Whether you’re saving for retirement or already retired, finding the right financial advice can be tricky. There are hundreds of industry credentials, varying advisor experience levels, and geographic challenges for those who want to meet face-to-face.
Oftentimes, the best financial advisor for your situation may not be local, which makes finding that person even more difficult. I’ll take the guesswork out of finding the best online fiduciary financial advisors for your unique situation.
For example, let’s say you just went through a divorce. A financial advisor with the CDFA ® credential (Certified Divorce Financial Analyst) may be most appropriate, but that advisor may not be local. Likewise, for large investors with extensive investment requirements, the CFA ® (Chartered Financial Analyst) may be the best fit! However, CFAs ® are few and far between, and your best fit may be across the country.
Due to this fact, many folks are turning to online fiduciary financial advisors for guidance. But how do they differ from traditional advisors? And more importantly,is an online financial advisor best for your unique situation?
Online fiduciary financial advisors are becoming more popular
In this article, we’ll explore the pros and cons of using an online fiduciary financial advisor. We’ll review the key benefits of working with online advisors and guide you on how to find one that best suits your unique needs. You’ll learn essential questions to ask these fiduciary advisors to make sure you are making the right choice.
Table Of Contents:
- Why Use an Online Fiduciary Financial Advisor?
- Essential Questions to Ask an Online Fiduciary Financial Advisor
- 1. What are your qualifications and experience?
- 2. How do you get paid? Are you a fee-only fiduciary, fee-based fiduciary, or commission-based?
- 3. Can you describe your investment philosophy?
- 4. How often will we communicate, and what methods do you use?
- 5. What specific financial planning services do you offer?
- FAQs About Online Fiduciary Financial Advisors
- Conclusion
Why Use an Online Fiduciary Financial Advisor?
Before we go further, let’s first clarify who exactly an online fiduciary financial advisor is. They are professionals who provide financial advice and planning services online. Unlike most “traditional financial advisors”, a fiduciary is legally obligated to act in their clients’ best interests. The “fiduciary” commitment to putting your needs first makes finding them the best option for optimal financial results.
Accessibility and Convenience
You might be wondering, “Why choose an online fiduciary financial advisor over a traditional, face-to-face advisor?”. A major advantage of online advisors is their accessibility and convenience. After COVID, most people became accustomed to working virtually through Zoom and other meeting software. This relationship – while not “face-to-face” is pretty convenient as you can meet with them anywhere in the world!
Imagine you are an entrepreneur with a hectic schedule or you travel frequently. Maybe you’re retired and spend most of your time fishing… Virtual meetings with an online advisor let you receive expert advice without needing to find time to drive across town or take time out of your busy workday. You can seamlessly integrate financial planning into your schedule with the touch of a button.
Transparency and Reduced Costs
Many people hesitate to hire financial advisors because of concerns about hidden fees or confusing costs. I get it! Most financial advisors still work on commissions. That means they might be motivated to recommend products that earn them the highest commission rather than the ones that are best suited to your financial needs .
By contrast, online fiduciary financial advisors usually operate under a fee-only compensation structure. You’ll know exactly how much you’re paying and what value you’re getting in return. The transparent pricing model substantially reduces – or fully eliminates – the worries of hidden fees or biased product recommendations. Also, they often have lower overhead costs compared to traditional advisors with fancy offices, allowing them to offer their services at more affordable prices.
According to a Journal of Retirement Study , research shows more consumers now prefer advisors with a fully disclosed fee-only structure. Additionally, online fiduciary advisors often charge less, on average. These advisors might have an annual flat fee, charge by the hour, or base their fee on a percentage of the assets they manage for you.
Diverse Options and Expertise
Because these services are online, it widens your potential pool of advisors. That gives you access to diverse specialists with niche skills. For example, the CDFA ® credential mentioned above. Or if your primary need is retirement planning you can easily locate a financial advisor specializing in this field who may hold the CRPS℠ (Chartered Retirement Planning Specialist) credential.
However, some online advisory firms are similar to “matchmaking services,” matching clients to a pool of vetted fiduciary advisors with specific experience. For example, one such service is Nectarine. Their terms of use are transparent, disclosing advisors do not pay an additional fee for matchmaking services. The organization states all its advisors have an average rating of 4.94 out of five stars. You can then review those advisors. You can compare their rates, experience and credentials to find the right match for you. That personalized touch can bring an added dimension to your online experience.
Tech Integration and Financial Tools
Online fiduciary financial advisors utilize various financial technology tools to manage your investments and streamline your experience. Advanced algorithms manage portfolio allocation. Automated rebalancing keeps you on track to meet your long-term goals. Interactive dashboards offer 24/7 access to your accounts, allowing you to monitor your progress anytime.
For instance, the CFP board’s online directory, Let’s Make a Plan , enables you to choose from more than 40 financial focus areas. You can even tailor results to your current investable assets. The board’s website also shares insights and provides educational materials to learn more about financial topics relevant to your individual situation.
Essential Questions to Ask an Online Fiduciary Financial Advisor
You’re ready to take the next step. But it’s still wise to exercise caution when hiring a financial advisor – online or not. Don’t let the promise of slick technology or unreasonably high returns distract you from essential due diligence. Below is a list of must-ask questions for any advisor you are considering. Asking these questions can help build trust. More importantly, it can make sure you’re making the right decision.
