These days, there’s an adviser for almost everyone, which means you should only pay for what you need.
Defining the services you need will help guide you to choosing the adviser that’s right for you. If, for example, you decide that you primarily need advice about your investment portfolio, a robo-adviser might do the trick.
Robos are virtual advisers. Answer a few questions online, and computer programs match you with an appropriate, diversified portfolio of low-fee exchange-traded funds tailored to your time horizon and tolerance for risk. The robots monitor and rebalance your investments in tax-efficient ways throughout the year, and you never have to talk to a human being.
You’ll find robos at dozens of firms, such as Betterment and Wealthfront, as well as discount brokers, such as Charles Schwab, TD Ameritrade and E*Trade. Somewhere along the way, many people who use robo-advisers yearned for a bit of human interaction.
Some firms, such as Personal Capital and Vanguard, already were offering access to a certified financial planner or investment adviser in addition to their digital service. Now others, including Betterment and Schwab, offer access to a human too.
Robos deliver investment advice in a few mouse clicks. Robo-only services won’t give advice on your 401(k) plan, how to save more for retirement or how to afford college. But hybrid, robo-human services can provide some assistance. At most hybrids, when you need to talk to an adviser, you get the next available person on the phone line.
One exception is Personal Capital, where you work with a dedicated adviser.
The newfangled services charge clients the old-fashioned way — a percentage of assets under management. The typical robo rate hovers around 0.25 percent per year, but it can go as high as 0.50 percent. In most cases, that doesn’t include the expense ratios of underlying holdings. Hybrid services tend to cost a little more: between 0.30 percent and 0.91 percent of assets per year.
Robos appeal to investors who are looking only for portfolio advice and who are happy with index funds. Robos initially appealed to investors with small accounts, but many firms now have clients with seven-figure portfolios.
Nellie S. Huang is a senior associate editor at Kiplinger’s Personal Finance magazine. Send your questions and comments to firstname.lastname@example.org.