If you’re saving for retirement, starting a college fund for a new baby or are ready to finally put down the rent checks and invest in a home, it can be comforting to have a professional in your corner. Financial advisors can offer assistance and recommendations on where you should put your money to most effectively reach your goals for the future.
We’ve reviewed some of the best financial advising sources currently available for investors who are still on the hunt for the right financial advisor, as well as some tips on deciding whether a robo-advisor or a human advisor is best for your needs.
Quick Look: Best Financial Advisors of This Year
- Personal Capital
- Charles Schwab
Robo-Advisor vs. Human Advisor: Which is Right For You?
The first decision you’ll have to make when searching for a financial advisor is whether you’d like to work with a human advisor or a robo-advisor. Robo-advisors are automated investing platforms that use algorithms to determine the best investments for your unique life situation. When you sign up with a robo-advisor, you’ll answer a series of questions about your age, family status, savings goals and progress you’ve made toward retirement.
The robo-advisor will then use your unique situation to compile an ideal portfolio and shift the portfolio’s asset composition over time. This process is intended to offer a low-cost mimic of traditional financial advising and management services.
Is a personal financial advisor or a robo-advisor right for you? Some of the considerations you should take into consideration:
- Your financial goals: Robo-advisors are most often formatted to handle only passive investing strategies. This is great for investors who want to save for far-off goals like retirement or a child’s college fund. However, if you’re looking for more active management, you’ll likely be better off with a personal financial advisor.
- The amount of assets you have under management: If you have a high-value account (greater than $250,000 in assets), you will likely need a human advisor to handle your money to ensure that it is diversified at high level for protection, yet concentrated for your wealth to grow. If you have a lower value account, taking advantage of the lower fees and $0 account minimums of a robo-advisor can help you save more of your money.
- The complexity of your investing portfolio: If you’re just beginning to invest, a robo-advisor will typically have enough power to handle your needs. However, if you own your own business, make money through rental properties, or have a complicated income situation, a human financial advisor may be better suited for your needs.
Three Questions to Ask a Financial Advisor
If you’ve decided that a human financial advisor is the best choice for you, you aren’t quite done. All human advisors are not created equal—and unlike robo-advisors which follow the algorithm that a company has created. Firms may have better and worse advisors on their teams. Before you sign a contract with a personal advisor, be sure to ask him or her these three crucial questions.
- What specific services do you provide? Unlike some other industries that require specialized training or certification to claim a title, anyone can call himself a financial planner or advisor—even if they have no experience or education in finance. Ask your candidate to explain what he or she provides to their clientele—as well as what they do not provide—so you can make sure that all of your needs are covered.
- What is your investment strategy? Each financial advisor has his own unique investment strategy, but you’ll need to choose an advisor whose strategy aligns with your risk tolerance. Be sure to ask each candidate how he decides which securities to buy and when it’s time to sell.
- Who is your average client? You’ll want to look for an advisor who works with people like you—financial planners who have experience and have seen success with men and women like yourself will be more likely to succeed with your investments. If your candidate has only worked with clients far above or below your income, move on.
The Best Financial Advisors
1. Personal Capital
Personal Capital is technically classified as a robo-advisor, but its service also offers a unique blend of both human intelligence and AI. The advising service seamlessly blends algorithmic reliability with human creativity, allowing users to quickly set up an account and then hand the reins off to a team of finance professionals.
Personal Capital’s unique structure allows it to charge less in fees when compared with traditional human advising services. If you have $1 million in your account, you’ll pay 0.89% annually, while higher balance accounts pay even less. Personal Capital also offers a host of spending management tools free for all users, including investment checkups and spending analyzers.
It’s important to note that Personal Capital is aimed at high-value account holders; investors who have over $200,000 in their accounts get assigned two personal financial advisors dedicated to their account. If you have less than $200,000 in your account, you’ll have access to a team of advisors who work together to manage a host of accounts.
However, account minimums at Personal Capital are high—you’ll need at least $100,000 just to open an account. Thus, Personal Capital is best used by high net-worth investors who are looking for a hands-off approach to money management.
Betterment is one of the largest names in robo-advising services with over $11 billion in assets under management. The company offers two services, Betterment Digital and Betterment Premium. Betterment Digital is the advising service’s flagship offering.
It boasts $0 account minimums and low fees, which make it particularly appealing to newer and younger investors; Betterment Digital’s fees are just 0.25%, which is exceptionally low. Betterment Premium offers an increased range of services (including unlimited phone connection with human financial advisors) if you have at least $100,000 in your account in exchange for 0.40% in management fees.
Like most robo-advising services, Betterment focuses on building a diverse portfolio that’s suitable for long-term returns. The robo-advisor divides funds between ETFs belonging to 12 different asset classes, and the service also automatically rebalances the portfolio as your needs change with age, income, or living situation.
