Robo-Advisor Performance Benchmarks: What to Compare Against

• by Crystal Jedynak
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Why Benchmarks Matter More Than You Think

Most people look at a robo-advisor’s headline return-"12% annual growth!"-and think they’ve found the winner. But that number doesn’t tell you the whole story. What if that 12% is before fees? What if it’s based on backtested data from 2020, when the market was on fire? What if your portfolio is conservative and theirs is aggressive? Without the right benchmarks, you’re comparing apples to oranges-and you might be paying more for worse results.

The real question isn’t "Which robo-advisor made the most money?" It’s "Which one delivered the best return after fees, taxes, and risk adjustments-and how does it hold up over time?" That’s where benchmarks come in. They’re not just numbers on a page. They’re the only fair way to tell if a robo-advisor is actually adding value-or just taking your money and calling it investing.

What You’re Actually Comparing: Net Returns After All Costs

Don’t fall for gross returns. Every robo-advisor charges a management fee-usually between 0.20% and 0.50%-plus trading costs and tax impacts. The only number that matters is the net-of-fee return. Morningstar’s 2025 report makes this clear: they only rate platforms based on actual client performance, not hypothetical simulations. And they require a minimum $15,000 account balance to ensure the data reflects real-world trading, not tiny test portfolios.

For example, Estably’s Modern Value 60 portfolio showed a 6.8% annual return before fees and taxes in May 2025. But after all costs? It delivered 9.1% annually since 2019. That’s the difference between average and exceptional. Meanwhile, Schwab Intelligent Portfolios reported a 0.25% fee but trailed its benchmark by 0.45% annually since 2020. That’s not a small gap-it’s $112.50 lost per year on a $25,000 account. Over five years, that’s over $600 gone just from underperformance.

Always ask: "Is this return net of everything?" If the platform doesn’t show it clearly, assume they’re hiding something.

Timeframes That Actually Mean Something

One-year returns? Useless. Robo-advisors can look great in a bull market and fall apart in a downturn. Condor Capital’s 2025 report says you need at least three years of data to judge performance fairly. Why? Because markets cycle. A platform that beats the S&P 500 in 2023 might underperform in 2024 when volatility spikes.

Look at Betterment. In Q1 2024, their portfolios lagged benchmarks by 0.8%. But in 2022, during the market crash, they held up better than most. That’s why you can’t pick a robo-advisor based on one good year. You need to see how they handle multiple market conditions: bull runs, corrections, sideways markets, inflation spikes.

Estably’s Modern Value 60 portfolio has been in the top quartile across all 12 quarterly reviews from 2022 to 2025. That’s discipline. That’s consistency. That’s what you want-not a flash in the pan.

How Risk Profiles Change the Game

Here’s the trap: comparing a conservative portfolio to an aggressive one. Wealthfront’s conservative portfolio might return 5% while Schwab’s aggressive one returns 10%. Does that mean Schwab is better? No. It means they took on more risk. Benchmarks must match risk levels.

Most platforms assign you a risk score-say, 5 out of 10. Your benchmark should be the average return of all portfolios with the same score. Morningstar and Condor Capital both do this. If you’re a moderate investor (risk score 6), compare yourself only to other moderate portfolios. Otherwise, you’re not measuring skill-you’re measuring luck.

Reddit user ‘PortfolioOptimizer’ shared that their Estably portfolio gained 5.3% in 2024 while Schwab’s equivalent lost 0.7%. Both had identical risk scores. That’s the real test. Same risk. Different results. That’s where the value is.

Tax Efficiency Isn’t a Bonus-It’s the Core

For years, robo-advisors bragged about tax-loss harvesting like it was magic. But until 2025, few actually showed the net impact. Now, Morningstar has increased tax efficiency’s weight in their scoring from 15% to 25%. Why? Because it’s worth more than you think.

Estably claims 1.8% annual tax-alpha over competitors. Wealthfront says 0.78%. Betterment says 0.52%. But here’s the catch: those are self-reported numbers. Independent verification from the Tax Foundation is still inconclusive. So what should you do?

