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Is DIY Investing Truly Cheaper than Robo-Advisors?

October 30, 2017

Robo-advisors have certainly brought down fees for investors, but investors who are ambitious do-it-yourself types can easily reap the benefits of the robos’ portfolio allocation — for nothing, Bloomberg writes.

The funds from providers such as Charles Schwab and Vanguard, which robos put their clients into, are also available on platforms such as Robinhood Financial, which doesn’t charge the 25 to 50-basis point fee typical at robos, according to the news service. And Bloomberg suggests that young investors who want to get into the market could “mimic” a robo-advisor’s fund allocation for free.

But Dan Egan, director of behavioral finance and investment at robo-advice pioneer Betterment, tells the news service that asset allocation is merely a “commodity.” The true value offered by robos, he says, is in the advice provided on how much to save and where, tax loss harvesting, retirement planning and the ability to talk to experts, according to the news service.


So for investors who don’t want to be as hands-on, the extra fee paid to robos still makes sense, Bloomberg writes. The same goes for anyone who wants to eventually work with a financial planner, which many robo-advisors now offer for a slightly higher fee, according to the news service.

By Alex Padalka
  • To read the Bloomberg article cited in this story, click here.