Robo-advisors vs. financial advisors: What's the difference? | Facet (2024)

What to consider when deciding between a financial advisor and a robo-advisor

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  • ByFacet
  • March 3rd, 2022
  • 5 minute read

Robo-advisors vs. financial advisors: What's the difference? | Facet (1)

Key takeaways

  1. A robo-advisor is an online service that uses technology to build low cost, diversified investment strategies with limited planning advice and human interaction
  2. A traditional financial advisor provides personalized investment and retirement advice but planning for other areas of your life may be limited
  3. A modern financial advisor integrates a dedicated advisor with technology to provide the best of both worlds – advice for all aspects of life plus a seamless digital experience
  4. When choosing the best option, consider the breadth of the advice, the option to work with a human advisor, and if their fee model is tailored to your needs

Robo-advisors have gained popularity over the last decade. They have ushered in an era of app-based, tech-centric, and online investing platforms. With low fees and account minimums, they offer a no-frills solution that some prefer to a traditional financial advisor.

Robo-advisors remain popular for people looking for a low cost investment solution and a DIY (Do-It-Yourself) approach to the rest of their finances. Many people still look to financial advisors for a more personalized experience and planning that looks at all aspects of their lives.

So which option is right for you? Here’s what you need to know and how to make the right choice for you.

What is a robo-advisor?

A robo-advisor is a digital or online service that offers automated investment advice. It is a self-guided platform that uses technology and computer algorithms (fancy term for a set of rules or calculations) to help you create a low cost, globally diversified investment strategy.

Investment solutions are based on a risk profile assessment which is typically an online questionnaire. You share information such as your goals (like retirement), your time horizon, and the level of risk you are comfortable with. Then their computer models design an investment solution for you. Your investments are managed over time through automated rebalancing and tax-loss harvesting where appropriate.

Robo-advisor fees are based on how much you invest. They typically range from 0.25% to 0.50% of your account balance. You pay less than working with a traditional financial advisor, but you get less in terms of human interaction and planning advice. With a robo-advisor, you’ll have access to an online dashboard that tracks your goals and your investments and that offers self-guided planning tools. For advice, you have access to a call center or a team of financial advisors should you reach certain investment minimums and pay a higher fee.

What is a financial advisor?

A financial advisor is a professional that you can hire to help manage various aspects of your financial life. You will typically work 1-on-1 with your advisor, or a small team, that gets to know you and your situation and then helps to craft a more tailored investment strategy or more holistic financial plan.

When it comes to services, what you get from a financial advisor can vary greatly so you need to do your own research and ask the right questions. Most traditional financial advisors will focus primarily on investment and retirement advice. Because of this, they charge based on how much you invest and that fee averages around 1%. Some advisors will offer other planning services, but they are secondary to your investments.

Some financial advisors offer a more modern approach that integrates human advice and technology. You’ll get a dedicated advisor and personalized advice that looks at all aspects of your life, not just your investments. An enhanced experience is delivered via a digital platform where you can see your entire financial picture, access your investments, and track your planning goals over time. They typically charge a flat, fixed fee that’s personalized to your needs. You’ll get regular check-ins, assistance with executing your strategy, and help with evolving your plan as life changes.

What are the key differences between a financial advisor and a robo-advisor?

robo-advisortraditional financial advisormodern financial advisor
FeesFrom 0.25% to 0.50% of the amount you invest.Typically 1% of the amount you invest but can be higher.Flat, fixed fees from $1,800 per year to $5,000+ per year.
ServicesTypically limited to investment management. Limited planning advice at higher investment levels.Often limited to investment management. Some advisors offer financial planning services.More holistic planning and advice that looks at all aspects of your life (including investment management.)
Advisor RelationshipCall center in most cases. Team of advisors for higher investment balances and a higher fee.Typically a dedicated advisor. May take a team-based approach depending on services.Dedicated, 1-on-1 relationship with a CFP® Professional. Can be supported by a team of experts.

Often use technology to enhance the overall experience.

Investment Management Required?Yes.Yes.No, but offered at no additional cost.
Ongoing ServiceYes, but typically limited to investment advice and access to online planning tools.Yes. Typically limited to investment and retirement advice. Planning advice is often limited.Yes. Ongoing planning and regular check-ins to adjust your strategy as needed. Periodic investment reviews are included.

What to consider when choosing between a financial advisor vs. robo-advisor

There are a few things you need to consider when choosing between a robo-advisor and a financial advisor. Here’s what you need to know:

  • The advice that’s offered - At the heart of the decision is the kind of advice you want. A robo-advisor will offer a low cost investment solution and a DIY approach to everything else. A financial advisor can offer a broader range of services and advice that is tailored to your needs and provide ongoing support as your life changes.
  • The quality of the advisor - Should you choose to work with a financial advisor, you want to understand their education and credentials. The gold standard for financial advice is the CFP® Professional designation because of the education and ethical standards required to obtain it.
  • The cost for the services - Robo-advisors, in most cases, will be the lower cost option, but you are also getting less in the way of advice and ongoing support. Financial advisor fees can vary, and you’ll want to know what services are provided for the price you pay. You want to look for a fee model that puts your interests first and that is directly tied to the advice you receive.

