The question of the day is all about making cents of online investment services – Which is best? In other words; should you or shouldn’t you? Naturally, as you might as well expect with this sort of question, there is no one size fits all answer here. Should you use Robo-Advisors or Human Advisers?
Working Definition of Robo-Advisors and Human Advisers
Let’s begin with a good clear definition of what we are talking about here so that everyone is on the same page. For the purpose of this article, we will define an online investment service as any sort of investment service where you don’t have the dedicated attention of a specific financial adviser – a Human Adviser. In most cases, this is done as a sort of lowering the bar if you will so that those with fewer dollars to invest can still benefit from professional advice.
Robo-Advisors?
Although you may have encountered the term Robo-Advisors in and around your Google Searches for investment advice, this phrase is something of a disservice to the industry.
Uh, hmm; not so much. Actually this is considered to be somewhat of a derogatory term by those in the business. Although you may have encountered the term Robo-Advisors in and around your Google Searches for investment advice, this phrase is something of a disservice to the industry. For example, the term “robo” implies more of a commoditized, mass produced product. Yet as you already know, each financial situation is unique. Consequently, it would not make sense to try and use a one size fits all approach.
What’s Available?
It turns out that there is a wide range of online investment services. Depending on which firm you’re looking at, you can receive access to services such as portfolio management, asset management, investment advising, financial planning, portfolio analysis, online brokerage services, asset allocation advice, and more. The point is that depending on your own personal financial situation, chances are you can locate an online investment advisory service that fits your needs which is exactly what we do.
How Do They Do It?
Understand that even the best online investment service can only work with what you give them. Most of these firms start the process with an online questionnaire for you to fill out. For example, should you happen to be interested in how best to allocate your assets among the various investment choices available to you, the online questionnaire will have specific questions about your time horizon. Using this information, the adviser will then suggest a model portfolio for you to implement based on that timeline.
Using an online investment advisor means you have to take the time out to carefully think through the initial part of the setup.
At the same time, there are some online investment advisory services that offer to select which portfolios that best fit your risk tolerance, time horizon, that sort of thing. The point to get here is that using an online investment advisor means you have to take the time out to carefully think through the initial part of the setup. Otherwise, the advice you receive, the portfolio models and such, will have little to no real meaning.
Real World Examples of Online Investment Services
Here is what this looks like in the real world. Take a look at how it works at the online investment company named Betterment. Betterment begins their process with an online interview process that is specifically focused on your time horizon for specific financial goals. During this process, you have a wide range of different investment goals to choose from such as wealth building, retirement savings amount, retirement income targets, safety net funding amounts, IRAs, and more.
Going a step further is another online investment adviser firm named Hedgeable. Hedgeable takes this process one step further. Instead of merely offering you model portfolios and the like, Hedgeable will actually manage your money for you to meet the goals you have identified. This means, Hedgeable will buy and sell securities for you account.
Another step up in the online investment service realm can be found at Personal Capital. Like Hedgeable, Personal Capital will also manage your money for you. Yet Personal Capital takes it one step further – Personal Capital provides wealth management services.
Now What?
The above list is a small sampling of what’s available out there in terms of online investment services. Check out our other article discussing Robo-Advisors.
Bottom line is this: if you are the type of person who doesn’t mind taking care of your personal finances online, then online investment advisors are the next logical step for you. On the other hand, should you be more comfortable dealing with your human financial adviser face to face, well that option is still available also and that’s exactly what we do.
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Posted from Admin at Association Financial Services, LLC
