Around 2008, the same year that the iPhone was made public, Robo-advisors began to appear for everyday investors.   

Backend Benchmarking, who specializes on research and analysis about digital advisors, found that just over 10 years later, roboadvisors managed approximately $785 billion.

Many firms built their models in order to capitalise on the popularity of digital culture and its rise.

These include Independent Shops such as Betterment, Personal Capital, Wealthfront, and traditional Wall Street brokerages such Fidelity Investments and Merrill Lynch; and Financial Engines which cater to 401k plan investors.

An established player who has historically focused their efforts on a wealthy older client base may be able to leverage technology to attract a younger class of investors. They can use online stock trading platforms like Robinhood or for cryptocurrency assets and show an interest in the digital financial world.  

David Goldstone of Backend Benchmarking research and analytics manager said about robo-advisors, “They are everywhere now.” In the last decade, robo-advisors were launched by almost every bank and discount brokerage.

Experts in the field say robots can be particularly well-suited to younger investors with little or no wealth.

One, because of low account minimums or none, robo-advisors have a low entry barrier.

Acorns, Fidelity Go, Betterment and Ellevest, a robo for women, offer clients the option to sign up for their base digital service with no prior wealth. Merrill Edge Guided Investing (SigFig), SoFi Vanguard Group (Wisdomfront) have minimums ranging between a few bucks up to $3,000.

Goldstone explained that clients who have at least $250,000 in their portfolios can still use traditional firms to manage the money.

Perhaps it’s not surprising that the average user of robos is younger. Elly Stolnitz of Wealthfront spokeswoman, saying that around 90% of Wealthfront’s 470,000 clients are below 40. They average a balance of $60,000.

This demographic trend may also be a function of the greater digital affinity among Generation Z and millennials, which grew up digitally natives. They might be attracted more to robo services.

“[Our users]Want to be able money management the same as other areas? [online food delivery via] DoorDash,” Stolnitz said.

According to Dan Egan (Vice President of Behavioral Finance and Investment), Betterment has an average user age 40 with accounts ranging from $55,000 to $60,000

He said that wealth and age aren’t all factors. Clients in their 60s or 70s have multimillion-dollar portfolios. The oldest client is more than 90.

Egan explained that Egan believes it is attractive to people who wish to leave the management of their portfolio in their hands.

This management fee is typically lower than that of a traditional financial advisor who charges 1% annually on client assets. The typical robo charges 0.25% to 0.35% annually for their advice service — about a fourth of the cost, Goldstone said.

This means that an investor would need to spend $100,000 per year on their services. A robo will charge $250. (Not all advisors are charged a 1% service fee. For example, some advisors now charge monthly subscription fees and one-time consultation charges.

Charles Schwab or SoFi may not charge an advisory fee, while Fidelity (SigFig) and SigFig will only charge balances greater than $10,000.

Investments in the portfolio — often low-cost index mutual funds or exchange-traded funds — do carry an additional fee. Firms may invest in clients’ name-brand funds which increases their revenues via fund fees. For tiered services, they may impose higher minimum account fees.

William Whitt, Aite-Novarica Group’s strategic advisor, said that portfolios can be quite good if you don’t have much money.

You might have to make compromises when you use a solely digital service.

Although digital services are able to automate important investments functions such as fund choice, stock-bond/cash mix and portfolio rebalancing regularly, advisors who work with clients lament their inability to use algorithmic software to help them through specific situations.

These could include explanations behind specific strategies or assistance in difficult times such as job loss, stock market crashes or other unpredictable circumstances.

Financial planners also believe they’re better suited for proactivity and delving into needs of some clients beyond money management — whether tax, estate or business planning, which may prove too complex or nuanced for an online questionnaire, for example.

Johnson, Delancey Wealth Management said that “we do more than just invest.”

Johnson explained that digital advisors are not capable of helping clients decide whether to purchase long-term liability, stock options or buy long-term-care insurance. Johnson added that it is possible for clients to establish an LLC, LLC, or any other entity.