Managing your money and your investments can be overwhelming, especially for beginner investors who know little about the stock market. Online financial advisors and even robo-advisors, can take some of the guesswork out of the process and may be the best way to get started.
Robo-advisors offer an automated way to invest your money online for less than traditional advisors. These types of online financial advisors use a computer algorithm to divvy up your funds in a professionally-designed portfolio.
The software platform investment approach has become popular in the last few years since it offers a low-cost way to build a portfolio. It’s an alternative to hiring a financial advisor or making your own investing decisions.
Let’s look at the best online financial advisors and the best robo-advisors to help you get started.
Best Online Financial Advisors
There are several things to consider when selecting the best online financial advisor for your situation. These include the minimum to get started, investment fees, current portfolio mix, investment goals and more.
Here’s a look at some of the best online financial advisors so you can decide which one will work best for your individual situation.
If you’re looking for the best online financial advisors, check out Paladin. Paladin Registry is not a robo-advisor, but a service that helps you find financial advisors based on your situation and financial goals.
Using Paladin Registry, you can find highly rated (read: five stars) financial planners, advisors and money managers. The service is free for users while financial professionals have to pay a fee to participate, besides meeting the stringent qualification criteria.
Paladin Pros and Cons
Free for users looking for a vetted financial professional
Extensive database of five-star financial advisors, planners and money managers
Not an actual advisor that will manage your money for you
Once you connect with an advisor, you will pay additional fees for their services
Just like Paladin Registry, SmartAsset helps you find qualified financial advisors to help you create a financial plan for your future. The SmartAsset Match Quiz assesses your current financial priorities, your investment horizon, your goals, your assets and more to match you with the right advisor for your situation.
The service is free and you can get matched with a financial advisor that fits your individual needs. SmartAsset also offers free financial modeling calculators that help you visualize how different decisions can affect your finances such as buying a house, retirement and more.
SmartAsset Pros and Cons
Free match up with a qualified financial advisor
Free financial planning calculators and information
Must meet with an advisor to find out the fee structure
Personal Capital calls its online financial advisor services digital wealth management. It offers many features similar to other robo-advisor options but one feature that makes it stand out is the hybrid online/human model that offers access to licensed financial advisors and not just an online portfolio builder.
This makes Personal Capital suited for investors with a more complicated financial mix such as larger portfolios, complex financial planning needs and tax strategy requirements. Other features include dynamic portfolio allocation and ongoing rebalancing based on current market conditions.
The service does not come cheap - in fact, it’s on the higher end of online financial advisor options. Clients with up to $1 million in assets under management can expect to pay a 0.89% fee with a sliding scale and a decline to 0.49% for portfolios of more than $10 million. There’s a minimum of $100,000 to sign up for the digital wealth management service.
Even if the investment fees are too high for you, consider signing up for Personal Capital to access their free analysis tools for investors. Once you sign up and connect your accounts, you can analyze your portfolio allocation, find hidden fees and more.
Personal Capital Pros and Cons
Free investment analysis tools just by signing up
Hybrid online/human model with access to a licensed advisor
Premium features such as tax strategy, dynamic portfolio allocation and more
High minimum asset requirements of $100,000
Some of the highest investment fees running between 0.49% – 0.89%
Betterment is arguably the pioneer in the online financial advisor space. Founded in 2010, the robo-advisor is based on the premise of helping investors decide what to do with their money.
When you open an account, you will walk through a questionnaire about your financial goals and set up investment portfolios to match each goal. Betterment will suggest a portfolio mix based on your investment time horizon and risk profile.
There is no minimum balance required to open an account, which is great for new investors. No matter your balance, you have access to features such as a custom portfolio, tax-loss harvesting, rebalancing and more.
Expect to pay a 0.25% investment fee on both taxable and tax-advantaged accounts. Investors with investment assets of $100,000 or more can get access to a human financial advisor, but this feature comes with a higher 0.4% investment fee.
