Reviewed September 2026.
A robo-advisor is software that builds and maintains a diversified portfolio for you after a risk questionnaire. Examples include Betterment, Wealthfront, and Schwab Intelligent Portfolios. You deposit cash; the robo buys a mix of ETFs, rebalances, and often offers tax-loss harvesting in taxable accounts. The usual price is an advisory fee on assets under management (AUM), commonly around 0.25%/year, on top of the funds’ own expense ratios.
Compare the advisory fee in dollars to DIY index funds. Broader AUM vs flat-fee vs DIY comparison: What is an AUM fee and how to compare it. Brokerage fee line-items vary by firm (Brokerage account fees).
What you get for the fee
| Feature | Typical robo | Typical DIY at Fidelity/Vanguard/Schwab |
|---|---|---|
| Portfolio build | Questionnaire → model ETF mix | You pick funds (Asset allocation) |
| Rebalancing | Automatic | You calendar or band-rebalance (Rebalancing) |
| Auto-deposit | Built in | Automatic investment plans |
| Tax-loss harvesting | Often included (taxable) | Manual, or not done |
| Human CFP access | Sometimes a higher tier | Separate RIA / planner fee |
Fee math vs DIY
Assume a $40,000 taxable portfolio of low-cost index ETFs.
| Path | Advisory fee | Fund ERs (illustrative) | Approx. annual cost |
|---|---|---|---|
| Robo at 0.25% AUM | $100 | 0.05% → $20 | ~$120 |
| DIY same ETFs | $0 | 0.05% → $20 | ~$20 |
Difference ≈ $100/year on $40k (0.25%). On $200,000, 0.25% is $500/year before fund ERs. Some robos waive advisory fees under a balance threshold or use cash sleeves that earn less than a brokerage sweep; read the Form ADV / fee schedule.
When the fee is often worth it
- You would not invest at all without autopilot.
- You want automatic rebalancing and will not open a spreadsheet twice a year.
- Taxable account is large enough that disciplined tax-loss harvesting might offset part of the fee (not guaranteed).
- You value a single app for goal buckets more than minimum cost.
When DIY usually wins on cost
- You can buy one total-market ETF or a target-date fund and leave it alone (Investing basics).
- Balance is small and the flat dollar fee (if any) or cash drag is large relative to returns.
- You already rebalance inside a 401(k) and only need a simple IRA index fund.
Worked example: Maya’s choice
Maya has $25,000 to invest and can set a $200/month auto-deposit. She compares:
- Robo: 0.25% → about $63 in year one on the starting balance (grows as the balance grows), plus ETF ERs.
- DIY at Schwab: two low-cost mutual funds (U.S. stock + international) already held in the account, with Schwab’s automatic investment plan buying $200 on payday, rebalance each January. Advisory fee $0. (Schwab’s documented automatic-investment feature covers eligible mutual funds you already hold, not ETF share purchases; ETF buys would be manual.)
Maya picks DIY because she will follow a written January rebalance reminder. Her coworker Sam picks a robo because Sam has skipped investing for three years; the $60–$100 annual fee is cheaper than another year at $0 invested.
Checklist
- Write the AUM fee as dollars per year on your balance, not only as a percent.
- Add fund expense ratios and any wrap, account, or cash-sleeve drag.
- Ask whether you will actually rebalance and contribute without the app.
- Compare to one or two index funds plus calendar rebalancing.
- Read how to leave (ACATS transfer fees, tax lots moved in-kind).
Educational only. Not investment advice. Fee schedules and features change; verify on the provider’s current Form ADV and client agreement.