I'm not seeing references to robo advisors, or evidence to support that they underperform direct index funds in either of those two links.
I don't believe said evidence exists, here's why.
First, the robo advisors distribute your money directly against and amongst several index funds.
Second, the money-saving benefits robo advisors provide that direct indexing doesn't, like very frequent automatic rebalancing and automated (aggressive) tax-loss harvesting.
Third, the ability to diversify any amount of money. You can put $1k into Wealthfront and diversify across five Vanguard index funds. But directly on Vanguard, this is impossible because the minimum investment in most Vanguard funds is $3k [0].
With that, take their Total Stock Market Index Fund as an example. If you can only invest $3k in it, your expense ratio is 0.16% [1]. If you can invest $10k in it, your expense ratio is 0.05% [2]. Through Wealthfront, I can hold the VTI ETF at 0.05% expense ratio, which I don't have to pay directly, only indirectly out of the standard Wealthfront fees.
The best possible claim I can imagine then is that for very large accounts, excluding tax-loss harvesting benefits and any benefits of rebalancing, it is cheaper to index invest — for example, if you have a $100k account and can spend less than $225 worth of your time [4] in the entire year keeping up on it, rebalancing if you wish, etc., then in some cases you could beat the robos. The tradeoff of going direct is arguably not free though. I also don't believe this level of investment applies to most people, at least most Americans.
In fact, for accounts under $10k, the Wealthfront fee is zero. I can't think of a good reason why everyone shouldn't take advantage of that.
Tax-loss harvesting has very limited benefit. Mostly you can offset income. But it's only $3k/year. You can harvest enough losses by hand to easily take the $3,000 deduction too.
> Third, the ability to diversify any amount of money. You can put $1k into Wealthfront and diversify across five Vanguard index funds. But directly on Vanguard, this is impossible because the minimum investment in most Vanguard funds is $3k.
No... you can buy the same Vanguard ETFs with no minimum.
> With that, take their Total Stock Market Index Fund as an example. If you can only invest $3k in it, your expense ratio is 0.16% [1]. If you can invest $10k in it, your expense ratio is 0.05% [2]. Through Wealthfront, I can hold the VTI ETF at 0.05% expense ratio
You can just buy VTI as an individual. You still get the 0.05% rate.
> The best possible claim I can imagine then is that for very large accounts, excluding tax-loss harvesting benefits and any benefits of rebalancing, it is cheaper to index invest — for example, if you have a $100k account and can spend less than $225 worth of your time [4] in the entire year keeping up on it, rebalancing if you wish, etc., then in some cases you could beat the robos.
I feel like you may have overlooked some of the nuances in my answer, because I've already specifically pointed out how the robo advisors can be cheaper than buying the indexes directly for a lot of people.
