Best Robo-Advisors In A Nutshell

Robo-advisors are digital platforms that provide automated, algorithm-driven financial planning services with limited human oversight. These platforms are becoming mainstream as consumers look for low-cost financial and investment advice. Many younger consumers also enjoy robo-advisors for their comprehensive digital financial planning tools and socially responsible investment portfolios. The global robo-advisory market size is predicted to reach over $41 billion by 2027.


SoFi is an online lending platform that provides affordable education loans to students, and it expanded into financial services, including loans, credit cards, investment services, and insurance. It makes money primarily via payment processing fees and loan securitization.

SoFi is a fintech company that was founded in 2011 by Mike Cagney, Dan Macklin, James Finnigan, and Ian Brady. The company is known for developing a range of high-quality financial products, including student loan refinancing, mortgages, personal loans, and credit cards.

In 2019, SoFi released its own robo-advisor called SoFi Automated Investing. As part of the service, the company provides automatic rebalancing and goal-based planning to help users reach their life goals. Customers also get access to career services, financial advisors, and discounts on other products in the SoFi family.


Betterment is an American financial advisory company founded in 2008 by MBA graduate Jon Stein and lawyer Eli Broverman. Betterment makes money via investment plans, financial advice packages, betterment for advisors, betterment for business, cash reserve, and checking accounts.

Betterment was one of the first robo-advisors to hit the market. Launched in 2008, investors can easily get started by answering a few questions to determine their risk tolerance and preferred time horizon for cashing out their investment.

The platform then recommends a stock-and-bond allocation and automatically adjusts the balance whenever a deposit or withdrawal is made. Betterment algorithms also check for portfolio drift daily and will rebalance if necessary. 


Wealthfront is an automated Fintech investment platform providing investment, retirement, and cash management products to retail investors, mostly making money on the annual 0.25% advisory fee the company charges for assets under management. It also makes money via a line of credits and interests on the cash accounts.

Wealthfront shares many similar features with Betterment, including a 0.25% annual advisory fee and tax-loss harvesting. Unlike Betterment, however, Wealthfront requires a minimum balance of $500 to get started.

The platform is also favored by parents because it offers a 529 college savings plan, which allows them to save for their kids’ future tuition. Wealthfront also offers a branded debit card with a 0.1% annual percentage yield (APY).


Ellevest is a robo-advisor platform and financial literacy program founded primarily for women, with approximately 90% of its 120,000 users identifying as female. Founder Sallie Krawcheck argued most investment platforms were made for men, with women tending to invest much lower amounts and parking 68% of their money in cash.

To that end, Ellevest was created to encourage more women to invest and save for life goals including retirement or the down payment for a house. The platform also offers advice on budgeting, saving, paying off debt, and even applying for unemployment. 

Ellevest has a three-tiered membership program, with the basic plan at $1 month including an approved savings account, branded debit card, and brokerage account.

M1 Finance

M1 Finance is a North American online trading platform for common and preferred stocks and exchange-traded funds (ETFs). The company also offers margin lending, cash management, and a checking or debit account service. M1 Finance has a standard assortment of revenue streams for an investment platform. As a market maker earns money on the bid-ask spread, M1 Finance also offers a single premium subscription dubbed M1 Plus, and through interest and interchange fees.

M1 Finance is preferred amongst more sophisticated investors because it offers a unique combination of automated investing and high-level customization. 

Consumers enjoy the M1 Finance platform because it offers a low-cost way to invest in fractional shares with a higher degree of control over portfolio construction. 

Importantly, the platform does not charge portfolio management fees, trading fees, or any fees associated with deposits or withdrawals to a connected bank account.

Key takeaways:

  • Robo-advisors are digital platforms that provide automated, algorithm-driven financial planning services with limited human oversight. 
  • Betterment and Wealthfront developed two of the earliest robo-advisor platforms for simple goal-based investing. For more sophisticated investors or those desiring more customization, M1 Finance is a superb option.
  • Ellevest is a robo-advisor platform that was created to encourage women to invest and save for important milestones. Relative newcomer SoFi Automated Investing is also a platform developed by leading fintech product developer SoFi.

Robo-Advisors: Automated Financial Planning Platforms

  • Introduction: Robo-advisors are digital platforms with automated, algorithm-driven financial planning services and limited human oversight.
  • SoFi: Online lending platform providing affordable education loans and expanded into financial services, including SoFi Automated Investing with automatic rebalancing and goal-based planning.
  • Betterment: One of the first robo-advisors, offering investment plans, financial advice, and automated portfolio rebalancing.
  • Wealthfront: Fintech investment platform providing investment, retirement, and cash management products with a 0.25% annual advisory fee.
  • Ellevest: Robo-advisor and financial literacy program primarily for women, designed to encourage more women to invest and save for life goals.
  • M1 Finance: Online trading platform offering automated investing and high-level customization, preferred by sophisticated investors.
  • Key Takeaways: Overview of leading robo-advisor platforms and their unique features.

Read: SoFi Business Model, Betterment Business Model, Wealthfront Business Model, M1 Finance Business Model.

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Connected Financial Concepts

Circle of Competence

The circle of competence describes a person’s natural competence in an area that matches their skills and abilities. Beyond this imaginary circle are skills and abilities that a person is naturally less competent at. The concept was popularised by Warren Buffett, who argued that investors should only invest in companies they know and understand. However, the circle of competence applies to any topic and indeed any individual.

What is a Moat

Economic or market moats represent the long-term business defensibility. Or how long a business can retain its competitive advantage in the marketplace over the years. Warren Buffet who popularized the term “moat” referred to it as a share of mind, opposite to market share, as such it is the characteristic that all valuable brands have.

