Choose an online broker if you want to select investments and make your own trading decisions; choose a robo-adviser if you want an automated service to build and manage a portfolio based on information you provide. Neither is automatically cheaper or better. The right fit depends on how much decision-making and ongoing work you want to handle, plus each provider’s services, fees, and terms.
How an online broker differs from a robo-adviser
An online brokerage account can be self-directed: you choose investments and place trades. The exact services depend on the firm and account arrangement, and brokerage support does not necessarily include investment advice.
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A robo-adviser is an automated advisory program. It generally asks about your goals, time horizon, finances, and risk tolerance, then uses your answers to create and manage a portfolio. Providers differ in their investment methods, monitoring, and degree of human support. The SEC describes robo-adviser services as varying in their approaches and features: Investor Bulletin: Robo-Advisers.
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| Decision point | Online brokerage account | Robo-advisory account | What to check |
|---|---|---|---|
| Who chooses investments | In a self-directed arrangement, you generally choose and trade investments. | An automated program uses your information to create and manage a portfolio. | Whether the account is brokerage, advisory, or combined; who can trade and under what authority. |
| Ongoing management | You may need to select, monitor, and adjust investments, depending on the service. | The service may monitor and rebalance the portfolio; schedules and triggers vary. | Monitoring and rebalancing practices, changes to asset allocation, and whether a person can answer investment questions. |
| Human help | Support and any advice depend on the firm and account arrangement. | Some services provide access to investment professionals; others offer limited or no human investment interaction. | Support channels, access to a qualified person, and whether support includes investment advice or only technical help. |
| Tax-related activity | Tax effects depend on your holdings and transactions. | Rebalancing or tax-loss harvesting may involve sales and tax consequences; wash-sale rules may be relevant. | Which transactions the service may make and how they could affect your individual tax situation. |
| Choice and complexity | Can suit investors who want direct choice and accept responsibility for investment decisions. | Can suit investors who want an automated management process and are comfortable with its portfolio method and limits. | Available investments, restrictions, portfolio design, and conflicts of interest. |
The SEC notes that human interaction differs from one robo-adviser to another: Investor Bulletin: Robo-Advisers. Ask what “support” means before treating it as access to personalized investment advice.
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Compare total costs, not just a headline fee
A brokerage account can carry charges beyond a stated trading commission. Depending on the firm and your activity, costs may include account maintenance, inactivity, closing, wire or transfer fees, margin interest, transaction charges, and expenses charged by investment products. Check the firm’s current fee schedule and account terms; the SEC’s guide to fees and expenses explains why costs deserve scrutiny.
A robo-adviser may charge an asset-based fee, a subscription fee, or another type of advisory charge. Add underlying fund expenses and any account or other indirect charges to estimate what you would actually pay. A recurring dollar fee can take a substantial share of a small balance. Fee structures vary, so do not assume a robo-adviser is always less expensive than a broker.
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To see why even modest annual fees matter over time, the SEC’s 2025 illustration assumes a hypothetical $100,000 investment growing at 4% annually for 20 years. It ends at approximately $208,000 with a 0.25% annual fee, $198,000 with a 0.50% annual fee, and $179,000 with a 1.00% annual fee. These are illustrative values under those assumptions, not a forecast or expected return: SEC guidance on understanding fees.
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For your own comparison, request or calculate the all-in cost using your balance and expected activity. Review the fee schedule, Form CRS, account agreement, Form ADV brochure where applicable, and fund prospectuses. Investor.gov explains how to review a firm or professional’s disclosures in its investment professional resources.
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Use this checklist before opening an account
- Identify the service. Confirm whether the proposed account is brokerage, advisory, or a combination, and what the firm will do for its fee. Read its Form CRS and account agreement.
- Find out who controls trades. Ask who selects and changes investments, whether the firm has discretion to trade, and how often it monitors or rebalances a portfolio.
- Clarify human support. Ask whether you can speak with a person about investment decisions, and whether that person provides advice or only technical assistance.
- Add up costs. Include advisory or transaction charges, account fees, fund expenses, margin interest if relevant, and other indirect costs. Compare the total against the alternative for your likely usage.
- Understand the portfolio process. For a robo-adviser, review its investment approach, restrictions, rebalancing practices, and any tax-loss harvesting. Ask what transactions could occur and consider the possible tax effects for your circumstances.
- Check the firm and its conflicts. Review the services and product limitations, compensation, and conflicts described in the disclosures. Investor.gov directs readers to BrokerCheck and IAPD for relevant registration and background checks.
Which one is likely to fit your needs?
Consider an online broker if you want to make the investment decisions
A self-directed brokerage account may fit if you want to choose investments and are willing to monitor and adjust them yourself. First confirm that the firm offers the products and support you need and that you understand the account’s costs and terms.
Consider a robo-adviser if you want an automated management process
A robo-adviser may fit if you prefer to provide information about your goals and risk tolerance and have a program manage a portfolio. Check that you are comfortable with its investment approach, the level of human help, its fees, and the way it handles rebalancing and potential tax-related transactions.
These are service-model distinctions, not promises about investment results. Investments can lose value with either option, and a provider’s suitability depends on your circumstances and its actual terms.
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