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What is the difference between a financial advisor, robo advisor, and stockbroker?

Add investing to the list of things that changed after 2020 and likely won’t go back.

According to a recent CNBC survey conducted with Momentive Invest in You, 26% of the public began investing in 2020.1

This influx of money into the markets was caused by a desire to prepare for an uncertain future, extra cash from pandemic relief, and the rise of alternative investments.1

Taking the first step to start investing is a milestone in your financial security journey.

Still, putting money away is just part of the equation.

The next step, especially in times of market volatility, is to invest well.

You need to determine where and how to invest to maximize returns and minimize taxes. More, you need to diversify your portfolio to help temper the impact of volatile market swings.

Finally, but most importantly, you need access to your investments when the moment of your goal arrives.

For most people, after investing for several months or years, they discover that bringing in an investment professional can further their goals. (Plus relieve the stress of managing investments on their own.)

As you consider the type of financial services relationship that fits you and what you hope to accomplish, you have a few options:

What does a stockbroker do?

Stockbrokers are registered by the state to buy and sell securities products such as stocks, bonds, and mutual funds. Stockbroker is a generic term that can be used for a variety of roles. They generally earn commissions on transactions.

What services do stockbrokers offer?

While some brokers offer additional services, for many, their main offering is to recommend which stocks to buy and which to sell.

They don’t often create a strategy that accounts for or coordinates your goals as they relate to life and finance. Instead, they are just focused on investment performance.

How much does a stockbroker cost?

The cost of working with a stockbroker depends on their commissions and trading fees. The standard commission for full-service brokers today are between 1% to 2% of a client’s managed assets.3

You may also need to maintain a minimum dollar amount in your account to meet investment requirements.

Is a stockbroker right for you?

Working with a stockbroker may be a good way to get started in investing. But keep in mind, they may have limited services, so they aren’t always the best choice for long-term investing.

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What is a robo advisor?

Robo advisors, also known as automated investment or online advisors, use computer algorithms and advanced software to build and manage your investment portfolio.

What services do robo advisors offer?

Robo-advisors can manage individual retirement accounts and taxable accounts. Some also manage trusts and a few will help manage your 401(k).

Working with a robo advisor means you will receive little to no human interaction and personal advice.

Often, when you sign up for an account with a robo advisor, you will fill out a questionnaire telling the computer your risk tolerance, goals, and investments. Then, the program will generate a recommended portfolio for the “generic you.” You can pick and choose which investment options you prefer, but you don’t get the chance to discuss your options with an interested professional.

Robo-advisors offer low-cost, turnkey portfolio creation, and management services online. Portfolios are pre-established and created using algorithms. You answer questions about your risk tolerance and the robo advisor will provide your recommended investments.

You can also expect:

  • Rebalancing your portfolio automatically or quarterly via a computer algorithm
  • Basic financial tools, such as retirement calculators
  • Tax-loss harvesting and other tax-strategy offerings

How much does a robo advisor cost?

Robo advisors typically cost an 0.25% to 0.50% annual management fee.2

Usually, you will not pay a transaction fee with a robo advisor.

Minimum investment requirements vary based on the robo you choose, ranging from $500 to $10,000 or more.

Is a robo advisor right for you?

Robo-advisors may be ideal for newer investors just getting started, or for rollovers of smaller account balances. Additionally, they are helpful for people who don’t have a lot of time to manage their investments and want to use technology to provide their specific portfolio allocations.

Robo-advising is an inexpensive start for investing, but you can only go so far with a computer. You may miss being able to have a conversation with a real person about your concerns and goals and the benefit of having a strategy that is custom to you not just people like you.

Robo-advisors make very general recommendations. They don’t make a strategy specific to you or your situation, and they do not manage behavior, helping investors avoid financial mistakes based on emotion (often fear or greed).

If you’re nervous about automated investments, a financial professional may be a better choice for you.

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What does a financial professional do?

Each financial professional offers different services and has different specialties, but most focus on helping you increase your assets while managing risk.

They help with retirement solutions, investment selection, student loan repayment and estate planning. Some offer additional resources such as life and disability insurance, property and casualty insurance, employee benefits planning, long-term care preparation and Medicare supplement.

The number of services a financial professional provides is largely dependent on the resources they receive from their supervising firm.

Capabilities of North Star financial professionals →

The main difference with financial professionals is that they work from a strategy and then build a portfolio that can help you achieve your goals.

The most valuable benefit of a financial professional is that the strategy drives the portfolio. Also, financial advisors can take on a fiduciary responsibility to fine-tune your strategy/portfolio on an ongoing basis, and they are there to help manage behavior to make sure you can stick to your strategy.

How much does a financial professional cost?

This depends on which professional you choose. Each one can choose a different method of charging for their services and what services are included in that price.

Percentage of assets

If the advisor is managing assets for you, you are charged a fee that is typically a small percentage of the assets the advisor is managing. On average, financial advisors charge 1% to 2% in fees per year.

There are both fee-only advisors and fee-based advisors. If they are a fee-only advisor, this percentage of your assets is all they can make from you. However, if they are a fee-based advisor, they may also be able to collect commissions on certain products they sell.

Variations of this method include charging a percentage of your net worth or your adjusted gross income.


On the sale of specific products, the financial professional is paid a commission from the financial or insurance products you purchase from them.

Financial planning fees

With a fee-based financial plan, you pay a specific amount at predetermined intervals for ongoing financial advice from your advisor.

After a consultation to understand your financial situation, the advisor can tell you the financial planning fee and what it covers.

An annual financial planning fee can range from $500 to $10,000 depending on the complexity of a plan. The average cost of a standalone financial plan is $2,450.4

Specialized financial planning fees

In this case, you are paying based on an hourly rate determined by the scope of the services being provided. Hourly fees for financial advisors range from $100 to $400 per hour.4

Is a financial professional right for you?

When you’re ready for individual help managing your wealth and protecting yourself and your family financially, a financial professional is a good place to start.

In most cases, they will act as your financial coach, building a relationship with you through changes in your life (marriage, children, retirement, etc.) and uncertainty in the market, and helping you make sound financial decisions for you based on your values and goals.

If you want real-life wisdom and ongoing personal guidance—branching out much further than a portfolio—consider a financial advisor.

Often you can connect with someone who not only has investing expertise but who you relate to personally and who will walk with you through all life’s ups and downs.

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    1CNBC: Momentive poll: Invest in you. SurveyMonkey. (2021, August). Retrieved October 26, 2022, from

    2O’Shea, A. (2022, August). How Much Does a Financial Advisor Cost? Nerd Wallet.

    3Ganti, Akhilesh. (2022, May). What Is a Brokerage Fee? How Fees Work, Types, and Expense. Investopedia.

    4Hicks, Coryanne. (2022, September). What to Know About Financial Advisor Fees and Costs. U.S. News.

    Securities offered through Cetera Advisor Networks LLC, member FINRA/SIPC. Advisory Services offered through Cetera Investment Advisers LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity.