2024 Robo-Advice Landscape: Industry Shifts and Leading Platforms (2024)

• The robo-advice industry experienced some consolidation in the past year
• Compare updated returns for the major robo-advisers over various periods
• See The Robo Report’s top picks among the current robo-advisory services

Robo-advice emerged in 2008 with the launch of Betterment and Wealthfront. While robo-advice products are now a permanent part of the financial advice landscape, recent years have witnessed a consolidation across this industry, with most start-ups either being acquired or shut down.

With a mission to bring transparency to the robo-advice industry, Condor Capital Management publishes The Robo Report, a free, comprehensive quarterly newsletter reporting on the digital advice industry. The report tracks 37 accounts across 27 robo-advice providers.

Each year, we look back at the industry and provide AAII members with an update on the robo-advice industry, products and portfolio performance.

The portfolios we track in The Robo Report represent moderate to moderately aggressive portfolios, with a few exceptions. We aim for portfolios that contain allocations of 60% in equities and 40% in fixed income. All performance commentary in this article is for the period ended March 31, 2024.

Robo-Advice Industry Highlights

There have been some notable changes in the robo-advice industry. Goldman Sachs has reached a deal to sell the investment accounts of its Marcus robo-service to Betterment, with completion expected in June. Initially launched in February 2021 to attract retail investors, Marcus aimed at a demographic significantly broader than Goldman Sachs’ traditional clientele. The downstream move ultimately did not meet expectations, leading to an exit from the robo-advisory space. This news follows JPMorgan Chase & Co.’s (JPM) announcement in late 2023 that it would be shuttering its robo-advisory service.

Betterment rolled out a revamped premium plan in April 2024. The upgraded plan includes new benefits, such as access to preferred rates on Betterment’s Cash Reserve and a 20% discount on estate planning services. Premium customers are now subject to an annual management fee of 0.65%, a notable increase from the previous fee of 0.40%.

Both the increased fee at Betterment and the shuttering of the Goldman Sachs and JPMorgan Chase robos represent the difficulty of offering advisory services at rock-bottom prices while earning meaningful profits for the provider.

Top Pick Among Robo-Advice Platforms

Our top pick this year for best overall robo-adviser is Merrill Guided Investing. Merrill offers two distinct service tiers: a digital-only option called Merrill Guided Investing for those with $1,000 or more; and a hybrid tier called Merrill Guided Investing With Advisor for investors with $20,000 or more.

The base tier provides a comprehensive suite of features, including live operational support, an environmental, social and governance (ESG) investment portfolio and a single goal-per-account planning tool to forecast future account value and probability of success. For more complex planning needs, investors can engage with live advisers at the higher tier.

Merrill’s ranking benefits from its allocation to municipal bonds within its fixed-income component and from a preference for large-cap stocks on the equity side. This approach consistently positions Merrill at the forefront of our rankings, delivering robust returns over three- and five-year periods. With its proactive management and comprehensive strategy, Merrill Guided Investing stands out as an excellent choice for investors seeking dynamic portfolio management. Its performance and service offerings firmly establish it as the best overall robo-adviser.

Top Pick for Beginners

SoFi remains our top pick for those new to investing. Many beginners grapple with managing student loans or other debts as they start their investing journey. SoFi offers a comprehensive platform that helps with debt consolidation and provides a wide array of investing resources. In addition to debt assistance, SoFi offers access to career coaching and live financial planning sessions.

Noteworthy among its features is SoFi Relay, a robust budgeting tool that integrates external financial accounts into its platform, providing a comprehensive snapshot of an individual’s financial landscape. With these offerings and its competitive fee structure, SoFi stands out as a great choice for beginning investors.

Best for Digital Planning Tools

The expansion of robo-advisers has revolutionized the financial industry by democratizing access to financial advice. These platforms ensure that high-quality financial planning is available to anyone with an internet connection and a commitment to invest in their financial future.

Wealthfront, a leader in digital-first financial planning, exemplifies this shift from conventional advisory services and their often-higher fees. Its planning tool manages many financial goals—from retirement and educational savings to buying homes and planning vacations—and stands out for its depth and versatility. The home purchasing tool is particularly refined, incorporating Redfin data.

Although Wealthfront’s tools might seem complex compared to those from other providers, it excels in offering extensive customization. Users can simulate detailed scenarios, including retirement outcomes, sudden financial gains and real estate investments, enabling highly personalized financial plans.

