What Is a Robo-Advisor?

A robo-advisor is an online platform that manages your investments automatically. After you answer a few questions about your goals, income, and risk tolerance, the platform builds a diversified portfolio—typically made up of ETFs or index funds—and adjusts it over time.

Unlike traditional financial advisors, robo-advisors don’t give personalised human advice. But they offer low-cost, algorithm-driven investing, usually with built-in features like auto-rebalancing and dividend reinvestment.

Popular robo-advisors in Australia include:

• Raiz – good for micro-investing and round-ups

• Spaceship – focuses on high-growth, future-focused portfolios

• Stockspot – more traditional, ETF-based portfolios

• Six Park and InvestSMART – combine automation with some human oversight

Why Young Investors Are Turning to Robo-Advisors

1. Low Barrier to Entry

Many platforms allow users to start investing with as little as $5 to $100. This is particularly attractive to students or early-career professionals who want exposure to markets without needing thousands of dollars upfront.

2. Set-and-Forget Simplicity

One of the biggest advantages of robo-advisors is automation. Investors can set up regular deposits and let the platform handle asset allocation, rebalancing, and diversification. For people who find finance overwhelming or time-consuming, this is a major drawcard.

3. Lower Fees Than Human Advisors

Robo-advisors typically charge an annual management fee of 0.25–0.70%, much lower than the 1–2% charged by traditional advisors. Since high fees compound over time, this difference can significantly impact long-term returns.

4. Emotion-Free Investing

Young investors are particularly prone to emotional investing—panic-selling during downturns or chasing hype stocks. Robo-advisors use algorithms, not emotions, which helps enforce discipline and consistency.

What Are the Drawbacks?

Despite their advantages, robo-advisors aren’t perfect.

1. Limited Customisation

Most platforms offer a handful of model portfolios based on general risk profiles (e.g., conservative, balanced, high growth). If you want to choose specific sectors, avoid certain companies (e.g., fossil fuels), or tailor your strategy more deeply, robo-advisors may not be flexible enough.

2. Lack of Personal Financial Advice

Robo-advisors can’t replace the depth of insight a qualified financial advisor offers. They won’t help with budgeting, superannuation, tax strategy, or insurance. For young investors with more complex needs, this can be a limitation.

3. Fees Can Still Be High for Small Balances

Platforms like Raiz and Spaceship often charge flat monthly fees on top of percentage-based management fees. For small portfolios, these flat fees can eat up a significant portion of returns. For example, a $3.50 monthly fee on a $500 balance equates to an annual cost of over 8%.

Who Are Robo-Advisors Best For?

Robo-advisors are particularly well suited to:

• Beginners who want to start investing but feel unsure about where to begin

• Time-poor professionals who want their money managed automatically

• People with small balances, especially those using platforms with no minimum investment

• Those who value discipline over control, and are comfortable letting the platform manage allocation decisions

Let’s say you’re 25 years old, earning $60,000 a year, and want to invest $50 weekly without needing to check the stock market. A robo-advisor like Raiz or Spaceship could be a great way to get started, helping you build habits and exposure without requiring deep expertise.

Robo-Advisor or DIY?

The decision to use a robo-advisor often comes down to your confidence and interest in investing. If you enjoy researching funds and picking ETFs, using a low-cost brokerage like Pearler, CommSec, or Superhero may give you more control and slightly lower costs over the long term.

But if your goal is simply to “get started” and avoid analysis paralysis, robo-advisors are hard to beat.

Final Verdict

Robo-advisors are not a perfect solution, but they offer a smart, accessible, and disciplined entry point into investing—especially for young Australians with limited capital and experience. As your financial literacy and investment knowledge grow, you can always graduate to more hands-on strategies.

In the meantime, having something invested—automated, diversified, and low-cost—is far better than waiting on the sidelines trying to time the perfect moment.