How We Rank the Robos
The robo advisors were ranked on a comprehensive set of criteria. The final robo score was made up of a qualitative review of their services, platform, company, and features, as well as a quantitative score based primarily on the costs and performance of the portfolio. A small portion of the quantitative score is based on the size and tenure of the robo advice product. When scoring the qualitative aspect of the service, we looked at six main criteria: financial planning, user interface and customer experience, product features, access to live advisors, transparency and conflicts of interest, and account minimums.
Below we give examples of what earned robos points in each section.
Financial Planning: Here we graded the platforms on the quality of financial planning services offered. Robos that allowed users to build or create single or multi-goal financial plans were awarded points. Examples of financial planning tool features that earned points were those that allowed for “what if” scenarios, helped users calculate retirement spending needs, and offered suggestions on appropriate monthly saving goals.
User Interface and Customer Experience: Here we evaluated the user interface and the digital customer experience. We looked at the ease of getting to basic account information and general accessibility of the site. Points were also awarded to platforms that had good content and articles on basic personal finance and investing topics. Availability of live chat options and mobile apps also helped robos score higher in this category.
Product Features: Robos were awarded points for different types of features. Tax-loss harvesting, types of accounts offered, access to impact or other themed portfolios, and the ability for a robo to customize a portfolio to a specific customer situation were all among the features we looked for in this category.
Transparency and Conflicts of Interest: In this category we looked for things like whether or not a user could compare their portfolio to a standard benchmark easily to help them understand performance. We also awarded points for platforms that made their models available before account opening, and further points if they also published performance of their models to prospective customers. White papers and other information on how portfolios are constructed were also awarded points. We also awarded points to those portfolios that did not rely entirely on proprietary products when constructing their portfolios.
Access to Live Advisors: Robos with access to live advisors, or the ability to upgrade to a product that has live advisors, earned points. Robos earned more points if there was a dedicated live advisor option, if they required their advisors to hold CFPs, and if live advisors were made available to all service levels.
Account Minimum: Robos earned points for having lower minimums. This section was weighted less than the other five categories above.
Costs: Robos with low management fees, low expense ratios, and low or no allocations to cash scored the highest for costs.
Performance: We used two metrics to grade a robo’s performance. The first was Sharpe Ratio, which is a measure of risk-adjusted returns. The second was their return above/below the normalized benchmark. This measurement method reduces the impact of different equity/bond allocations in the portfolio. The method of using a normalized benchmark was created by the team at The Robo ReportTM and is explained in detail in the methodology section.
Size and Tenure: This score is based on the AUM and age of the robo advice products. Large amounts of AUM and older products are less likely to be discontinued in the future, forcing a client to change providers or products, which can be disadvantageous to the client. Robos that do not publish their AUM specific to the robo advice product only received the points available for the age of the robo. We encourage robo advisors and their parent companies to release AUM data for their different products in the interest of transparency to the investor.