By Sheryl Rowling
SAN DIEGO–A reader has asked me about online investing options. “They are less expensive than using an investment advisor,” the reader said. “Should I consider cyber-investing?”
A: Although it’s true that “robo” advisors can be a good alternative for some investors, “live” advisors can provide much more – even for investors who don’t consider themselves rich.
I view what advisors bring to the table similarly to Maslow’s Hierarchy of Needs. Here is my illustration:
Investors might look at the value of investment/financial services from some or all of the above levels. Let’s look at each level.
Costs: Investors who look at advice as a cost, not a benefit, will typically opt for online investing. In some cases, “robo” advisors charge as little as 0.35% per year with no trading costs. Advisors cannot compete with that, so, if cost is your only criteria, online investing is for you.
Tangible Benefits: Adding up the tangible benefits from advisors can outweigh the additional cost vs. online offerings. Cyber management is generally on a per-account basis and usually offers only a set selection of funds. Advisors can choose from the universe of investments and manage at the household level, allowing opportunities for postponing or eliminating some tax on income and gains. Although some “robo” advisors boast about harvesting tax losses on a daily basis, investors should know that this strategy merely postpones tax.
Intangible Benefits: Do-it-yourselfers tend to have a tendency to sell low and buy high. An advisor can add discipline and help prevent these investors from making emotional decisions. Having a professional to talk to and rely on can provide peace-of-mind and, ultimately, result in better long-term returns.
Goals: A diversified portfolio doesn’t address the main purpose of investing: reaching goals. A financial advisor can coordinate investments with time-line, risk tolerance, tax situation, cash flow needs, estate goals and contingency planning. Helping clients achieve their needs, wants and desires is what truly sets advisors apart from the “robo” advisors.
The bottom line: Utilizing the services of a qualified Registered Investment Advisor can truly pay off in the long term. In other words, you get what you pay for!
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Sheryl Rowling is a certified public accountant, personal finance specialist, and principal of Rowling & Associates. She may be contacted via sheryl.rowling@sdjewishworld.com