Final word

When choosing the right type of advisor for your situation, it’s important to look at your entire life and financial picture, not just your investments. You also want to think about not just where you are today but where you want to be in the next one, three, or even five years (if not more).

Robo-advisors can offer low cost investment solutions but little when it comes to the rest of your life. Financial advisors can look at all aspects of your life and help you make smarter, more informed decisions that help you navigate life and all of its twists and turns with greater clarity and confidence.

To learn how a CFP® Professional at Facet can work with you to develop an ongoing financial plan to help you live well today and invest for your future, get in touch today.

Schedule a free introductory call


Facet Wealth, Inc. (“Facet”) is an SEC registered investment adviser headquartered in Baltimore, Maryland. This is not an offer to sell securities or the solicitation of an offer to purchase securities. This is not investment, financial, legal, or tax advice. Past performance is not a guarantee of future performance.


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As a seasoned financial expert with a deep understanding of both traditional financial advisory services and robo-advisors, I can provide valuable insights into the considerations one should make when deciding between the two. My extensive experience in the financial industry, coupled with a thorough knowledge of investment strategies and financial planning, positions me well to guide individuals in making informed decisions about their financial future.

Now, let's delve into the key concepts discussed in the article:



A robo-advisor is an online service that leverages technology and computer algorithms to construct low-cost, diversified investment portfolios. It offers a self-guided platform where users input information about their goals, time horizon, and risk tolerance through an online questionnaire.

Investment Strategy:

The investment solutions provided by robo-advisors are based on a risk profile assessment. Computer models design a globally diversified investment strategy for users, managing investments over time through automated rebalancing and tax-loss harvesting when appropriate.


Robo-advisor fees typically range from 0.25% to 0.50% of the account balance. These fees are lower compared to traditional financial advisors but come with limited human interaction and planning advice.


Services offered by robo-advisors are primarily focused on investment management. Users have access to an online dashboard for tracking goals and investments, along with self-guided planning tools. Additional advice is available through a call center or a team of financial advisors for those meeting specific investment minimums.

Financial Advisor:


A financial advisor is a professional who assists individuals in managing various aspects of their financial life. Traditional financial advisors may focus on investment and retirement advice, typically charging around 1% of the amount invested. Modern financial advisors integrate human advice with technology to offer a more holistic approach to financial planning.


Services from a financial advisor can vary, with traditional advisors primarily focusing on investment and retirement advice. Some may offer additional planning services. Modern financial advisors provide more comprehensive planning and advice that considers all aspects of an individual's life.


Traditional financial advisors typically charge a percentage of the amount invested, averaging around 1%. Modern financial advisors often charge flat, fixed fees ranging from $1,800 to $5,000+ per year, providing a more personalized and comprehensive service.

Key Differences:

  • Fees:

    • Robo-advisor: 0.25% to 0.50% of the amount invested.
    • Traditional Financial Advisor: Typically 1% of the amount invested.
    • Modern Financial Advisor: Flat, fixed fees.
  • Services:

    • Robo-advisor: Primarily investment management with limited planning advice.
    • Traditional Financial Advisor: Focus on investment and retirement advice.
    • Modern Financial Advisor: Holistic planning and advice covering all aspects of life.
  • Advisor Relationship:

    • Robo-advisor: Call center, with a team of advisors for higher investment balances.
    • Traditional Financial Advisor: Typically a dedicated advisor, possibly with a team-based approach.
    • Modern Financial Advisor: Dedicated, 1-on-1 relationship with a CFP® Professional, supported by a team.

Considerations When Choosing:

  1. Advice Offered:

    • Robo-advisor: Low-cost investment solution and a DIY approach.
    • Financial Advisor: Broader range of services, tailored advice, and ongoing support.
  2. Quality of the Advisor:

    • Look for education and credentials, with the CFP® Professional designation considered a gold standard.
  3. Cost for Services:

    • Evaluate the fees and services offered by both robo-advisors and financial advisors. Look for a fee model aligned with your interests.
  4. Long-Term Planning:

    • Consider where you want to be in the next few years. Robo-advisors may offer low-cost investment solutions, but financial advisors can provide more comprehensive life planning.

In conclusion, the decision between a robo-advisor and a financial advisor depends on individual preferences, financial goals, and the level of personalized advice and planning needed. While robo-advisors offer cost-effective investment solutions, financial advisors provide a more comprehensive and personalized approach to financial planning.

Robo-advisors vs. financial advisors: What's the difference? | Facet (2024)
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