By Justin Pritchard, CFP®, an online financial advisor serving clients nationwide.
Working with a financial advisor can look however you want it to look. If you’re not into stuffy offices, sales pitches, or spending eight hours on the golf course, you’ve got plenty of other options. One of the best ways to take full advantage of those options is to work with a financial advisor online.
Why Work With an Online Financial Planner?
A financial advisor should be somebody who can help you with your goals and who understands your life. That doesn’t necessarily mean you need to share intimate thoughts and feelings (although you can), and you don’t need to pick somebody who’s exactly like you. But you’re best served by somebody who—more or less—understands what wavelength you’re on.
So, what do you gain from working with an advisor online?
No Geographic Limitations
Traditionally, people worked with financial advisors based on geography: Whoever lives closest to you is the person you work with, for better or worse. Also, you might end up with whoever you see most often at community events or around town. Right or wrong, that’s just what you did.
Now, you’ve got numerous options from advisors around the world. It’s still critical to investigate advisors, but that’s easier than ever.
- Explore what credentials and education they have, such as the CFP® designation, at a minimum.
- Ensure they have a clean regulatory background by looking them up on Brokercheck.
- Find out what type of work they do and what types of clients they typically work with.
- To reduce conflicts of interest, make sure you’re working with a fee-only advisor who is a fiduciary with all clients at all times.
- Investigate how long they’ve been working with people like you—not just how long they’ve been out in the workforce.
If you don’t believe that the business that happened to open up shop nearby is automatically the best for you, you can work with somebody else. In addition to getting the help you want and deserve, you may enjoy some privacy by working with somebody remotely.
In many cases, advisors can work with out-of-state clients, but they need to follow specific rules. A skilled advisor should be very familiar with those rules.
Continue reading below, or watch (or listen to) a video with this information:
The right advisor for the right need: Similarly, you can now choose a financial planner that focuses on the things you want help with. A good CFP® practitioner is well-versed in numerous subjects—and will take the big picture into account, in many cases. But choosing somebody with their finger on the pulse of your most important topic has its benefits.
You gain free time by getting financial planning services online. Instead of driving to an appointment, finding parking, sitting in a waiting area, and finally meeting to discuss your needs (and reversing all of that to get back home), you can handle everything online.
There’s still room for pleasantries and small talk if you’re in the mood for some informal discussion. But you eliminate some of the most burdensome logistics that eat up hours in a busy world. Wouldn’t you rather spend that time on more important things, like quality time with loved ones and activities you enjoy?
Filling time? As a side bonus, you might limit meetings to only the length required to cover your finances. When you have an in-person meeting, you and your advisor might feel compelled to spend a full hour to justify your trip to the office (even if that means discussing topics that don’t need your attention). Your advisor may feel an obligation to review details that you’d rather not bother yourself with—that’s why you hired an advisor in the first place.
If you need a particular kind of help, can you get it from local providers? Some people just sell insurance and call it a “financial plan.” Others will only work with you if you transfer a substantial sum of money to their firm. But with a wider universe of financial advisors available online, you’ve got a better chance of getting exactly what you want. That might be:
- Somebody to help you plan for the future without taking over your investments
- A second set of eyes on your investment strategy, just to see if anything looks off
- A review of what your current advisors are recommending
- A one-time meeting to ask lots of questions for a flat fee
There are plenty of financial planners available to help with those items—but you might not know them personally (yet) or drive past their office every day.
It’s (Usually) All In Writing
Want a record of everything your advisor tells you, and do you enjoy taking time to think through responses as you work on your financial plan? That’s especially easy with an online-only relationship. Yes, you can have voice calls and video conferences that are not recorded. But if you want to pin down some details in writing, that’s completely natural in a virtual relationship—just send an email, or ask your advisor to do so.
As you might imagine, this has several benefits:
- There’s less for you to remember or write down yourself
- It’s harder for a salesperson to mislead you (or there’s a record, at least)
- Misunderstandings might be less likely when everything is spelled out
There’s no guarantee that you’ll pay less with an online financial planner, but there’s a decent chance that you’ll at least know how much you pay. As a result, you’re less likely to get taken for a ride.
Again, the traditional model relies on geography and whoever you’re familiar with. Unfortunately, there are some really great people stuck in some surprisingly bad sales systems. Those systems require them to sell certain products—many of which aren’t in your best interest. What’s more, it’s hard to tell exactly what you pay, and some of those advisors often don’t even know about money changing hands behind the scenes. There may be a lot of revenue sharing going on upstream from your local advisor—think “shelf space” at your grocery store, and you’re on the right track.
