robo-advisor vs financial advisor

Robo-Advisor vs. Financial Advisor: What’s The Difference

Robo-advisors are the financial future. They are able to provide personalized advice and investment management at a much lower cost than traditional financial advisors,” said Mr. Jeremy Siegel, Professor of Finance at the Wharton School of the University of Pennsylvania.

Robo-advisors are replacing part of traditional financial advisors’ work. Is financial technology taking over humans’ jobs? Let’s see the differences between them:

Features Robo Advisor Human Financial Advisor
Accessibility 24/7 online In-person meetings, phone consultations
Suitability level Appropriate for beginner customers with minimum knowledge and passive investors Suited to advanced or active customers seeking specialized advice
Face-to-face Interaction Minimum to none Direct interactions with a human financial advisor
Personalization Standardized planning based on risk and goals Highly personalized plans tailored to individuals and circumstances
Investment approach Use of artificial intelligence and another algorithm, automated approaches Tailored-made investment plans based on a client’s financial circumstances and risk tolerance.
Cost Lower fees, usually 0.25% to 0.5% of assets under management Higher fees are generally 1% to 2% of assets under management


What is a Robo Advisor?

Robo-advisors are investment services using algorithms and software to build and manage investment portfolios for clients. They call for little interaction. You answer some questions set by a Robo-advisor, which sets up a portfolio based on your answers to programmed questions about your finances.

The questions consist of your investment goals, risk tolerance, and horizons. A Robo-advisor creates a portfolio allocating and investing exchange-traded funds (ETFs), money market funds, or other mutual funds in various proportions based on investment criteria. 

Besides, a Robo-advisor regularly monitors and rebalances your portfolio to meet your investment guidelines as markets change.


  • Low costs: Robo-advisors typically charge an annual fee of 0.25% to 0.50% against assets under management, far less than charges collected by a human financial advisor, allowing more investors low-cost investments.
  • Convenience: Unlike traditional financial advisors, Robo-advisors offer online investment management services 24 hours daily. Investors can open and fund accounts, manage portfolios, and seek investment advice through user-friendly web platforms or mobile applications.
  • Disciplined investing: Unlike human advisors, Robo-advisors are programmed to stick to investment guidelines and disciplines without human bias. They provide an easy-to-follow and objective way of investment management. Investors use the quantifiable criteria to make informed decisions.


  • Technology and program assumption issues: Robo-advisors are subject to malfunctions requiring immediate repair and adjustments. Clients may risk investment losses due to frequent glitches and downtime. Besides, wrongful calculations and assumptions behind a Robo-advisor may likely produce investment performance contrary to projections, leading to client losses.
  • Lack of personal interactions: Robo-advisors minimize human interactions, leading to fewer discussions regarding changes in clients’ financial situations, e.g., investment goals, concerns, or other specific considerations relevant to an investment’s success. Robo-advisors may not meet clients’ criteria regarding investment goals and risk tolerance.
  • Lack of tailored-made planning: “Robo-advisors may not be suited for active investment strategies or for investors who may want to make tactical investment decisions.” Mr. John Bogle was the founder and former CEO of Vanguard Group. Robo-investing are machines implementing programmed and standardized orders for formulated portfolios. They may not fully understand complicated human emotions and needs in drafting and solving complex financial issues like strategic investment planning.

When to Use a Robo-Advisor

You may consider using a Robo-advisor in the following situations: 

Beginner investors

At a starting point, you start on a learning curve of the investing journey and require more knowledge to navigate. A Robo-advisor helps you create an easy-to-understand portfolio and guides you toward investment diversification and rebalancing.

Cost-conscious investors

The annual fee charged by Robo-advisors is lower than that charged by human advisors. Low costs can enhance your portfolio return over time. A portfolio run by a Robo-advisor can significantly impact the return due to the compound effect.

Hands-off investment style

Investment management requires time and effort to achieve the expected results. You may not be able to afford these due to your busy schedules. A Robo-advisor can help you to create, monitor, and regularly rebalance your portfolio.

Fees and Accessibility

“Robo-advisors have the potential of democratizing investing by making it more accessible and affordable to a broader range of individuals.” Mr. Michael Kices is a CFP@ Behavior Finance Advisor at Buckingham Strategic Wealth Partners. 

Robo-advisors charge an annual fee of 0.25% to 0.5% of your portfolio assets, lower than financial advisors charge. Besides, they can provide online services for you 24 hours a day without rest, offering a popular place for general investors.

What is a Financial Advisor?

A financial advisor provides more personalized investment advice, besides portfolio management services, than a Robo-advisor. He has more in-depth knowledge of investments relating to risks and financial markets, providing more comprehensive investment services to clients.

A human advisor digs deep into a client’s financial circumstances, such as psychological attitude and non-financial factors likely to influence a decision-making process in financial goals and investment time frame. A tailor-made financial plan for a client is a financial advisor’s work at the end of the first phase of financial planning.

Like a Robo-advisor, however, a human advisor builds up and understands more based on a close relationship, like understanding a client’s needs, risk mapping, goals, and timeline. A financial advisor should establish immediate rapport with his clients before proceeding. A solid rapport helps an advisor understand his client more and craft a personalized financial plan.


