While many people choose to handle their finances and investments on their own, a good number of households opt for the services of a professional financial advisor. This means scheduling visits to an office to discuss investments and other financial goals.
Like our shopping, entertainment, and other parts of financial management, you can now choose an online financial advisor that you never meet face-to-face. But is that a good idea? Lets dive in and take a look at the pros and cons of online-only financial advising and whether or not it makes sense for you.
Why an Online Financial Advisor Makes Sense
Much of our lives have moved into the digital world. While the concepts hardly existed just a decade ago, we look to our phones and computers for online banking, calling a ride, booking an overnight stay in someone elses empty apartment and much of our daily shopping. Why not handle all of your finances the same way?
Think of how you communicate with your boss, your family, and your friends. It doesnt matter if they are sitting in the same room or across the world. Video chats, phone calls and emails often take place of in-person conversations. It may work as well for a financial advisor.
In fact, going to an online advisor may give you more and better options. If you live in a small town, for example, you get access to more options for advising. Even if you live in a big city with lots of advisors, you may find a better fit with a specialist nowhere near your home or office. Your finances are distinctive and you should find the right advisor for your unique needs.
Robo-Advisors Take Online Advising to the Next Level
Working with an expert advisor with a focus on your type of financial need is great, but you may be able to find a lower cost and better service with a digital investment manager. This type of financial advisor is known as a robo-advisor. And these great investment services are growing in popularity for good reason.
With a robo-advisor, you answer a short quiz explaining your financial goals, and the computer takes care of the rest. Based on your risk tolerance, timelines and goals, a robo-advisor will put your dollars into a portfolio tailored to your needs.
Robo-advisors typically put your funds into one of a few pre-built portfolios for people with similar financial situations. Once you fund your account, your money is invested in a list of diverse, low-cost exchange traded funds (ETFs).
While it may seem strange to hand over control of your money to a computer, consider the benefits. The portfolios are designed by some of the best financial minds in the world. Computers dont trade with emotion. And when you do compare actively managed funds to passive ones, passive typically perform better.
With better performance and lower fees, online financial advisors and robo-advisors are often an excellent choice.
What You Dont Get With an Online Advisor
Of course, there are downsides to any change in investment style. The big loss when moving to an online financial advisor or robo-advisor is some loss of a personal touch. Depending on the type of online advisor you choose, you may not have an easy option to pick up the phone and talk to a person in charge of managing your finances.
If you do have a personal financial advisor you work with online, you cant head over to the office for a face-to-face, personal conversation. You cant shake their hand and look them in the eye when asking for financial advice.
Some people put a lot of value in the personal experience. That is why many people choose a traditional brick-and-mortar bank over an online bank even though online banks often offer lower fees and better interest rates.
Ultimately you have to decide if a human advisor is worth the cost, and if you are willing to pay a premium to meet with someone when you have money questions versus handing over control to a computer or a remote advisor you only meet online.
Making the Right Choice for Your Money
There is no right or wrong answer on whether you should choose an in-person financial advisor or a financial advisor you only work with online. In fact, you may not need one at all! But if you do want an advisor, you shouldnt be swayed from an online advisor just because you cant sit down in the same room.
Just like SelectQuote can quickly offer you multiple competitive insurance quotes that can save you money, an online financial advisor can handle your investments and save you money. And at the same time, you can work with an online advisor in your pajamas sitting behind a laptop screen. No need to drive anywhere or schedule an appointment into your busy schedule.
If you think an online financial advisor would be a good fit for your needs, you are probably right. In 2019 and beyond, you can certainly find an online advisor that meets your needs.