Buffet Indicator

The Buffet Indicator is a measure of the total value of all publicly-traded stocks in a country divided by that country’s GDP. It’s a measure and ratio to evaluate whether a market is undervalued or overvalued. It’s one of Warren Buffet’s favorite measures as a warning that financial markets might be overvalued and riskier.

Venture Capital

Venture capital is a form of investing skewed toward high-risk bets, that are likely to fail. Therefore venture capitalists look for higher returns. Indeed, venture capital is based on the power law, or the law for which a small number of bets will pay off big time for the larger numbers of low-return or investments that will go to zero. That is the whole premise of venture capital.

Foreign Direct Investment

Foreign direct investment occurs when an individual or business purchases an interest of 10% or more in a company that operates in a different country. According to the International Monetary Fund (IMF), this percentage implies that the investor can influence or participate in the management of an enterprise. When the interest is less than 10%, on the other hand, the IMF simply defines it as a security that is part of a stock portfolio. Foreign direct investment (FDI), therefore, involves the purchase of an interest in a company by an entity that is located in another country. 


Micro-investing is the process of investing small amounts of money regularly. The process of micro-investing involves small and sometimes irregular investments where the individual can set up recurring payments or invest a lump sum as cash becomes available.

Meme Investing

Meme stocks are securities that go viral online and attract the attention of the younger generation of retail investors. Meme investing, therefore, is a bottom-up, community-driven approach to investing that positions itself as the antonym to Wall Street investing. Also, meme investing often looks at attractive opportunities with lower liquidity that might be easier to overtake, thus enabling wide speculation, as “meme investors” often look for disproportionate short-term returns.

Retail Investing

Retail investing is the act of non-professional investors buying and selling securities for their own purposes. Retail investing has become popular with the rise of zero commissions digital platforms enabling anyone with small portfolio to trade.

Accredited Investor

Accredited investors are individuals or entities deemed sophisticated enough to purchase securities that are not bound by the laws that protect normal investors. These may encompass venture capital, angel investments, private equity funds, hedge funds, real estate investment funds, and specialty investment funds such as those related to cryptocurrency. Accredited investors, therefore, are individuals or entities permitted to invest in securities that are complex, opaque, loosely regulated, or otherwise unregistered with a financial authority.

Startup Valuation

Startup valuation describes a suite of methods used to value companies with little or no revenue. Therefore, startup valuation is the process of determining what a startup is worth. This value clarifies the company’s capacity to meet customer and investor expectations, achieve stated milestones, and use the new capital to grow.

Profit vs. Cash Flow

Profit is the total income that a company generates from its operations. This includes money from sales, investments, and other income sources. In contrast, cash flow is the money that flows in and out of a company. This distinction is critical to understand as a profitable company might be short of cash and have liquidity crises.


Double-entry accounting is the foundation of modern financial accounting. It’s based on the accounting equation, where assets equal liabilities plus equity. That is the fundamental unit to build financial statements (balance sheet, income statement, and cash flow statement). The basic concept of double-entry is that a single transaction, to be recorded, will hit two accounts.

Balance Sheet

The purpose of the balance sheet is to report how the resources to run the operations of the business were acquired. The Balance Sheet helps to assess the financial risk of a business and the simplest way to describe it is given by the accounting equation (assets = liability + equity).

Income Statement

The income statement, together with the balance sheet and the cash flow statement is among the key financial statements to understand how companies perform at fundamental level. The income statement shows the revenues and costs for a period and whether the company runs at profit or loss (also called P&L statement).

Cash Flow Statement

The cash flow statement is the third main financial statement, together with income statement and the balance sheet. It helps to assess the liquidity of an organization by showing the cash balances coming from operations, investing and financing. The cash flow statement can be prepared with two separate methods: direct or indirect.

Capital Structure

The capital structure shows how an organization financed its operations. Following the balance sheet structure, usually, assets of an organization can be built either by using equity or liability. Equity usually comprises endowment from shareholders and profit reserves. Where instead, liabilities can comprise either current (short-term debt) or non-current (long-term obligations).

Capital Expenditure

Capital expenditure or capital expense represents the money spent toward things that can be classified as fixed asset, with a longer term value. As such they will be recorded under non-current assets, on the balance sheet, and they will be amortized over the years. The reduced value on the balance sheet is expensed through the profit and loss.

Financial Statements

Financial statements help companies assess several aspects of the business, from profitability (income statement) to how assets are sourced (balance sheet), and cash inflows and outflows (cash flow statement). Financial statements are also mandatory to companies for tax purposes. They are also used by managers to assess the performance of the business.

Financial Modeling

Financial modeling involves the analysis of accounting, finance, and business data to predict future financial performance. Financial modeling is often used in valuation, which consists of estimating the value in dollar terms of a company based on several parameters. Some of the most common financial models comprise discounted cash flows, the M&A model, and the CCA model.

Business Valuation

Business valuations involve a formal analysis of the key operational aspects of a business. A business valuation is an analysis used to determine the economic value of a business or company unit. It’s important to note that valuations are one part science and one part art. Analysts use professional judgment to consider the financial performance of a business with respect to local, national, or global economic conditions. They will also consider the total value of assets and liabilities, in addition to patented or proprietary technology.

Financial Ratio



The Weighted Average Cost of Capital can also be defined as the cost of capital. That’s a rate – net of the weight of the equity and debt the company holds – that assesses how much it cost to that firm to get capital in the form of equity, debt or both. 

Financial Option

A financial option is a contract, defined as a derivative drawing its value on a set of underlying variables (perhaps the volatility of the stock underlying the option). It comprises two parties (option writer and option buyer). This contract offers the right of the option holder to purchase the underlying asset at an agreed price.

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