Online Financial Advisors: A Comprehensive Guide
What Are Online Financial Advisors?
A financial advisor is a catch-all term that includes financial planners and investment advisors. Most online advisors offer investment management — whether it’s carried out by a human or a sophisticated computer algorithm — and financial planning services or tools.
Types of Online Advisors
The main types of online financial advisors are:
- Robo-Advisors: Automated investment platforms (aka robo-advisors) use algorithms to generate a custom investment portfolio based on an individual’s risk tolerance, goals, and time horizon. Robo-advisors typically offer low-cost ETFs as a cost-effective way to instantly diversify an investor’s asset allocation and mitigate risk.
- Human Advisors (Virtual): Financial advisors that offer personalized financial planning and investment advice online through virtual meetings, email, and other virtual communication channels.
- Hybrid Models: Some online brokerages offer hybrid financial advice, combining automated investment advice and management through a robo-advisor and one-on-one consultation from a human advisor.
Benefits of Using Online Financial Advisors
Online financial advisors allow you to ditch the in-person hassle and access expert financial guidance from your phone or home computer. Online financial advisors leverage investment technology and generally low-cost compared to traditional in-person consultants.
Not only does it make investing more affordable for many individuals, but clients can more easily adjust and monitor their investments on their own time. Robo-advisor and hybrid online advisors typically offer online dashboards and tools for convenient managing and monitoring.
Top Online Financial Advisors
- SoFi Automated: Best Online Advisor for Low Fees
SoFi Automated Investing offers individual and joint taxable brokerage accounts, traditional IRA, Roth IRA, and SEP IRA. SoFi stands out for its lack of advisory fees, free one-on-one consultations with CFPs, portfolio diversity, and goal-planning features. SoFi builds a personalized investment portfolio based on your risk tolerance, goals, and time horizon. Additional SoFi membership perks include loan discounts and career counseling.
- Betterment: Best Online Advisor for Diversified Investing
Betterment Investing offers individual and joint taxable brokerage, traditional IRA, Roth IRA, SEP IRA, inherited IRA, and trust. Betterment is a robust trading platform offering premium plans with unlimited access to CFPs through phone or email. Investors can use the platform’s goal-setting feature, ESG investing, automatic rebalancing, and easy-to-use financial dashboard.
- Wealthfront: Best Online Advisor for 529 Plans
Wealthfront Investing offers individual and joint taxable brokerage, traditional IRA, Roth IRA, SEP IRA, trust, and 529 savings plan. Wealthfront is one of the best online financial advisors for college education savings and cryptocurrency trusts. You can borrow up to 30% of your investment balance at a low interest rate with a portfolio line of credit. Wealthfront also offers personalized recommendations with smart financial planning software.
- Ellevest: Best Online Advisor for Financial Planning and Personal Development
Ellevest offers individual taxable brokerage, traditional IRA, Roth IRA, and SEP IRA (all held at Folio Investments). Ellevest is a comprehensive financial advisor and trading platform built around women’s unique needs and challenges. Investors get access to an extensive library of content and advisor-led workshops. Additionally, Ellevest offers a socially responsible investment portfolio and monthly progress reports.
- Ameriprise Financial Investments: Best Online Advisor for Retirement Saving
Ameriprise Financial Investments offers three managed account options that can be opened as an individual brokerage account, traditional IRAs, Roth IRAs, Simple IRAs, SEP IRAs, 401(k)s, 403(b)s, 529 plans, and Coverdell education savings accounts (CESA). Ameriprise Financial Investments is one of the largest registered investment advisors in the US and is best for experienced investors looking for advanced charting and investing features. You’ll get access to fiduciary financial advisors for consultations or account management.
How Much Do Online Financial Advisors Cost?
Financial advisors providing financial advice often charge by the hour, typically between $100 to $300. Advisors creating a comprehensive financial plan tend to charge a flat rate between $1,000 and $3,000.
If you hire an advisor to manage your investment portfolio, you’ll be charged a percentage of your account balance, typically between 1% and 3% annually. In comparison, that’s much higher than the fees that the best robo-advisors charge; you get the added benefit of building a relationship with a trusted source who can adjust your strategy as needed, provide personal recommendations, and answer questions when they arise.
How to Choose the Best Online Financial Advisors
The best online financial advisor for you depends on your goals, risk tolerance, investments, and time horizon. If you’re a new investor interested in passive investing, an online robo-advisor is likely a good place to start. On the other hand, if you’re looking for professional insight and a customized financial plan, you’re better off with access to a human advisor through phone or video calls.
You can also meet with an expert in person for financial guidance. So if you prefer to meet face-to-face, here are some tools to find some in your area:
FAQs
- Are online financial advisors trustworthy?
Online financial advisors are generally trustworthy. The best advisors follow the fiduciary rule, meaning they operate in their clients’ best interest and are fee-only. This means client fees are their only compensation, and they don’t earn a commission when they invest in certain funds or buy financial products.
- Does everyone need a robo-advisor?
Not everyone needs a robo-advisor, but beginners or passive investors looking for a hands-off approach to stock trading may prefer how cost-effective and convenient robo-advisors are. Affordable financial advisors can be hard to come by, so robo-advisors are a great alternative for many people. However, a financial advisor may be better if you need specific advice on your finances or investment strategy or if you’re too overwhelmed or confused by your money to plan for retirement or invest in the stock market.
- How much does an online financial advisor cost?
The cost of an online financial advisor varies from platform to platform and advisor to advisor. The cost largely depends on the services, licensing, account balance, and complexity. Robo-advisors typically charge lower fees than human advisors.
Why You Should Trust Us: Our Methodology
We reviewed the best online financial advisors using Business Insider’s methodology for rating investment platforms. We compared a long list of Registered Investment advisors (RIAs), considering fees, investment selection, access, ethics, and customer service. The best online advisors have top marks in all five categories. Investment platforms are given a rating between 0 and 5.
In this article, Tessa Campbell of Business Insider provides an overview of online financial advisors, detailing the types, benefits, and some of the top options for 2024. Online financial advisors include robo-advisors, human advisors (virtual), and hybrid models, offering low-cost, accessible financial planning and investment management services.
The article highlights the advantages of using online advisors, such as convenience, affordability, and ease of monitoring investments through online dashboards. It also presents a curated list of top online financial advisors for 2024, including:
- SoFi Automated Investing: Best for low fees with no account minimum or management fees and free consultations with Certified Financial Planners (CFPs), but lacks tax-loss harvesting.
- Betterment: Best for diversified investing, offering goal-based planning and socially responsible investing, though it charges a monthly fee.
- Wealthfront: Best for 529 plans and offers tax-loss harvesting and cryptocurrency trusts but requires $100,000 for advanced strategies.
- Ellevest: Best for financial planning and personal development, particularly for women, offering personalized advice and extensive educational content but limited to individual and retirement accounts.
- Ameriprise Financial Investments: Best for retirement saving, offering a wide range of account types and access to fiduciary advisors but has high fees and complex structures.
The article also outlines the costs associated with online financial advisors, which vary based on services and advisor types, and provides tips on choosing the best advisor based on individual financial goals and preferences.