Summary of the 3 Types of Online Financial Advisors

In the past several years, investment startups and entrepreneurs have popped up all over the place. Their goal? To address the financial services industry’s past inability to provide personalized but affordable advice to investors who don’t have large amounts of money. Recent developments have shown that these new players are here to stay, at least for now.

Serving the demographic of people who aren’t rich is long overdue, and these investment startups are out to prove that anyone who makes money should take the time to invest it wisely — without having to pay a high price to an advisor.

These types of online financial advisors can be broken down into three categories, as seen in the tables below.

Summary of Online Financial Advisors

1. Custom Advising

It may seem a bit confusing to categorize the new breed of online financial advisors into a traditional category, but compared to the completely automated financial planning services of other companies, these startups are still approaching it from a traditional human-assisted point of view.

Their target market is made up of everyone from professionals to students, who need a bit of hand-holding in the beginning stages of investing. Many of these individuals have an average income of $75k or more. For the most part these advisors provide a customized investment portfolio, after having had a phone call or online chat with the investor.

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CompanyFeesMin. DepositMore InfoRebalance IRA0.50%/annually, $250 setup fee, and trading fees, min $500/yearNoneReviewWiseBanyanNone (currently in beta)NoneReview

2. Tech-Assisted

These types of online firms are focusing on mixing tech-assisted financial advising with traditional human contact, as an increasing number of financially savvy investors become more comfortable working with computer programs to invest their assets.

The typical markets they target are younger investors, like Millennials and Gen-Y’s, who prefer to lean on technology for financial advice, and investing decisions.

CompanyFeesMin. DepositMore InfoFutureAdvisor0.5%/annually$10kReviewPersonal Capital0.75% – 0.95%/annually depending the amount invested$100,000ReviewMarketRiders$14.95/month + trading feesNoneReview

3. Automated

From the moment you open an account, your money is invested into portfolios that are run by computer programs, without any contact from a human being (except through an automated email message). This lack of personalization helps keep investing costs super low.

If you already have some decent knowledge of investing and want your portfolio to run on auto-pilot, then you are their target market.

CompanyFeesMin. DepositMore InfoBetterment0.35%/annuallyNone – less than $10k must deposit $100/mo or pay $3/moReviewSigFig$10/monthNoneReviewWealthfrontFree for first $10k, 0.25%/annually for anything higher$5,000Review

To find out more about each of these online firms, click on the review links above.

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