Vanguard Digital Advisor took top honors in Morningstar’s 2023 robo-advisor evaluations and is the only digital advice platform to receive a “high” rating out of 18 robo-advisors the firm analyzed.

Of the 18 robo-advisors evaluated, Vanguard Digital Advisor and Fidelity Go ranked first and second “thanks to their low costs, nuanced asset allocation approaches, broad range of planning tools and transparency,” Morningstar said in the new report.

“Our assessments focused on the factors that most directly help investors reach their financial goals,” Amy Arnott, a portfolio strategist at Morningstar, said in a new blog.

Schwab Intelligent Portfolios, Betterment/Betterment Premium and Wealthfront rounded out Morningstar’s top five robo-advisors, receiving “Above Average” ratings.

From there, ratings dipped to “Average” for robo-advisors like US Bankcorp Automated Advisor and Wells Fargo Intuitive Investors, which came in seventh and 10th respectively.

Firms receiving “Below Average” ratings from Morningstar for their robo-advisors include Ally Invest, Merrill Guided Investing, Citi Wealth Builder, E*Trade Core Portfolios and UBS Advantage.

Robo-advisors’ combination of services and affordable pricing—25 basis points versus a 1% average assets-under-management fee to hire a live advisor—“is becoming increasingly appealing, thanks to Generation Z’s ability and preference to handle its finances online, the pandemic driven shift to virtual interactions with advisors and increasing interest in novel assets like crypto,” Arnott said.

The platforms are also attractive to more seasoned investors who don’t meet human advisors’ minimum assets requirement. Just 7% of advisors will work with investors with less than $100,000, Cerulli said.

But despite their appeal and potential for growth, digital advice platforms still account for a small percentage of investable assets, Morningstar said. Robo-advisors managed around $740 billion in assets as of early 2022—a small fraction of the $31.4 trillion U.S. retail market, which Cerulli defines as investors with $100,000 or more to invest.

While some RIAs have embraced the addition of a robo-advisor for their younger clients, those who don’t meet asset minimum requirements or those who may prefer a digital experience, the vast majority are still steering clear of offering a digital advice platform. Just 12% of RIAs offer a robo-advisor and only 36% are in the process of selecting one, according to a recent Alta Group survey of 100 independent RIAs.

While robo-advisors substantially reduce barriers of entry to investing, advice and tax efficiency, the digital platforms are not a perfect choice for everyone, Arnott said.

“If you’re still learning the basics about investing and are intimidated by making decisions independently (and looking to invest a good amount), it might be smart to work with a human advisor who can take the lead and guide you thought the ins and outs of their decision-making," she said.

“Investors with larger, more complex portfolios could also benefit from the support of a traditional financial advisor. That’s especially true for complex matters like life insurance and risk management, estate planning and retirement drawdown strategies,” Arnott said.

Morningstar said it did not analyze or rate Ellevest’s and J.P. Morgan Automated Investing robo-advisors because of conflicts of interest: Morningstar is a minority owner of Ellevest and J.P. Morgan invests in funds that track Morningstar Indexes.