How can I find the best online financial advisor?
To find the best online financial advisor, you need to understand what they do, how they differ from robo-advisors, how much they cost, and what the benefits and risks are of using them.
Summary
Online financial advisors offer financial advisory services online only rather than face-to-face.
Robo-advisors are different from online financial advisors. Robo-advisors are based on computer algorithms, while online advisors are actual human beings.
Online financial advisors are often cheaper and easier to access than traditional financial advisors.
Online financial advisors favor fixed annual fees and percentages of assets under management.
Unbiased can connect you to a financial advisor, online or in-person, perfectly suited to meet your needs.
What is an online financial advisor?
Online financial advisors offer financial advice on a range of relevant topics, from budgeting to investing in the stock market.
They only differ from traditional financial advisors in one way: they interact with you online via email, video conferences, and other forms of digital communication.
What is a robo-advisor?
A robo-advisor is a digital platform, often in the form of an app, which offers financial advice based on computer algorithms.
Typically, robo-advisor users fill out online questionnaires regarding their financial goals, investment timelines, and risk tolerance. The robo-advisor then feeds this information into its algorithm to produce financial advice relevant to each user.
Although robo-advisors are generally cheaper than other types of financial advisors, it’s important to note that you get what you pay for. In other words, robo-advisors come with some significant risks:
Inflexible algorithms
Inadequate personalization
Vulnerability to cyber attacks
Absence of emotional intelligence
Excessive dependence on technology
Human online financial advisors offer the affordability and convenience of robo-advisors, without these risks.
Online financial advisor vs robo-advisor: what’s the difference?
As you may already have guessed, an online financial advisor differs from a robo-advisor in that the former is a human being, while the latter is a computer algorithm.
Online financial advisors provide affordable help with finances without exposing you and your money to the threats to which robo-advisors are vulnerable. The best online financial advisors have the edge over robo-advisors in many ways:
They can tailor their financial advice to your particular goals and circumstances.
They can help you better understand financial matters like taxes and the stock market so you can make informed decisions.
They can keep a close eye on the markets and respond to unforeseen changes in a timely and appropriate manner.
They understand your emotions surrounding your finances and can help you navigate them to make smart financial decisions.
What are the benefits of an online financial advisor?
In addition to having the edge over robo-advisors, online financial advisors also offer numerous benefits not provided by traditional offline advisors.
Online financial advisors:
May be cheaper: Every financial advisor operates on a different fee structure, which may or may not fit your pocket. As online financial advisors operate virtually, they may have lower overheads, which could translate to lower fees.
May offer speedier response times: If you work with an online financial advisor, you’ll likely get answers faster than with an offline advisor. You won’t have to wait for an appointment or to have your phone call returned since your advisor will be available via email, video chat, or instant messaging. This also means you won’t have to pay for an appointment every time you need a question answered.
May make financial tracking easier: Many online financial advisors offer online dashboards for you to monitor your financial situation whenever you wish. This is an improvement on the traditional method, which would require you to wait for the next quarterly report to assess your situation. Online advisors may also offer a range of other financial planning tools, such as mortgage or interest calculators, for even greater convenience.
All of this, and online financial advisors still offer most of the benefits of traditional advisors. It then really becomes a matter of personal preference whether you’re comfortable with forgoing the face-to-face experience to enjoy the benefits of online financial advice.
How much should I pay for online financial advice?
It can be difficult to compare the fees offered by different financial advisors because each firm uses its own fee structure.
For example, some advisors charge a percentage of your assets under management (AUM), while others may charge an hourly fee or flat rate.
Your own financial situation and preferences will determine which fee structures are best for you.
Here is a general overview of how much financial advice costs in 2023:
Typical financial advisor fees
| Fee Type | Typical Cost | Investment Amount |
|---|---|---|
| Fee Type | Typical Cost | Investment Amount |
| Flat fee | $7,500 – $12,500 | $1 – $1,999,999 |
| Hourly fee | $120 – $300 per hour | Varies |
| Percentage of AUM | 1.05% – 1.02% | $500,000 – $1,000,000 |
Source: USA Today
Online financial advisors, in particular, tend to favor a percentage of AUM or an annual flat fee. The AUM fee can range from 0.30% to 0.89%, while the flat annual fee can be $2,000 or more, depending on your needs.
It’s worth noting how these figures are markedly lower than those (cited above) for financial advisors in general.
How to find the best financial advisor online
Whether you use an offline or online financial advisor, it’s important to research your options with great care before you settle on an advisor.
Some factors to consider when seeking the best online financial advisor:
The scope of the advisor’s services and whether they can meet your particular needs.
The value of their assets under management. This will help you find the firm with the right amount of clout to handle your assets, whether they are extensive or limited.
The fees they charge and how these are structured.
The platforms (for example, email, video chat, messengers, etc.) they use to communicate.
Their overall investment strategy, including their approach to risk vs. reward.
The online financial planning tools they offer.
Their credentials and registration with regulatory bodies like the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Want expert financial advice?
Now that you’ve found out how to find the best financial advisor online and why robo-advisors are no match, you may want to learn more about finances and get expert financial advice.
Let Unbiased match you with an SEC-regulated financial advisor who can provide expert, personalized advice that doesn't rely on an algorithm.
Writers
Our team of writers, who have decades of experience writing about personal finance, including investing and retirement, are here to help you find out what you must know about life’s biggest financial decisions.