With Ellevest Exit, Betterment Acquisition Another Robo-Advisor Bites the Dust

The robo-advisor business continues to consolidate.

Betterment’s announcement on Feb. 26, 2025, that it will acquire Ellevest’s automated investment business in April is another in a long line of deals in the digital advice arena. The companies did not disclose how many Ellevest clients or assets will go to Betterment. But it’s more evidence that robo-advisor firms need scale to thrive in a business that caters to investors with smaller accounts. This is the second time in a year that Betterment has sought to bolster its size by snapping up a rival’s assets and accounts.

Ellevest will transfer only accounts and assets under management to Betterment under the terms of the deal. Ellevest, founded in 2014 as a robo-advisor targeting mostly women, will keep its technology, employees, and operations and remain focused on clients with larger account balances, the companies said. Ellevest clients can opt out of the transfer, slated for April 17, and the deal is subject to closing conditions.

The move shows how difficult the once-promising area of digital advice has become, especially for firms servicing the smaller accounts that are typical of robo-advisor clients. Ellevest, in which Morningstar has an ownership stake, will continue to offer financial planning and wealth management services to clients with $500,000 or more to invest.

The digital advice industry has consolidated in recent years as many robo-advisors struggled to meet their once-lofty growth expectations. In April 2024, Goldman Sachs sold its Marcus Invest unit to Betterment, while J.P. Morgan shut down its robo-advisor in December 2023 because of weak demand. Other major financial institutions either closed their robo-advisors or merely maintained them without updating or adding features.

The list goes on. In 2015, Northwestern Mutual bought LearnVest, which launched in 2008, only to shut down three years later. BlackRock sold FutureAdvisor’s direct-to-consumer business to Ritholtz Wealth Management in 2023, eight years after buying it. UBS scrapped its January 2022 plans to acquire Wealthfront nine months later. Morgan Stanley’s 2020 acquisition of E-Trade seemed to be an outlier. Morgan Stanley phased out its own robo-advisor after the acquisition, opting instead to rely on E-Trade’s more established brand.

Meanwhile, larger incumbent financial firms with a lot of experience selling investments directly to clients, such as Vanguard, Fidelity, and Charles Schwab, have come to dominate the robo-advice area with their own compelling and affordable digital offerings.

Put simply, the robo buzz has quieted, and it hasn’t left the mark human advisors once feared it would. Estimated digital advice assets of roughly $700 billion in 2024 represented less than 2% of the $36.8 trillion US retail market, which Cerulli Associates defines as investors with $100,000 to $5 million.

Today, robo-advisors serve as a sensible entry point for young investors’ first saving and investing efforts. A pure robo-advisor can suffice for investors with simple financial lives for whom cost is a key differentiator. Robos in their simplest form can offer significant savings over human advice.

That said, robos have become more sophisticated as their clients have aged. Many offer premium services that include more-personalized, human-provided advice once clients accumulate enough assets. The hybrid approach is now the norm.

As most of the portfolio-construction process gets automated or outsourced, either via a robo-advisor or model portfolio, the real value of advice becomes apparent. Decades ago, financial advisors sought to earn their fees by focusing on stock-picking or actively managing mutual funds for clients. Now, they add the most value by helping clients sort through other complex issues, such as insurance, estate planning, stock-based compensation, and tax planning.

Betterment ranks among the best robos available, alongside Vanguard’s and Fidelity’s offerings. To read our latest review of robo-advisors, click here.