Online investment advisors, also known as “robo-advisors” or “online advisors”, use technology to lower costs and create processes, such as opening an account, that require minimum or no direct human contact. You’ll likely be offered standardized model portfolios containing lower-cost investments, such as exchange-traded funds (ETFs). As such, online advisors charge lower fees because of their lower operating costs.
Traditional advisors provide more personalized services. A human advisor will be your point of contact and is responsible for providing services, managing your portfolio, and answering your questions. You may also be offered more investment choices and strategies. While traditional advisors may charge higher fees compared to an online advisor, you may find these services of value if, for example, you have complex financial needs or large financial assets. You may also prefer dealing with one dedicated individual who you can build a professional relationship with.
| Online investment advisor (robo-advisor) | Traditional advisor | |
|---|---|---|
| Costs | Low | Varies |
| Minimum balance | None to low | High |
| Investment approach | Model portfolios | Tailored asset mix |
| Investment products | Exchange-traded funds (ETFs) Mutual funds | Wide range (including ETFs and mutual funds) |
| Technology use | High | Varies |
| Point of contact | Automated and self-serve solutions. A team of professionals managing multiple accounts. | A dedicated professional to manage your portfolio and answer your questions. |
| Additional products and services | Limited | Varies; wide range |
