Are robo-advisors a good platform for long-term investments?

Imagine a simplistic scenario where a digital advisor charges a tiered fee range of 0.2 - 0.8%, whereby a 0.8% flat fee is charged up to $20,000 and fee is reduced to 0.2% if AUM is $200,000 and above.

If you park $10,000 with them, they earn $80 of fees. You pay 0.8& fees.

If you park $200,000 with them, they earn $400 of fees. You only pay 0.2% fees.

As Randy has pointed out, the business model of the company has to be such that it is profitable. That means generating more revenue.

For the above simplified example, there's two ways to generate more revenue - higher fees, or higher AUM. Since revenue is fee % x AUM, if robo-advisors want to decrease fees for their clients, they can increase their revenue by incentivising clients to invest more funds with them, to achieve lower fees.​​​

Different platforms have different fees but generally they decrease as you put in more money. You are essentially paying for the convinience of having their platform manage your investments.

In the long term, most robo-advisor should be fine as they track ETFs. The fees will give you smaller returns but you should still make a decent % back unless you really want to min-max everything.

For the lowest fees nothing beats DIY where you only pay per transaction. TD ameritrade and tiger are currently the more popular options.