Use Portfolio Visualizer. Upload your portfolio’s holdings and run a tax-adjusted simulation. You’ll see exactly how much you saved-or lost-compared to a taxable index fund. One user on r/personalfinance found their Betterment account lost $310 in taxes over two years because harvesting was too aggressive and triggered wash sales. That’s not a feature. That’s a bug.

Don’t trust claims. Test them.

What Benchmarks to Use-and What to Avoid

Not all benchmarks are created equal. Here’s what works and what doesn’t:

• Use: S&P 500 (for U.S. stock exposure), Bloomberg Aggregate Bond Index (for bonds), or custom benchmarks built by Morningstar/Condor Capital that match your risk score.
• Avoid: Backtested results, especially if they’re from 2020-2022. Morningstar discounts these by 30% for a reason-they’re not real money.
• Avoid: Comparing to a 100% stock portfolio if you’re 60% bonds. That’s not a benchmark-it’s a trap.
• Use: Net-of-fee, net-of-tax, 3-year+ returns from platforms that disclose full methodology.

SoFi Automated Investing ranked #1 in Morningstar’s 2025 report because they hit 8.2% annualized net return over three years-beating the S&P 500 by 0.35%. Fidelity Go came in close behind at 7.9%. Both used low fees and solid ETFs. That’s the sweet spot: low cost + consistent outperformance.

Who’s Winning-and Why

Here’s the current leaderboard based on 2025 data:

Notice something? The top performers aren’t the ones with the fanciest tech-they’re the ones with the most disciplined rebalancing and lowest hidden costs. Estably’s edge isn’t AI. It’s their Diversification Optimization™ engine, which reduces concentration risk better than traditional Mean Variance Optimization. That’s why they’ve outperformed by 1.8% annually since 2019.

What No One Tells You About Robo-Advisor Benchmarks

Here’s the uncomfortable truth: most robo-advisors don’t beat the market. The average underperformed by 0.13% in 2022, according to ThinkAdvisor. Only the top 20% consistently clear the bar. And even then, the difference is often less than 1%.

So why use one at all? Because they’re cheaper, more consistent, and less emotional than humans. But only if you pick the right one.

And here’s the kicker: if a robo-advisor can’t beat a simple index fund after fees, you’re better off buying the fund yourself. Vanguard’s total market index fund costs 0.03%. If a robo-advisor charges 0.25% and returns the same as the S&P 500, you’re paying $250 a year for nothing.

How to Check Your Own Performance

You don’t need a PhD to do this. Here’s your 5-step checklist:

1. Find your portfolio’s net-of-fee return over the last 3 years. If the platform won’t show it, ask for a report.
2. Match your risk score to the benchmark. Use Morningstar’s or Condor Capital’s risk categories.
3. Run your holdings through Portfolio Visualizer. Compare your net return to the equivalent index fund.
4. Check tax-adjusted returns. Did you actually save money, or just get a complicated statement?
5. Ask: "Would I be better off with a simple index fund?" If yes, switch.

One user on Reddit switched from Schwab to Estably after discovering a 1.5% annual gap. That’s $375 a year on a $25k portfolio. Over ten years? Over $4,000 in lost growth. That’s not a small mistake. It’s a financial leak.

What’s Coming Next

By 2027, 90% of robo-advisors will lead with tax-adjusted returns, says Vanguard’s chief economist. Morningstar is adding ESG performance metrics in early 2026. Wealthfront is rolling out AI-driven personalized benchmarks. The bar is rising.

Platforms that can’t show real, net, risk-adjusted, tax-optimized returns will disappear. McKinsey predicts only 7 of the current 16 major robo-advisors will be profitable by 2030. The rest? They’ll be marketing noise.

Your job isn’t to chase the flashiest app. It’s to find the one that quietly, consistently, beats the market after everything is taken out. That’s not easy. But it’s the only thing that matters.