Morningstar published its first “Robo-Advisor Landscape” report, which examines the current digital advice landscape in the United States by providing a detailed evaluation of 16 U.S.-based robo-advisors.
“Digital investment advice can be a good option for smaller investors who may not be able to afford a traditional financial advisor. However, there is work to be done on the level of transparency, higher fees in some cases, and financial planning tools that support investors with varied investing goals. We hope this guide will make it easier for investors to choose a robo-advisor and encourage the industry to improve,” said Amy C. Arnott, portfolio strategist at Morningstar and lead author of the report.
Morningstar’s manager research analysts qualitatively assessed each robo-advisor on the features and benefits that are most likely to help investors reach their financial goals, including fees, quality of investment advice, and breadth of financial planning tools. Those assessments took the form of “High,” “Above Average,” “Average,” “Below Average” and “Low.”
The report key findings attends that the typical robo-advisor playbook includes portfolios composed of passively managed, low-cost exchange-traded funds with a range of risk levels. However, asset allocation ranges vary, and many providers add quasi-active strategies, such as factor tilts, strategic beta, and direct indexing.
Also, the median advisory fee among robo-advisors surveyed was 0.30% of assets per year—making them significantly cheaper than traditional financial advisors’ typical 1% levy.
The Robo-Advisor Landscape complete report is available here.
Por Meritxell Sedo
Por Funds Society, Madrid