Research cutoff: September 26, 2026. Robo-advisor prices, portfolios and terms differ by firm and can change. This guide explains how to inspect a specific service. It is not a ranking, a live fee comparison or a recommendation to open an account.
Ask whether the documented service and complete costs fit your goal. A small headline fee tells you little about the portfolio, questionnaire assumptions, support or exit terms. Collect those answers before transferring money.
What the automated service actually does
A robo-advisor generally gathers information about your goals, time horizon, income, assets and risk tolerance through an online questionnaire, then creates and manages a portfolio. The SEC’s robo-adviser investor bulletin explains that services, investment approaches, account minimums and access to a human adviser vary widely. Do not assume that two firms offering an automated portfolio perform the same tasks.
Identify the legal advisory firm, account custodian and executing broker. Confirm which account types it manages, whether you can customize the allocation and whether it offers wider financial planning.
Test the questionnaire, not only its result
The SEC warns that a recommendation reflects only the information a tool asks for and receives. A short questionnaire may miss debt, a near-term purchase, other accounts or cash needs. It may funnel you into preset portfolios. Answer accurately, then record important facts it did not request.
Ask how responses become a stock and bond mix, when the tool requests updates, and whether you must report changed circumstances. What happens during a market decline? Inspect underlying holdings, geographic exposure and concentration. A “moderate” label does not show whether the allocation fits money you must spend soon.
Calculate the whole cost stack
Separate the advisory charge from fund expenses, commissions, trading spreads, account charges and exit fees. The SEC’s robo-adviser bulletin asks investors to consider direct and indirect costs. A low advisory charge can coexist with costly funds. Ask whether the firm or an affiliate earns money from products, cash holdings or referrals.
For illustration, a constant $10,000 balance charged a hypothetical 0.25% advisory fee and 0.10% weighted fund expense ratio would imply about $25 plus $10, or $35 annually. Actual balances, fee tiers and fund mix vary. Trading costs, taxes and other charges are excluded. This is arithmetic, not a firm quote.
Ask when fees are assessed, whether a minimum applies and whether human support costs extra. Compare annual dollars at your expected balance and the cost of leaving. Our ETF spread versus expense-ratio guide explains costs outside the advisory fee.
Read Form ADV in a practical order
Search the firm’s legal name in the SEC’s Investment Adviser Public Disclosure database and confirm its registration and disciplinary record. The SEC’s Form ADV investor bulletin says Part 1 contains basic business, ownership, affiliations and disciplinary information. Part 2A is the plain-English firm brochure: read its services, fee schedule, other expenses, investment strategies, risks, brokerage arrangements and conflicts. A brochure supplement in Part 2B covers relevant people who provide advice. For SEC-registered advisers serving retail investors, Part 3 is a shorter relationship summary with services, costs, conflicts and suggested questions.
Match the brochure’s legal entity and program to the account agreement. Ask for written clarification if fees appear to contradict the sales page. A filing is disclosure; registration does not guarantee returns.
Inspect the portfolio and the rules behind it
List the actual funds or securities, their weights and their expense ratios. Check whether the program is limited to its own or affiliated products and whether you can reject a holding. The SEC bulletin notes that some robo-advisers offer only a limited set of portfolios or focus on ETFs. Our niche ETF checklist helps inspect holdings and concentration; our small-portfolio allocation guide addresses the broader mix across accounts.
Ask what triggers rebalancing and whether the program may trade without each order’s approval. Can it pause sales or withdrawals? How is cash treated? How long might a transfer take? A backtest cannot establish how it would handle your deposits, withdrawals and taxes.
Check taxes, human support and exit terms
Some programs advertise tax-loss harvesting. The SEC bulletin cautions that any benefit depends on the investor’s tax situation and that wash-sale rules can matter. Ask which account types qualify, whether the program sees your other accounts, what records it supplies and whether it can coordinate transactions across a household. Do not treat a projected tax saving as a guaranteed reduction in cost; consult a qualified tax professional for a personal case.
Find out who answers investment questions, through which channels and at what minimum or extra fee. Technical support differs from portfolio advice. The SEC and FINRA’s automated-tools alert urges investors to examine assumptions and privacy practices. Check what data the service collects, shares and retains, and how to close or transfer the account.
Seven questions to keep beside the agreement
- What is the exact legal adviser, and what does its current Form ADV disclose?
- Which financial facts does the questionnaire omit, and who must update them later?
- Which securities can enter the portfolio, and what are their total fund costs?
- What advisory, trading, account and exit charges apply to your balance?
- Does the firm, an affiliate or a referrer benefit from a recommended product?
- Who can answer investment questions, and what are the limits of that service?
- What happens to trades, taxes, personal data and withdrawals if you leave?
If a material answer is missing, request the relevant current disclosure and compare it with the contract. Keep a copy of the version you reviewed and the date. This gives you a more durable decision record than a dated “top ten” ranking.
Frequently asked questions
Is a robo-advisor always cheaper than a human advisor?
No. Compare the complete advisory, fund, trading and account costs for the service you would actually use. A lower advertised advisory fee does not establish the lowest total cost.
Does a risk questionnaire make the recommended portfolio suitable?
Not by itself. The output depends on what the tool asks and what you disclose. Check whether it considers your goal, cash needs, other holdings and changes in your circumstances.
Where can I check a robo-advisor’s fees and conflicts?
Find the firm in the SEC Investment Adviser Public Disclosure database. Read its Form ADV Part 2 brochure for the fee schedule, other costs, strategies and conflicts; review any available relationship summary.
Does tax-loss harvesting guarantee a tax benefit?
No. Its value depends on your situation, transactions and applicable tax rules. Ask how the service identifies losses, handles wash-sale risk and coordinates with accounts it cannot see.
Educational information only; not individualized investment, legal or tax advice. Illustrative fees are invented for arithmetic and exclude balance changes and other costs. Investment values can fall, and automated management does not prevent losses.