Betterment Pros and Cons
No minimum to open an account
Customized portfolios at all investment levels
Features like rebalancing and tax-loss harvesting with no minimum requirement
Sub-accounts can support different investment goals
0.25% investment fee, which is higher than other platforms
Minimum balance and higher fees required to access human financial advisors
Limited investment options
Vanguard is a well-known name in investment circles and is synonymous with low-cost investing. It was founded in 1975 as a client-owned mutual fund company with no outside owners. Many online financial advisor platforms build portfolios using Vanguard funds as the basis.
While Vanguard was late to the robo-advisor bandwagon, it has a solid offering of low-cost funds that will help you build a balanced investment portfolio. While there’s a $50,000 minimum account balance requirement, it comes with access to a human financial advisor.
The annual cost to use Vanguard’s online financial advisory services is 0.3% of assets under management. While the fee may be higher than other robo-advisors, it comes with access to licensed financial advisors, unlike some competitors.
Vanguard Pros and Cons
Access to Vanguard’s low-cost mutual funds
Investment fee of 0.3% comes with access to human financial advisors
Investment fee discounts for higher balances
Help with financial planning, estate planning, taxes and more
$50,000 minimum to open an account can be a hurdle for new investors
Tax-loss harvesting only on individual basis (no automation)
Other robo-advisors have lower investment fees
Founded in 2019, Farther Finance is a newcomer to the field, but it offers several features that make it stand out. It marries the technology-based features that make robo-advisors attractive with a human touch. When you sign up with Farther, you get connected with a financial advisor who can help you define your goals and map out a plan to reach them.
There are no extra fees or limits on working with your financial advisor. Other features such as algorithm-based investing, automated cash management, tax optimization and custom portfolios help you tailor your investment strategy. Farther also allows you to link up all financial accounts from bank accounts to debt and even your company’s 401(k). This makes it easier to get a complete financial picture and work with your financial advisor on goal-setting and life planning.
There are no minimums to get started. The fee to use Farther is 0.8% of assets under management. However, there are no commissions or fees on trades, and no fees to talk to a financial advisor.
Farther Finance Pros and Cons
Access to human financial advisors included
Premium features such as automated cash flow management, tax optimization, custom portfolios and more
Offers holistic financial picture and goal-based savings
Higher fees than other robo-advisors or other online financial advisor options
No long-term historical performance or customer satisfaction data
What are online financial advisors (robo-advisors)?
Online financial advisors, also called robo-advisors, are automated investment managers. When you sign up to use one of these platforms, you will fill out a questionnaire to determine your financial goals, target retirement age, risk tolerance and more.
Based on your answers, the company’s proprietary software will design a portfolio mix of low-cost funds that will help you meet your financial goals. As you invest your money, the algorithm will invest it based on your portfolio mix.
Many robo-advisors also come with features such as tax-loss harvesting, automatic rebalancing and other features. Unlike traditional financial advisors, they offer low costs and may have the option to talk with a human advisor.
Related: Are Robo-Advisors Worth It?
Who are online financial advisors (robo-advisors) best for?
Online financial advisors have grown in popularity over the last few years, especially with new investors looking to get started. With low fees and small investment minimums, they offer a cheap way to get a professionally designed portfolio.
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Singing up with a robo-advisor can be done entirely online, which makes them flexible and easy to set up when you have time. They can be a great option for investors who don’t know where to get started or are worried about having the right asset allocation.
Investors who want a hands-off approach find online financial advisors a good option. They can build their portfolio, set it and forget it. Features such as tax-loss harvesting, hands-off rebalancing and automated asset allocation make them a good fit for long-term financial goals such as retirement planning.
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If you prefer a more hands-off approach, an online financial advisor may be the best option. This new hybrid approach takes the guesswork out of building an investment portfolio and can help you reach your financial goals.
Some robo-advisors also have the option to speak to a human financial advisor, making them the best of both worlds. Online financial advisors can also be a great option for new investors who feel overwhelmed by the options and don’t know how to get started.
Online financial advisors make investing easier and offer low fees, making them affordable for most people. Before you sign up for this type of service, do your research to ensure it’s a good fit for your long-term goals and financial situation.
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