Best Robo Advisor For First-Time Investors 2020

Posted on August 10, 2020

Best Robo Advisor For First-Time Investors

  • Winner: Betterment
  • Runner-up: Wealthsimple
  • Honorable Mention: SoFi

Betterment once again wins the award for Best Robo for First-Time Investors. Betterment has no investment minimum, making it accessible to all customers. Its annual management fee of 0.25% is low and, thus, is a prudent option. Additionally, Betterment stands out with financial planning tools that are easy to understand and compare an investor’s options intuitively. The user interface allows an investor to create specific portfolios that correspond to separate goals.  The goal forecaster shows how a one-time deposit, a change in recurring deposits, or even a change in time horizon can influence the outcome. The outcomes themselves show a range of possibilities so that the investor can understand the risks and manage their expectations. Finally, for those new to understanding investment risk, there is a sliding scale feature that displays how modifying the allocation to stocks increases the likelihood of achieving your goal but comes with increased volatility.

Betterment offers access to CFPs, for both one-time financial planning sessions or unlimited access with Betterment Premium. A new investor can benefit from having a one-time consultation to create a clear plan and ask questions. As the investor’s assets grow over time, their financial planning needs may become more complex and Betterment Premium is a natural next step. The CFP designation is the industry standard for financial planning, and Betterment is one of the only robos to specify this credential as part of their offering. 

Additionally, Betterment Everyday offers a high-yield cash account where investors can use their reserves to earn more interest than they would in a checking account. Betterment also offers socially-responsible investing, income-oriented investing, and smart-beta investing. These strategies may be interesting to new investors still exploring what makes sense for them. With no investment minimum, competitive fees, clear financial planning tools, CFPs, and different investing options to explore, Betterment is our top choice for the first-time investor.

Wealthsimple is a new addition to this category. Its Basic tier is a compelling offering with no account minimum to encourage accessibility, options for SRI or Halal investing, roundups to facilitate extra savings, and access to financial experts without additional cost. 

Access to a portfolio review with a financial expert at the lowest tier, without additional cost, makes asking questions and starting a dialogue with a professional easy for a first-time investor. Common behavioral pitfalls like trading when emotions are high, misjudging one’s risk capacity, or failure to stay the course, can all be mitigated with the assistance of an expert.

SoFi receives an honorable mention in this category.  SoFi has no minimum or management fee and offers access to expert advice. While SoFi originally began as a provider of consumer lending and student debt management, it views investment management as an important complement. Once customers pay down their student loans, they can begin saving, planning, and investing in-house with SoFi. SoFi Money offers high-interest saving and budgeting tools to support day-to-day personal finance needs. With SoFi, a new investor has an expert to call with questions, the knowledge that they are getting a great deal on their investing, and access to other financial tools and resources in the same place.

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