How to Choose a Robo-Advisor: 7 Checks Before You Fund One

These are the checks where the platforms genuinely differ and where the answer changes what you should pick. They are ordered by how much money the decision moves, not by how often they appear in marketing. Cost comes first because it is the largest controllable variable and the one most often compared as a rate rather than as an amount. The last check is included because leaving it out is how people end up comparing eight products in a category they did not need.

To be upfront, since this is our site: Walnut is not a robo-advisor and is not ranked anywhere on this page. It appears once, in check seven, as one of the routes available if the answer to “do I want one at all” turns out to be no.

Almost every robo-advisor charges a percentage of what you have invested, most commonly around 0.25% a year. The percentage is designed to sound small and it is the single largest controllable cost in the decision.

How to check it. Multiply the rate by the balance you expect to hold in three years, not the balance you have today. At 0.25%, a $50,000 balance costs about $125 a year and a $250,000 balance costs about $625, for the same service.

Where people go wrong. Comparing rates instead of amounts. The gap between 0.25% and no advisory fee is invisible as a percentage and obvious as a number.

The arithmetic, so you can put your own balance against it. This is the advisory fee alone at the category-standard 0.25%, before any fund expense ratios:

The ten-year column assumes a steady balance, so it understates the real figure for anyone still contributing. See robo-advisor fees explained for the full breakdown including fund costs.

The advisory fee is not the whole cost. Your money is invested in ETFs or mutual funds that charge their own expense ratios, and you pay both.

How to check it. Ask for the weighted average expense ratio of the portfolio you would be put in, then add it to the advisory fee. That total is your real annual cost.

Where people go wrong. Assuming a platform that builds portfolios from its own funds is cheaper. Sometimes it is, because the funds are cheap; sometimes the fund fee is where the cost moved.

A platform advertising no advisory fee has to earn somewhere. One common route is holding a required slice of your portfolio in cash and keeping some of the interest on it.

How to check it. Look for a stated cash allocation in the portfolio description. If a meaningful share of a long-term portfolio is required to sit in cash, treat that as a cost, because it is money not invested.

Where people go wrong. Reading no advisory fee as free. An uninvested cash requirement can cost more over a decade than a transparent 0.25%.

The best robo-advisor for you is one that supports the account you actually need. Roth and traditional IRAs, SEP IRAs, joint accounts, trusts and 529s are not all offered everywhere, and minimums range from nothing to five figures.

How to check it. Write down the account type first, then filter. Check the minimum both to open and to reach the tier whose features you are choosing it for.

Where people go wrong. Picking on features that only unlock above a balance threshold you will not reach for years.

Tax-loss harvesting is the headline feature on several platforms, and it does nothing inside an IRA or a 401(k), because there is no taxable gain to offset.

How to check it. If you are investing in a retirement account, ignore tax-loss harvesting entirely when comparing. If you are investing in a taxable account, it is worth real money and belongs high on the list.

Where people go wrong. Paying a premium tier for tax features in an account where they cannot apply.

Exits are where the cost shows up unexpectedly. Some platforms transfer your holdings out in kind, some sell everything first, and selling in a taxable account creates a tax bill you did not choose the timing of.

How to check it. Ask, before you fund it: can I transfer these holdings out in kind to another broker, and is there a transfer-out fee? Get the answer in writing.

Where people go wrong. Discovering at exit that leaving means realising gains on the platform's schedule rather than yours.

This is the check most guides skip, and it is the one that decides the other six. A robo-advisor is a good answer to one specific question: I want a diversified portfolio managed for me and I do not want to make the decisions. If that is not your question, the whole category is the wrong aisle.

How to check it. Ask what is actually bothering you. If it is that you do not know what to buy, a robo answers it. If it is that you already own things and cannot tell whether they are working, a robo does not answer that; it replaces your holdings with its own. Keeping your broker and adding analysis on top is a different route, and it is the one Walnut takes.

Where people go wrong. Choosing between robo-advisors when the real choice was whether to use one. It is worth ten minutes before you move money you would have to sell to get back.

This is worth spelling out because the two situations look similar and are not. Wanting a portfolio built for you is a robo-advisor question. Wanting to know whether the portfolio you already have is working is a portfolio analysis question, and handing your holdings to a robo does not answer it, because the robo sells them and buys its own. If that is your situation, see alternatives to a robo-advisor.

Once you have your account type, your balance, and an honest answer to check seven, the field narrows fast. The ranked roundup covers the major platforms on the same fields. If cost is the deciding factor, the low-cost options and the ones with no advisory fee are broken out separately. If you are choosing for a specific account, there are pages for retirement, a Roth IRA, and taxable accounts where tax features matter.

And if check seven went the other way, are robo-advisors worth it takes that question head on.