1. What are your qualifications and experience?
The primary consideration for the best fiduciary financial advisor is their experience and qualifications. Remember that certain certifications demonstrate adherence to fiduciary responsibility. For example, advisors with the CFP designation , meaning certified financial planner, are fiduciaries.
Always take time to research the firm’s background. Verify advisor work histories on resources such as FINRA’s BrokerCheck . Don’t just accept marketing claims, do your own due diligence to confirm they’re legit.
2. How do you get paid? Are you a fee-only fiduciary, fee-based fiduciary, or commission-based?
Don’t just assume someone is fee-only or even a fiduciary just because they have a slick website or claim to be. Always verify their compensation structure to know precisely how they make their money. Financial advisors typically get paid in three ways:
- Fee-only fiduciary : An advisor using this structure only receives direct compensation from their clients. It could be hourly fees, fixed annual fees or based on a percentage of your assets under their management. The Kitces Report, “ How Actual Financial Planners Do Financial Planning (2022), ” showed nearly 40% of financial advisors use an hourly rate with new clients. The same study showed that more financial planners who manage assets for their clients (more than 59%) now use a graduated fee system. For example, you pay 1% on your first $500,000, and .75% for assets exceeding that amount.
- Fee-based fiduciary : They earn compensation from client fees as well as a commission. That commission often comes from the sale of specific financial products. the commission component of this payment model could present potential conflicts of interest. Always ask them about their compensation to avoid biased advice and insist they fully disclose any commission-based compensation. Fee-based financial advisors “can” be fiduciary advisors, but – in my humble opinion – only if they fully disclose their commission compensation.
- Commission-based (NOT fiduciary): These advisors solely make their money by receiving commissions from the sale of specific products (typically insurance and annuity based). These professionals must abide by Reg BI under the Securities Exchange Act of 1934 , ensuring all recommendations are in a customer’s best interest. Even though these professionals are required by law to put their clients’ needs first, a fee-based model or a fee-only model is typically more transparent. It’s crucial to ask pointed questions to understand exactly how the advisors’ recommendations are driven by commissions they may receive.
3. Can you describe your investment philosophy?
You want your online fiduciary financial advisor’s investing style to be compatible with yours. For instance, a conservative investor nearing retirement needs very different investment guidance than a young, aggressive investor comfortable taking big risks.
Ask about their approach to investment management. Do they specialize in long-term growth, or are they more geared toward income generation? Ensure their strategies are right for you, not just another cookie-cutter approach.
4. How often will we communicate, and what methods do you use?
Open, ongoing communication builds trust. Clearly understand how frequently you will work with your financial advisor and how (Zoom, text, phone, in-person etc.). If the firm only offers communication via text, but you’re uncomfortable sharing personal information electronically, it’s best to know before signing up.
5. What specific financial planning services do you offer?
Not all advisors are created equal. Financial planning needs differ widely based on income levels, age, life circumstances and even cultural considerations. For instance, investors managing a company with over a million dollars in qualifying assets might receive different benefits through an online advisory program such as Schwab Private Client Services®, compared to those managing accounts with lower values.
Some platforms might specialize in one aspect, such as tax planning or debt management. Others might have a broad range of offerings. This can encompass everything from college savings (such as a 529 Plan), to retirement planning, insurance needs and estate planning. Clearly understanding their core expertise helps determine if their offerings are relevant to your situation.
FAQs About Online Fiduciary Financial Advisors
Which is better a fiduciary or a financial advisor?
Although “financial advisor” is a broad term, encompassing several different professional licenses, most consumers looking for this type of expertise seek financial planners to help create and manage investment and retirement plans. It’s not about which is “better,” rather understanding which professional has the right experience, credentials and fees to suit your situation. Additionally, verifying they’re a fiduciary ensures they are legally obligated to prioritize your interests, regardless of their job title or professional designation.
Who are the best fiduciary financial advisors?
Several reputable platforms provide this service, but there isn’t one company that’s “best” for every situation. Instead, start by looking for organizations affiliated with the National Association of Personal Financial Advisors, also known as NAPFA.
You can search for an advisor using NAPFA’s comprehensive search directory to filter advisors according to specialization and location. NAPFA advisors adhere to strict competency and continuing education standards, guaranteeing expertise regardless of individual client needs. Another excellent option is browsing the database through CFP board’s Lets Make a Plan online tool.
Which financial advisors have fiduciary responsibility?
Any financial advisor working with their clients as a fiduciary is legally obligated to prioritize the clients’ best interest. Those who aren’t fiduciaries must follow a “suitability” standard. That means they are only required to provide products deemed “suitable,” even if other options are potentially better or more advantageous for their clients.
How can you tell if a financial advisor is a fiduciary?
You should never just assume a financial advisor is a fiduciary. Advisory HQ advises you to always confirm. Directly ask, “are you a fiduciary?” It’s a straightforward question but essential to understand how they are obligated to treat you. Also, request to receive their regulatory documents to review before working with them. TheSEC website gives further information and helpful tips to identify fiduciaries.
Conclusion
Online fiduciary financial advisors are rapidly gaining popularity. They are reshaping how people manage their money. By blending niche expertise with cutting-edge technology, online fiduciaries create more accessible financial guidance typically at a lower cost. Always do your homework and ask probing questions. This will ensure your online fiduciary is reputable and a good match for your personal financial needs.