Wealthfront offers these sophisticated tools in its standard service, free of charge, enhancing the accessibility and adaptability of financial planning for a broader audience.

Where to Go for Complex Planning Needs

For individuals with intricate financial planning needs, digital tools offer significant insights, but combining robo-advisory services with access to live financial advisers—a hybrid model—often delivers the most comprehensive support.

Vanguard Personal Advisor remains the top choice for complex financial planning, offering a blend of digital and human advisory services for sophisticated needs. Vanguard’s hybrid model service tier is appealing for its affordability and accessibility. With a minimum investment of $50,000, clients engage with a live adviser for a 0.30% management fee. Investors allocating $500,000 or more gain a dedicated adviser, maintaining the same competitive fee structure. This approach allows investors to model multiple financial goals and manage assets more effectively at a significantly lower cost than the traditional 1% fee typically charged by human advisers.

Performance Leaders

Table 1 and Figure 1 show returns for the major robo-advisers over the trailing one-year, three-year and five-year periods ended March 31, 2024, as tracked by The Robo Report.

Over the last three years, Fidelity Go, Wealthfront (2016 vintage) and Zacks Advantage have led the pack in performance, bolstered by their large allocations to U.S. equities. The S&P 500 index delivered an annualized return of 11.50% during this three-year period, markedly outperforming the MSCI EAFE index and the MSCI Emerging Markets index, which returned 5.38% and –4.81%, respectively. Notably, Zacks Advantage allocated the highest percentage to domestic equities at 82% of the total equity portion of its portfolio, followed by Wealthfront at 74% and Fidelity Go at 70%, all above the average robo allocation of 66%.

While allocations toward value stocks have boosted the returns of robo-advisers in this group in 2022, the recent surge in growth stocks has started to diminish the impact of these value allocations. Last quarter, we reported that the Russell 3000 Growth index was closing in on the Russell 3000 Value index’s performance for the trailing three years. During this quarter, the Russell 3000 Growth has overtaken its value counterpart, as shown by its annualized return of 11.55%, compared to the 7.71% return of the Russell 3000 Value. Notably, this change partly explains why Schwab Domestic Focus has dropped out of the top spot for the three-year performance category, as the portfolio has one of the highest allocations to value.

In fixed income, municipal bonds played a crucial role in enhancing portfolio performance, with all leading portfolios showing high allocations to this asset class. This focus proved advantageous, as evidenced by the relatively modest annualized loss of 0.41% in the Bloomberg Municipal Bond index over the past three years, in contrast to the more pronounced loss of 1.87% seen in the Bloomberg U.S. Aggregate Bond index.

Top Performers Over Longer Periods

Over the past five years, the standout performers were Wealthfront (2016), SoFi, Zacks Advantage and Fidelity Go. Our Wealthfront (2016) account has had its relative performance substantially boosted thanks to a dedicated energy allocation. Wealthfront (2016) and Fidelity Go consistently favored investments in domestic large-cap equities. This approach has been particularly advantageous, aligning well with the strong performance of U.S. markets during this period. The S&P 500’s impressive five-year annualized return of 15.02% as of March 31 far surpassed the MSCI EAFE’s return of 7.92%, highlighting the benefits of a U.S.-centric investment strategy during this period.

The balance between growth and value allocations played a critical role in shaping equity performance. Despite a resurgence in value stocks in 2022, growth stocks maintained a considerable advantage. Over the last five years, the Russell 3000 Growth achieved an annualized return of 17.80%, significantly outstripping the 10.14% annualized return of the Russell 3000 Value. Zacks Advantage notably capitalized on this trend by shifting from the SPDR S&P 500 ETF Trust (SPY) to the Vanguard Russell 1000 Growth ETF (VONG), a strategic move that leveraged the dominant growth trend for enhanced returns. SoFi has also benefited from a growth tilt in its portfolio.

In the fixed-income arena, Schwab Intelligent Portfolios, Fidelity Go and U.S. Bank led the pack. U.S. Bank and Schwab consistently maintained high allocations to municipal bonds, which generally outperformed corporate bonds during the five-year period ending March 31, 2024, highlighting the broader market’s preference for safer, income-generating assets amid fluctuating interest rates and economic conditions. This performance differential is reflected in the Bloomberg Municipal Bond, which delivered an annualized return of 1.59%. In comparison, the Bloomberg U.S. Corporate index, representing corporate bonds, lagged slightly with a return of 1.52%.

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