Over the last decade, robo-advisors have gone from a fintech novelty to a mainstream investment solution. Promising low fees, automated portfolio management, and easy access to financial markets, they’ve become particularly appealing to younger investors and those new to the world of investing. But as the investing landscape grows more complex in 2025, many are asking: do robo-advisors really work? Can an algorithm actually build and manage a portfolio as well—or better—than a human financial advisor?
To answer that, we need to look at what robo-advisors do, how they perform, and who they’re best suited for. And, as always, the answer depends on your financial goals, your level of involvement, and your expectations.
What Exactly Is a Robo-Advisor?
A robo-advisor is an automated digital platform that provides investment advice and portfolio management based on your financial profile. After answering a series of questions—usually about your income, goals, time horizon, and risk tolerance—the algorithm allocates your funds into a diversified portfolio of ETFs (exchange-traded funds) and rebalances it periodically to keep it aligned with your objectives.
The appeal is clear: it’s simple, low-cost, and requires minimal effort. Platforms like Moneyfarm, Trade Republic’s savings plans, and even Fineco’s advisory tools in Italy have gained traction for precisely this reason. Globally, robo-advisory assets under management have ballooned to over $1.5 trillion as of early 2025, with services like Betterment and Wealthfront leading the charge in the U.S.
Do They Deliver Results?
In terms of performance, robo-advisors generally track the returns of the ETFs they invest in—meaning their performance closely mirrors the overall market. Since most robos use passive strategies, they typically don’t aim to beat the market but to give you broad exposure at minimal cost.
For example, during the 2020–2023 bull run, most robo-advisor portfolios delivered annualized returns of 7–9%, depending on risk level and regional exposure. In 2022, amid inflation and rate hikes, conservative robo portfolios held up better (down around 5–6%) compared to aggressive ones that saw losses exceeding 15%. These figures align closely with traditional 60/40 portfolios and passive index strategies.
However, during periods of high volatility—like the market dips of early 2025—robo-advisors may lack the flexibility or insight that human advisors bring. They don’t anticipate geopolitical risk, earnings surprises, or central bank policy shifts; they simply follow programmed rules. That can be both a strength and a weakness: they don’t panic, but they also don’t adapt beyond their design.
Costs, Access, and the Learning Curve
One of the strongest advantages robo-advisors offer is cost. While traditional financial advisors may charge 1–2% of assets under management, most robo platforms charge between 0.25% and 0.50%. Some—especially those integrated into banking apps—are even free or come bundled with minimal fees for ETF transactions.
That cost difference becomes meaningful over time. For a portfolio of €20,000, saving 1% in fees annually could mean an extra €6,000–8,000 in gains over 20 years, assuming modest annual returns. For beginner investors, this can be the difference between merely saving and actively building wealth.
And because they’re digital, robo-advisors make investing accessible. You can start with as little as €50 or €100. There’s no paperwork, no need to schedule meetings, and everything can be monitored through an app. That ease of use has made them a preferred choice among Millennials and Gen Z investors—many of whom prioritize simplicity and automation.
Are Robo-Advisors the Right Fit for You?
Robo-advisors work best for a specific type of investor: someone who prefers a hands-off approach, is focused on long-term goals, and doesn’t need highly personalized strategies like tax optimization, estate planning, or custom asset allocation. If your goal is to build wealth gradually with minimal stress, a robo-advisor can be an excellent entry point.
On the other hand, if your finances are more complex—or if you enjoy actively managing your investments—then a hybrid model or human advisor might better suit your needs. Some platforms now offer combined services, where you get algorithmic management plus access to a human advisor for specific questions.
The Future of Robo-Investing
As artificial intelligence continues to evolve, robo-advisors are becoming more sophisticated. Some are now incorporating ESG (Environmental, Social, and Governance) preferences, dynamic portfolio shifts, and even behavioral nudges to keep investors on track. That said, they’re still not perfect substitutes for experience and personal judgment.
In a world where market conditions can change overnight, robo-advisors offer a calm, steady hand. They eliminate emotion from investing and make diversification easier than ever before. But the best outcomes still come from understanding what you own, why you own it, and how it fits into your broader financial plan.
So yes—robo-advisors do work. But like any tool, their effectiveness depends on how you use them. For many, they are a smart first step into the investing world. For others, they are a complement to a more active strategy. Either way, they represent one of the most democratizing shifts in personal finance in the last two decades.