  • Personalized recommendations: “Human financial advisors offer personalized guidance and expertise that goes beyond investment recommendations,” Mr. Roger Ma, CFP@, CFA@ Managing Director at Behavior Finance  Investment Group. A financial advisor can offer a more suitable investment scheme by understanding more about and building a good relationship with a client. A client may benefit from a plan meeting his needs.
  • Investment research and analysis: A financial advisor conducts research and provides analysis orienting to a client’s criteria, for example, economic trends, industry developments, and company analysis, leading to an appropriate recommendation for his client.
  • Scope of recommendations: A financial advisor may introduce more about investment products than a Robo-advisor, including stocks, bonds, and derivative products besides ETFs and mutual funds.
  • Risk management: Besides regular monitoring and rebalancing your portfolio, a financial advisor may reduce investment risks by using hedging skills or income enhancements to minimize potential losses.


  • Higher costs: A financial advisor charges an annual fee of 1 – 2% on assets under management, which is more expensive than a Robo-advisor. Investors of lower assets may not afford the expenses a financial advisor requires. Moreover, higher costs may also reduce returns.
  • Limited access: Human financial advisors, like Robo-advisors, typically operate during business hours and may not be available 24/7. Clients may have limited access to a financial advisor owing to emergent matters or others requiring instant advice outside the hours.
  • Human bias: A human financial advisor may unconsciously integrate his bias into personalized advice to a client based on his beliefs, experience, and relationship with a client. It may lead to a biased investment plan.

When to Use a Financial Advisor

You should need a traditional financial advisor when encountering the following situations: 

Complex financial situations

Suppose you have multiple financial goals in conflict with one another or have sizeable assets requiring specialized management. In that case, a human advisor is a valuable option for offering complicated expertise and opinions.

Emotional difficulty

Clients may have emotional issues in making investment decisions. A financial advisor helps plan and execute strategic investment decisions in response to market changes.

Human interactions

Clients inclined to face-to-face consultation and close human relations may ditch Robo-investing in favor of a human advisor to handle financial matters.

Continuing changes

Your financial circumstances are ever-changing, like your risk tolerance and financial goals. A dedicated financial advisor may be an excellent fit to recommend financial advice and swiftly execute new plans in response to your changing needs.

Comprehensive financial planning

Suppose you require more financial services like estate, wealth, or tax planning. In that case, all-around financial planning services are the ones you should resort to. A team of financial planners from various fields should coordinate and facilitate your financial criteria into a complete financial plan.

Business planning

You are running a business and intend to integrate the business into your financial plan. A traditional financial advisor is a viable option as he has expertise and experience in drafting an appropriate financial plan by combining your investment and business needs.

Specialized in investment needs

Suppose you want to add more criteria to investment goals, such as ESG investing, regional investing, diversification requirements, or other alternative investing. In that case, a Robo-advisor may not be able to fulfill your investment requirements. A human financial advisor can offer specialized recommendations to help you in these areas.

Fees and Accessibility

A financial advisor usually charges an annual fee of 1-2% of assets under management. Though higher than a Robo-advisor, a human counselor can actively make a plan more personalized and appropriate to your personal needs in investment portfolio management.

Besides, a financial advisor makes better investment strategies in response to constant changes in the market and an investor’s needs.

robo advisor

Considerations for Decision-Making

A disaster may occur in your financial life regarding a wrongful choice between a Robo-advisor or a financial advisor. The following helps you on the way to financial success in selecting the right one:

  • Fees and charges: A significant gap between fees collected by a Robo-advisor and a financial advisor may affect your portfolio’s returns. The effect is more substantial if compounded. You should choose a more straightforward way of investing, like a Robo-advisor, if an auto-investing advisor can manage your assets.
  • Tech-savvy investing: Robo-advisors are a product of advanced technology. Investors may feel uncomfortable dealing with machines regarding wealth management. Traditional financial advisors still play an essential role in interactions and building close relationships with clients, preferring face-to-face consultations over data input.
  • Investing style: Investors with other engagements like work and family will likely spend less time managing their investments. A Robo-advisor assists in formulating investments and monitors and rebalances their portfolios automatically, making investing more accessible.
    Besides, automatic investing is appropriate for investors with a hands-off style without any hassles, like regular attention to investment monitoring and rebalancing.
  • Complex financial conditions: Clients with multi-financial services needs, such as estate planning, tax planning, investments with sizeable assets, or other investment criteria, should require a financial advisor to provide more comprehensive services to fulfill their financial goals.

Final Thought

A Robo-advisor provides affordable, streamlined, and 24/7 investing services; however, a financial advisor offers complex and comprehensive services but expensive services. You should choose one based on your situation to increase your investment success rate.

4 key takeaways

  • Robo-advisors provide a low-cost, streamlined, and standardized investing style to investors.
  • Financial advisors offer comprehensive and complex but expensive investment services.
  • Robo-advisors are suitable for investors with a hands-off style or a simple asset mix.
  • A financial advisor fits investors with significant assets or complicated financial situations.

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