Written By Travis Hornsby, CFA®, CFP®
Updated on August 28, 2026
I’ve seen many robo-managed client portfolios over the years. And one key downside of this type of portfolio is discussed far less than it should be.
Here's the downside: robo portfolios are built to grow a balance, not to be unwound and spent when you finally need the money. And the more complex the portfolio gets, the harder it is to leave the platform and take control yourself.
I’ll explain what I mean along with examples so you can reflect on how you’d manage your own money or hire someone to do it for you.
Robo portfolios were the future, but adoption has slowed
In the early 2010s, there were predictions that robo-advised models would one day manage trillions of dollars.
Industry leaders like Betterment and Wealthfront raised several hundred million in funding rounds, largely because some believed they would one day be as big as Vanguard.
As of summer 2026, though, each manages tens of billions of dollars according to their Form ADV filings on the SEC website.
While the companies that popularized robo-investing have not grown anywhere near as large as some predictions suggested, the idea of robo-managed accounts has proliferated.
Generally, the model involves paying about 0.25% of assets under management (AUM) for a portfolio allocation chosen for you based on risk questionnaires or goals. Some platforms add services on top, such as tax-loss harvesting.
So what do robo portfolios look like?
Robo models: Complex and hard to manage if you quit
My own philosophy of portfolio management is that your funds should never be invested in such an extreme way that it would be a nightmare to figure out how to manage your own money if you ever decided to quit or fire your advisor and manage everything yourself.
I believe in “cake and icing style” models, where you invest broadly in low-cost passive funds and add some “icing” in the form of small-cap and value stocks to potentially enhance performance and improve risk management over time. Of course, you can’t guarantee that adding those asset classes will yield that result, but it’s a bet I like making, both in my own investing and in client portfolios, based on academic theories like Fama-French factor investing.
The issue I have with robo-investing is that I sometimes see client portfolios with 20 to 30 positions.
Do you really need asset classes such as emerging market bonds and international developed-market bonds?
Or are such positions more about making the investing look complicated so that you won’t quit paying for their services?
I’d suggest that if you transferred your money from a robo company to your own brokerage account, you would now have to manage potentially dozens of positions, which would be quite confusing. Managing that many positions on your own requires ongoing attention, and that is where several common DIY investing mistakes begin.
It’s one reason why I’ve been skeptical about the actual usability of strategies also pitched by robos and submanagers such as direct indexing. Direct indexing means owning the individual stocks that make up an index instead of a single index fund. It sounds great in theory, but it also leaves you holding dozens or even hundreds of separate positions. If you ever needed to manage your own funds, you’d want to be very aware that such a thing would be really difficult to handle.
When humans add value that robo-advisors can't
A robo-advisor is not going to have a full view of your finances. It probably won't ask you why you’re leaving six figures sitting around in cash. It’s probably not going to pick up that you haven’t gotten around to doing your Roth IRA contribution yet, or why you haven’t increased your brokerage account contribution in five years.
Robos don’t have conversations with you during market downturns to dissuade you from taking any market-timing actions that could reduce your long-term performance.
I think it’s no coincidence that robo-managed portfolios have seen their adoption rate increase primarily after the 2008 market crash.
I’ve had conversations with individuals who had robo-managed portfolios and pulled their money out of the market whenever there were significant losses. Even though a human advisor is more expensive, a good one could try to prevent that type of behavioral finance mistake.
The biggest downside of robo vs. human management
The primary downside of robo-investing is that it treats the goal as wealth maximization rather than as using the money one day.
Some high-quality firms, like Betterment, have tried to introduce goal-based investing in response. That’s the idea of setting up different investment accounts, each invested in different ways to reflect an investor's goals.
But that’s an accounting trick. All those accounts still have an overall allocation. Splitting one pot of money into labeled buckets doesn't change how the whole thing is invested. You've renamed the money, and the same lock-in problem is still sitting underneath.
In the age of artificial intelligence (AI), trained humans in your corner can still add value despite their higher cost. There are planning gaps AI can't fix, and those gaps get wider for people with the added complexity of six-figure student loans.
For example, a robo-advisor isn't set up to provide the specialized advice that six-figure borrowers often need, such as:
- Asset location: Holding the right investments in the right account types to cut your tax bill
- Minimizing taxable income and adjusted gross income (AGI): Keeping your AGI lower to shrink your monthly income-driven repayment (IDR) payment
- Preparing for potential tax bomb payments: The tax you could owe on your forgiven balance at the end of an IDR plan
That kind of guidance rarely makes it into robo software, because six-figure borrowers are a small niche next to the millions of broad investors these platforms aim to serve.
The big question to ask before you use a robo-advisor
For individuals who value their time, the big question when you spend money is whether you are getting value, not what the lowest price is (unless that price is the only amount you can afford to pay).
If you want your money to be used one day to achieve your biggest dreams and goals, it could be a wise investment to make a plan customized to you and your dreams instead of accepting a one-size-fits-all investment plan that’s often unnecessarily complex, in my opinion, in order to keep you and your money stuck on the robo platform.
If you’re interested in that kind of customization and you’re a six-figure borrower, check out SLP Wealth.
