it is a little more complex than Empower’s, the planning tool comes with a high degree of customization like projecting retirement income such as Social Security, windfalls, real estate, and other details, allowing for users to build out complex plans. It also utilizes a feature called Self-Driving Money, which is a set of automated or semi-automated features that enable users to invest excess cash held in their bank accounts. This allows for users to integrate their spending and saving habits with their long-term goals. Wealthfront’s planner continues to be a premier example of innovation among robo advisors.

Best Robo for Complex Financial Planning

• Winner: Vanguard
• Runner-up: Empower

While some digital planning tools do a good job modeling complex situations, those with complex planning needs may still benefit from access to live advisors alongside robo planning, or a hybrid model. Vanguard wins the title for Best Robo for Complex Financial Planning. Their hybrid advice model allows access to a live financial advisor at a minimum investment of $50,000 for just 0.30% in management fees. For a $500,000 investment, investors get access to a dedicated adviser, available for the same low fee. This allows investors to model multiple financial goals and get a comprehensive view of their assets at a price point far below the 1% management fee typically charged by a traditional financial advisor.

Empower, the runner-up for Complex Financial Planning combines access to a live planner with one of the best digital planning platforms on the market. Empower has a high minimum investment at $100,000 and a high management fee at 0.89% but offers some stand out features. Aside from its planning tools, Empower offers investment options such as an SRI portfolio, and direct indexing, and for those with more than $5,000,000 on the platform, alternative investments like private equity are also available. Empower also offers a feature called Smart Withdrawal which simplifies the process of determining where to withdraw retirement spending funds, and how to do so in a tax efficient manner. This feature can assist with more complex decisions, like whether tax gain harvesting should be considered, or if a Roth conversion may be beneficial. These features combine to make Empower one of the best robo options for complex financial planning, even with its higher fees.