Where to Get the Right Financial Advice for Your Situation

By now, you may have heard that the Department of Labor will delay implementation of its Fiduciary rule for 60 days.  The rule, established under the Obama administration, required advisors who gave advice on retirement accounts to act as a fiduciary. That is, they’d have to  act in the client’s best interest.

The rule was finalized in April of 2016 and was set to start phasing in on April 10th, 2017. However, the Trump administration asked his Department of Labor to undertake new “economic and legal” analysis, and the DOL proposed the delay. While the administration doesn’t have time to eliminate the law —  that would required an Act of Congress and a lengthy rule-making procedure — they are taking substantial steps to limit its bite.

All this means that the landscape for people seeking financial advice has become muddier than ever.  You have fee-based advisors who act as fiduciaries, and commission-based brokers who do not, and now, robo-advisors like Wealthfront saying that anyone with under $1 million in assets gets cookie-cutter advice that is spit out by financial planning software.

People are always asking me what kind of financial advice they should get and where they should get it.  Today I’ll cover three different models for obtaining advice and look at what type of investors each approach suits best.  Remember, though, that the right answer for you will depend on your specific situation.



Robo-advisors, or “robos” for short, are automated, online portfolio managers that build diversified, low-cost portfolios for you based on your risk tolerance (usually found through an investing questionnaire).  Robos provide the simplest and cheapest form of personalized advice. They construct a portfolio for you, automatically rebalance it and, often, perform tax-loss harvesting for taxable accounts.

Robo-advisors first emerged in 2008, led by new firms like Betterment and Wealthfront.  Now the field has become more competitive with options including free-management robos like WiseBanyan and Charles Schwab Intelligent Portfolios and niche-specific robos like Ellevest and Worth FM.

Robo-advisors cost less and require smaller minimum portfolio sizes than traditional financial advisors — where you typically pay 1% of assets on portfolios of $500,000 in assets and up.  Robos create simple, diversified, low-cost portfolios — an approach that research demonstrates provides investors with the best results over time.

Robos are great for people who aren’t looking for additional financial advice (either because they have it under control or aren’t as worried about it).  However, building good portfolios is just one aspect of financial planning. And even the robos are starting to realize this.


Hybrid Robo-Advisors

Some Robos have recently begun to offer advisory services to supplement their core automated portfolio construction.  If you like the idea of automated investing, but occasionally want to talk to a human being, these hybrids may work for you.

While never purely a robo, Vanguard has led this movement calling access to flesh-and-blood advisors an “emotional circuit breaker, so you don’t abandon a well-thought out plan.”  Vanguard offers advisory services for just .3% of your portfolio or 30 basis points. There is a $50,000 portfolio minimum. But at that size you’re paying just $150 a year! For that amount, Vanguard says you will get “a customized financial plan” and “ongoing investment advice.”

However, if you read the fine print, you’ll find that  you only get a dedicated advisor if your portfolio exceeds $500,000. If you have less than that, you’ll have access to a pool of advisors, but you’ll likely talk to someone different every time you call. Still with $500,000 of assets, you’re only paying $1,500 versus $5,000 per year for those advisors that charge the industry standard of 1%.

Other robos like Betterment, Charles Schwab and Personal Capital have followed Vanguard in offering advisory services with varying fees. For those with portfolios over $100,000, Betterment charges .40% for one call a year with an advisor and unlimited calls for .50% for those with portfolios over $250,000.  Personal Capital charges .89% for those with accounts under $1 million.  Those with portfolios under $100,000 get a dedicated advisor and those with over $100,000 get a second dedicated advisor, while still keeping the costs under $1,000 a year.  Schwab offers advisory services for .28% of the portfolio with a $900 quarterly fee maximum (or $3,600 a year). They also use a pool of advisors.

Keep in mind that these costs are for the advisory services. You still have to pay the fees for the ETFs or Index Funds, and in Betterment’s case the investing platform,  on top of that.

I think this is a great step up for people who don’t have a lot of investable assets and want human advice at low cost.  However, I’m a bit skeptical about how in depth this service can get given the volume of people serviced and using a pool of advisors. The advice also seems mainly portfolio-focused.  If you want guidance on more complex financial issues, you may still want additional help.


Registered Investment Advisers and Other Independent Financial Planners

As I’ve said before, financial planning involves much more than investing. You need to have a good understanding of your cash flow, net worth, insurance protection, estate planning and your tax situation. In order to get truly comprehensive advice, you will need to go to someone that considers your entire situation.

But what if you don’t want to pay 1% of assets, or don’t have a large portfolio?  Many fee-only advisors offer comprehensive advice for an hourly or monthly fee. Don’t believe  Wealthfront’s comment that these fee-based advisors “tend not to be the most capable because the smarter ones have figured out that they can earn far more money by charging an annual 1% advisory fee on investment accounts in excess of $1 million”— it’s  simply not true.

If you’re searching for a good fee-based advisor, look for a CFP® certificant.  Advisors earn this designation by meeting education and experience requirements, passing an extensive exam and demonstrating high ethical standards.

That’s a good start, but you’ll still have to do some research. Working with an independent advisor allows you to meet with him or her to make sure you find a good fit, rather than getting stuck with whoever answers the phone.  Ask potential advisors whether they are familiar with your specific need and adhere to a fiduciary standard that requires them to serve your best interests.

The fees for these advisors can be as low as $50 dollars a month. And as with my practice, you may find that they require an engagement fee (anywhere from $500 – $3000).  But for that fee you get a truly comprehensive plan including:

  • Work on your cashflow – tracking, managing, forecasting
  • Investment plans based on your personal Investment Policy Statement, taking into consideration your risk tolerance and risk capacity
  • Substantial task return review and analysis
  • Student loan analysis and debt management
  • Risk management analysis
  • Essential estate planning review

Even more significantly, a dedicated advisor can help get you organized, educate you on the specific aspects of your financial plan, proactively plan for life’s inevitable transitions and keep you accountable to sticking with your goals.  Lastly, unlike hybrid robo-advisor services, many independent advisors specialize in specific circumstances like new parents, women in tech, or LGBTQ couples. You can find more niche-focused advisors in organizations like NAPFA and the XY Planning Network.

Overall, getting the right financial advice isn’t one size fits all. And luckily we have all of these options that you should be able to find something that fits your desires and your budget.

As always, I would love to hear what you think. Where are you getting your financial advice? Do you think comprehensive planning is overrated?