Can you replace your financial advisor with a website?

 

The financial crisis left many investors feeling burned and now some of them looking for alternative ways to obtain financial advice.

Losing money can be very stressful, and when we lose money we always try to figure out what we could have done differently. For investors that use financial advisers, the blame is easily cast on the managers, so it makes perfect sense to me that a lot of investors are looking for other ways to obtain advice.

The result is a growing popularity of computer programs and websites that use sophisticated algorithms to recommend investment strategies and ideas, and in some cases oversee investment portfolios. In most cases, these programs are cheaper than what you would expect to pay a financial adviser, making the case for using them even more compelling.

Middle income investors who want to seek out financial advice can pay up to $200 to $300 an hour for a meeting with their advisor. If you want a fully managed account with an advisor you can end up paying 1% or more of your assets each year.

When things are good, and everyone is making money, people tend to pay less attention to what they are paying in fees. When things go bad, as they did during the recession, people start to resent their advisors for charging these fees. After all, financial advisors are getting paid regardless of whether or not they are making you any money.

Another reason why financial advice software is gaining popularity is the fact that the younger generation is used to turning to their computer for information and research. If you want to learn about anything in this world, chances are high that the information is easily found online, so why not apply that experience to investing?

Software built to deliver financial advice is not a new idea, but after years of trial and error, it appears as though the industry is starting to get it right, at least according to Bill Doyle, a principal analyst with Forrester Research. He told the Wall Street Journal that he has been watching this industry for more than 10 years, but he is more excited than ever about the space because “the software required to transform this industry finally works.”

There are several startups offering software to aid in the investment process. These include Wealthfront Inc., Personal Capital Corp., and FutureAdvisor. Adding credibility to the industry are some of the big names involved in these startups. For example, Personal Capital's CEO, Bill Harris has previously been the CEO of both Paypal and Intuit.

He announced earlier this year that he had raised $25 million to start the company. Harris says that there are $32.3 trillion investible assets in the U.S. He believes that most people keep their money in different places, and has positioned Personal Capital as an easy way for investors to keep track of where everything is, how much they have, and how to improve their financial position.

The best advice if you want to start trying out these new services is to check out the free services that they offer and find one that suits your needs. Once you find a program that you like and feel comfortable with, do your homework and sign up for paid services that you believe will add the most value to your investing.

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.


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Michael Fowlkes

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.

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