If you need more control over your accounts, you can tweak your ratios with Betterment’s “flexible portfolios” feature, but this perk is limited to Betterment Premium account holders. Betterment is best for hands-off investors, newer investors, and investors who are interested in passive investing strategies for retirement.
0.25% annual fee
- Passive investors
- Lower fees
- Beginning investors
- Investors who don't want to manage money on their own
Wealthfront is another robo-advising service that offers a streamlined approach to individualized investing. When you sign up with Wealthfront, you’ll be led through a series of questions to help the platform determine your tolerance for risk and savings goals, then diverts deposited funds into a personalized mix of ETFs from 11 asset classes. Wealthfront says that its typical fund holder will have between seven and eight asset classes in his or her portfolio, ranging from emerging markets to high-dividend stocks.
If you’re a parent whose main savings goal is to put away money for a child’s college education, Wealthfront supports 529 college-savings plans with additional tools to estimate costs. You can choose a sample college that you’d like your child to go to and an estimated year of enrollment and Wealthfront will estimate costs associated with tuition, room and board and textbooks.
Wealthfront can also use this information to help you formulate a long-term savings plan to reach your goal before your child gets to the college stage. If college planning is one of your most important long-term financial goals, this tool can make Wealthfront a powerful planning force. Otherwise, the software is great for hands-off investors of all types.
4. Charles Schwab
Charles Schwab is an online investing service that has greatly expanded its services in recent years, including into the realm of personal financial advising and planning. Charles Schwab operates a number of branches across the United States, where account holders can create appointments to chat with financial advisors or pop in for one of their many free workshops and seminars the company runs throughout the year.
If you’re having trouble deciding between a robo-advisor and a human financial planner, Charles Schwab’s Intelligent Advisory service blends the best of both worlds. The minimum balance needed to open an account with Intelligent Advisory is $25,000 (much lower than Personal Capital’s $100,000 minimum) and connects clients with unlimited access to certified financial planners.
New account holders are initiated with a 30-minute video call to help clarify their needs, and the system then uses algorithms to help divide funds into a range of asset classes.
In an effort to compete with Vanguard, Charles Schwab recently removed fees for investors who purchase Charles Schwab index funds. This, combined with the brokerage’s $0 account minimum, means that you can get started with just a small amount of money.
Vanguard may be well-known as one of the first brokerages to help investors manage their own retirement savings with low-cost index funds, but the company also provides personal financial planning services to those with large balances. You’ll need at least $50,000 in your account to begin with Vanguard’s financial planning services, and management fees are 0.30% of your total account’s balance.
This is about on-par with other human financial advising services (including Charles Schwab), but is higher than a purely robo-centric advising service. Vanguard’s financial planning services are best suited for large account holders who want a low-cost way to get in touch with advisors when planning for retirement, college education savings or other long-term goals.
If you have under $500,000 in your account, you’ll have access to a remote team of financial experts; if you have at least $500,000, you will be assigned your own personal financial advisor dedicated to your account. Vanguard Personal Advisor Services prides itself on customizing portfolios on an individual and customized basis.
As is expected from Vanguard, customers can expect their portfolios to be built largely using Vanguard’s ETFs and mutual funds. This isn’t necessarily a bad thing, as Vanguard’s funds carry some of the lowest expense ratios on the market.
- Brand-new investors
- If you're hungry to save money on fees
- Those who are comfortable managing their finances online
If you’re an investor who’s interested in socially responsible investing, Wealthsimple is a great robo-advising choice. Wealthsimple is an automated investing service that provides socially responsible choices, up front and clear pricing with no hidden fees, free tax-loss harvesting, and access to financial planners.
The company has created three weighted socially responsible portfolios that focus on investing in companies that focus on the development of green and clean technology, that consistently score highly on diversity and employee satisfaction ratings, and that support innovation and economic development in developing countries. While this socially responsible investing comes at a price (0.4% to 0.5%), it can be worth if you want to invest only in a specific niche.
If you follow Islamic teachings, Wealthsimple offers”halal investing,“ a truly unique feature which allows users to invest only in Shariah-compliant corporations. Halal investors an invest in 50 individual stocks screened by a third-party committee of religious experts well-versed in the Islamic faith and principles.
This list of stocks excludes companies associated with alcohol, gambling, sexual themes or suggestive products, firearms, tobacco products and a number of other forbidden businesses. Halal portfolios also exclude bonds and other interest-producing assets, as they are also forbidden according to Islamic law.
Whether you’re an investing expert or you’re just getting started, it’s always comforting to have a helping hand guiding your choices. To learn more about long-term investing, check out Benzinga’s guide to opening your first IRA.