Some people even tell you that you pay “no fees,” but you know that’s too good to be true. Sure, you won’t see a transaction labeled as a fee, but there are always tradeoffs in finance, and those companies you’re sending money to have large buildings with well-paid executives.
The best online advisors are fee-only planners who do not earn any commissions for selling products (and don’t even have an employer telling them what to sell).
Downsides of Virtual Advice
This is primarily about the advantages of working together online, but it’s crucial to acknowledge potential challenges. As long as everybody is understanding and flexible, almost anybody can do well with online tools.
Not Quite Face to Face
The meeting experience is not the same as an in-person meeting. It may not feel as personal, and it may take some extra communication to make sure you and your advisor understand each other. For most things, it’s not an issue, but sensitive topics or complicated subjects require additional care.
Not a fan of video? If you don’t like the idea of video meetings and you prefer to just talk on the phone, that’s fine. Video is an option, but I have several clients I’ve only worked with by phone. I always offer video meetings, but some people prefer to talk in their pajamas, and there’s nothing wrong with that.
Sometimes technology doesn’t cooperate, and it may take a bit of trial-and-error to get familiar with new tools. You may need to reschedule a meeting or spend a few minutes getting materials in front of you when things don’t work perfectly. For the most part, the technology is quite reliable, which makes it frustrating on those rare occasions when you need to try something else.
Types of Services
A full-service financial advisor can accomplish a lot online. You can plan for a variety of goals, like education funding, retirement income, or buying property. You can also look at your entire financial picture with a skilled financial planner. That includes your tax (and strategies to manage taxes), investments, debts, income and expenses, estate planning, and more.
Financial advisors often manage investments, but that might not be a requirement. You may be able to just ask for advice for a flat (or one-time) fee and handle your investments yourself. Be sure to clarify that if you have strong feelings on the matter. You don’t want to waste time speaking with somebody who can’t offer what you want and need. You can pay advisors under a variety of engagements, but most fee-only advisors charge flat or hourly fees. When investment management is included, you might pay a flat fee or a percentage of your assets under management.
Full-service advisors have expertise in multiple areas, but they don’t necessarily do everything themselves. For example, they can help you identify gaps in your estate plan and discuss issues with you, but they aren’t attorneys (most of them, anyway). As a result, you typically work with an attorney licensed in your for document preparation and specific legal advice. Your financial planner can often provide references to online and local attorneys. The same goes for tax preparation.
I happen to be a full-service online advisor, so take that into consideration as you read descriptions of some alternative approaches to online advice below. Everybody has their own view, and that may be influenced by what they do for a living.
Robo advisors provide automated investment management services. They may also have basic online tools to help calculate your needs and goals. These services typically use traditional investment strategies (which isn’t a criticism) and tend to charge relatively low fees due to the automated nature of the service. The fee is often a percentage of your total account balance.
While robo advisors are a decent fit for some people, they primarily serve one need (investing) without considering the bigger picture. Also, some robo advisors have experienced technical problems during major market events or turned off their customers’ ability to change their investments. Especially during periods of high volatility, actually talking to somebody may be asking for too much.
Some major investment houses offer investment management and very basic financial advice. As you might imagine, the products they put your money in are typically their own (or they may be from vendors that share revenue for preferential placement). These services might charge a percentage of your account balance, an upfront fee, or an ongoing monthly charge.
Sometimes you can speak with a financial advisor through these arrangements. That’s great for basic questions, but if you want to go more in-depth, you may find that your representative is not allowed or not qualified to go there with you. Plus, there’s only so much anybody can accomplish when you call a 1-800 number and talk to somebody different every time. Still, depending on your needs, this may be sufficient.
Financial coaches can help you manage your spending and basic financial management needs. If you want help developing a budget, tracking your spending, or understanding your financial habits, a financial coach may be a decent option. A coach generally does not have licenses to provide investment advice or investment management, so the guidance you receive tends to focus on your income and spending.
If you’re not ready to invest and you don’t want to work with a fee-only financial planner, a financial coach could be a solution. These people are skilled at making sense of your everyday expenses, your debts, and other items that affect your overall finances.
Advisors Without the Right Tools
Online advice isn’t just about using video instead of meeting at an office. The whole experience can be streamlined, and the best online financial planners make your life easy. You don’t want to have to print a PDF, fill it in, scan it, and then email or fax it. Instead, an e-signature solution eliminates all of those steps. Want to provide documents to your advisor? An easy-to-use encrypted file-sharing vault is a necessity. Among other things, these solutions reduce the burdens on you and the amount of waste (with your personal information printed on it) floating around.
If working online sounds appealing but you’re not getting that from your current advisor, you always have the option to switch advisors.