One of the largest trends in investment advice is coming from an increasing number of online robo-advisors. While services vary, the main service offering is an easy access investment plan and in some cases, basic financial planning advice. We certainly appreciate their fee transparency (you should always know exactly what you pay for a service!) and the goal of keeping you invested.
We view these largely as a good thing for uncomplicated and beginner investors, mainly because it’s better than what they usually have…nothing! Since many advisors have large minimums and fees in the range of 1-2% of assets under management, one-on-one investment/financial planning advice can be unattainable or seemingly very costly. Robo-advisor’s fees generally range from .10% up to .89% with minimum deposits from $0 to $100,000. While this is generally lower than a live advisor, you do give up significant benefits of a holistic fiduciary advisor.
The Lighthouse Financial Advisors, Inc approach is to create enough value to earn our fee and strive to keep it well below the industry average. All while providing comprehensive tax, investment, and financial planning guidance. Part of an advisor’s value comes through managing the behavior gap, by establishing a customized investment allocation based on your risk tolerance and goals. Then making sure you actually stick with it in tough times. A Dalbar Inc. study shows, For the twenty years ending 12/31/2013 the S&P 500 Index averaged 9.22% a year. A pretty attractive historical return. The average equity fund investor earned a market return of only 5.02%. This is a stunning amount of return to miss out on, and is largely due to investors behavior gap of buying high and selling low.
We also provide proactive tax planning & prep, goal setting, insurance reviews, estate planning guidance, and are virtually always available for one-on-one planning.
For additional information on the different investment profiles (which can vary widely and perhaps take more risk than you’re willing to face in a down market) created by various robo-advisors, please see this informative article from www.wsj.com – http://www.wsj.com/articles/putting-robo-advisers-to-the-test-1429887456
Written by: Luke Carey, CFP®, EA, MS