Robinhood Launched A New Robo-Advisor. Here’s How It Stacks Up Against The Competition

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It seems like only yesterday that Robinhood waltzed onto the brokerage scene to show the grownups how kids these days think things should be done around here. 

Trading commissions? Hard pass. Crypto? Heck, yeah! Binary options — er, “events trading”? Check. 

How time flies. With its latest launch — Robinhood Strategies — the broker joins Betterment, Fidelity and Charles Schwab at the grownups table. The new managed-portfolio service is more than just another robo-advisor, according to the company. Let’s take a look and see how it stacks up. 

What is Robinhood Strategies?

First, a refresher: Robo-advisors are digitally based financial managers that build and manage investment portfolios (typically a mix of exchange-traded funds, or ETFs) based on a customer’s investment goals, timeline (when you need the money) and temperament (tolerance for risk). 

The “robo” refers to the underlying algorithm that fuels the behind-the-scenes work, such as adjusting portfolio holdings to maintain a target asset allocation. Some robo-advisors provide additional services, such as advanced goal planning, tax-loss harvesting and access to human advisors. 

Automated portfolio recommendations aren’t new to Robinhood. A few free existing tools within the Robinhood app — Robinhood’s “retirement recommendations” (available to customers with a Robinhood IRA) and its First Trade recommendations (for taxable accounts) — will suggest a mix of ETFs across asset classes based on your age and how you answered questions in your investor profile when you set up the account. 

Robinhood Strategies is different from the free recommendations in some key ways:

1. Portfolios are not limited to ETFs. Robinhood Strategies accounts with $500 or more will be invested in a mix of ETFs and individual stocks. Lower balances are limited to an ETF-only managed portfolio.
2. Investments are automated. The free guided tool merely makes suggestions, leaving it to customers to execute trades on their own. (There is a $20 minimum requirement to invest in the recommended ETFs.) Robinhood’s managed portfolio takes care of this step by automatically deploying your money proportionally across the recommended investments.
3. Ongoing management is included. The biggest difference between Robinhood’s free portfolio recommendations and its new paid service is the active management component. Instead of a single point-in-time list of ETFs with no ongoing alerts when the allocation gets out of whack, Strategies stays on the case and automatically makes portfolio adjustments when needed. It’s in constant communication, providing regular updates (via text and audio) on overall performance, market shifts, goal or account-specific nudges and explanations for any portfolio allocation changes. 

Robinhood Strategies vs. the robo competition

Robinhood has a history of undercutting competitors on costs. Robinhood Strategies’ 0.25 percent management fee is in line with what other robo-advisors charge. Here’s how Robinhood’s robo compares to offerings at Betterment, Fidelity and Schwab: 

Is Robinhood Strategies a deal?

Robinhood is sweetening the pot for a limited time to attract customers who fund a Robinhood Strategies account in the next few months. It’s offering a 1 percent transfer boost (up to $250 for non-Gold members and $500 for Gold subscribers) and waiving management fees on the first $500 to $1,000 invested through the end of the year. 

Like other promotions Robinhood runs for new and existing customers, there are strings attached — the main one being the requirement to maintain the account balance that earned the match for one to five years. 

With brokerage account bonuses being pretty standard these days, deciding if Robinhood Strategies is right for you comes down to a few personal factors.

• How much you have to invest: Fidelity Go Investors with less than $25,000 pay no management fees whatsoever. Plus, Fidelity uses its own zero-cost mutual funds in its managed portfolios.
• Whether you’re a Robinhood Gold member: A Robinhood Gold subscription goes for $5 a month or $50 for an annual membership. Robinhood Strategies’ annual management fees for Gold members are capped at $250. That means once your account value hits the $100,000 mark, every additional dollar is managed for free. That’s a boon for those with large account balances. For example, someone with a $250,000 account ends up paying a 0.10 percent management fee. Someone with $500,000 pays just 0.05 percent.
• If you want any human help: Automated portfolio management is the sole offering at some robo-advisors, including Robinhood Strategies. (Here are five robo-advisors with a human advisor option.) An investing-only service is fine for people who manage other financial tasks on their own or who work with a financial advisor on an as-needed basis.

Check out the rundown of Robinhood’s competition in our roundup of the best robo-advisors.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.