LOOKING FOR a low-cost advisory service? It may be no farther away than your computer keyboard.
In recent years, there’s been a proliferation of online advisors, including firms such as Betterment.com, Finhabits, FutureAdvisor.com, LearnVest.com, MotifInvesting.com, PersonalCapital.com, Rebalance-IRA.com, SigFig.com, Wealthfront.com and WiseBanyan.com. These firms typically either charge a percentage fee, based on the assets you invest, or they levy a monthly charge. Either way, you’ll likely pay far less than the 1% of assets or more charged by many traditional advisors. Many of the online advisors further trim your costs by recommending low-cost exchange-traded index funds.
Bigger financial firms are also muscling into the low-cost advice business. Vanguard Group’s Personal Advisor Services costs just 0.3% a year. T. Rowe Price has a free service built around its actively managed mutual funds. Charles Schwab also has a free advisory service, which uses its own and other firms’ exchange-traded index funds. For a fee, discount brokers TD Ameritrade and Ally Invest (formerly TradeKing) will also build a portfolio of ETFs for you. Fidelity Investments launched its own online advisory service in 2016, with total annual costs—including fund fees—estimated at 0.35% to 0.4%. Note: HumbleDollar is a marketing affiliate of Finhabits, Personal Capital, TD Ameritrade and Ally Invest, so it receives a fee if you click on the above links and open an account.
The downside of online advisors is that you typically lose the face-to-face contact you enjoy with a traditional advisor. The advice you receive is usually focused solely on your portfolio, while many traditional advisors will help with your broader financial life. Still, these computer-driven services can offer a more rigorous investment approach than you get with many traditional advisors, who may be basing decisions more on gut instinct and an occasional review of your portfolio. In addition, if you have less than $250,000 to invest, it’s hard to find an advisor who will manage your account on a fee basis and give your finances the attention they deserve, so an online advisor may be your best bet for low-cost, high-quality advice.
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