From Robo to Real Person: How to Choose Investment Advice
Investment advice can be as unique as you are. Learn what to consider when seeking financial advice and who might want a digital option versus working with a traditional advisor.
Key Takeaways
Today there are several ways to get investment advice, from getting everything online to having a long-term relationship with a financial professional.
Choosing which option is right for you often depends on your life stage, how much time you have and whether you want to speak to a person or not.
Learn about three options for investment advice and which types of investors prefer robo-advice, a one-time advice session or ongoing advice.
Investment advice today comes in all shapes and sizes. From do-it-yourself with an online robo-advisor to working one-on-one with a human financial advisor, there are reasons you may want to choose one over another.
Financial consultants Melissa Ohler, Zach Roth and Addison Schubert discuss what to think about when deciding who (or what) to work with, focusing on the three options available from American Century Investments.
Digital Advice for Those Who Are Tech-Savvy or New to Investing
Choosing a digital advisor, robo-advisor, online financial advisor—or whatever a company calls its algorithm-driven investment advice—means getting an automated recommended portfolio. Investors answer a series of questions online or on an app about their goals, timeline and feelings about risk to get a mix of investments that aligns with their needs.
Although there are still people behind the scenes managing the portfolios, the experience is a do-it-yourself, no-human-contact service.
Who Is Digital Advice Good For?
“Many people think digital advice is for the novice investor or those who are younger—and maybe more tech-savvy,” says Addison. But that doesn’t mean others can’t take advantage of this convenient investment advice.
Zach agrees, “Digital advice lies in the middle of do-it-yourself and do-it-for me.” That’s because you initiate the advice relationship by answering a series of questions about yourself, but investment professionals build and typically manage the portfolio that's recommended—that's the do-it-for-me part.
The portfolio the robo-advisor recommends is based on your answers. "And the good news is that the investment professionals are responsible for doing the hard work of research and analytics to stay on top of the markets so you don't have to."
“Digital advice breaks down barriers for those who want financial advice but don’t want to talk to a person,” says Addison. If you don’t have a lot of time or don’t know where to start in choosing an investment portfolio, this kind of service may be a good fit for you.
Sound Investment Strategies Included
Another benefit of a digital advisor is that it recommends a portfolio based on sound investing principles, such as a diversification. A diversified portfolio includes a mix of investments that don’t all react the same way during market changes, which helps manage risk.
And many digital platforms either automatically rebalance the portfolios or have investment professionals behind the scenes doing it. That means they adjust the investment mix to stay true to the risk level that aligns with your answers to the online questions.
Financial Advice In-the-Moment
Facing a life change or big money decision? A one-time session with a financial advisor could be a big help for a specific situation. For a one-time fee, you could have an advice session with a financial professional, such as Certified Financial Planner® (CFP). What are those times?
“Clients with whom I’ve had a one-time advice session usually need a quick answer about a financial situation,” says Zach. “And they usually know exactly what that topic is.” He says it can range from, “Should I convert to a Roth IRA?” to “When should I claim Social Security?”
Other scenarios that might be right for one point-in-time advice include a job change, a decision about whether you are financially ready to retire, a one-time financial plan or inheriting a sum of money.
How much risk should I have in my portfolio and what should I invest in?
What financial goal should I focus on first, and what’s my next step?
Is my portfolio in good shape?
What’s the best way to invest for college?
Should I convert to a Roth IRA?
Am I on track for my retirement goal?
How should I withdraw funds in retirement?
When should I start Social Security?
Am I doing enough to care for my family’s financial needs?
What should my financial plan be right now?
How do I handle finances after a job loss or change?
“A one-time session may be good for people who are not interested in a longer-term relationship with a financial advisor,” Addison says. Or it can also be a way to test the waters about financial advice if you’re wondering if it’s right for you but not ready to commit to more in-depth advice.
“Point-in-time advice can be good for investors of any age,” says Melissa. “Many times, a client will want to confirm if they are handling their investments appropriately. Speaking to an advisor can give you that second opinion or help you think about other options.”
Getting an Ad-Hoc Financial Plan
It’s possible to get a detailed financial plan with ad-hoc advice, but most likely it would take more than one session.
“With our personal consultations, you can get a financial plan in two or three sessions with a Certified Financial Planner,” says Addison. It’s important to know that your plan will be for that point in time and there’s no automatic follow-up if your needs change. You would need to reach out to us for another session.
A financial plan can be helpful to give you a broader picture of your situation right now. And that can help with those financial decisions you need to make. If you are interested in your plan changing as your life does, you may want more attention from a financial consultant or ongoing financial planning that you get with a more in-depth advice option.
Go Hybrid for the Best of Digital and Ad Hoc Advice
By nature, robo-advice is an online-only service. However, many services also give you the option of talking to person on an ad-hoc basis for a fee. This is true for American Century’s digital advice, with an option to request a personal consultation if you need it.
In-Depth Advice for Ongoing Needs
Clients who are looking for more than a one-time consultation may be interested in a one-to-one relationship with a financial advisor. In addition to getting a recommended portfolio, ongoing financial planning—that changes with you—is a hallmark of these kinds of services.
Who is a typical candidate for more in-depth advice? “A good number of the clients I work with are nearing retirement,” says Addison. “Many are looking for a financial plan that will get them to retirement and through it.”
Relationship and Products Draw Long-Term Advice Clients
Addison says that for many of his clients, the relationship is most important. “Knowing that someone is helping with their plan is a big draw.”
On the other hand, some of his clients come for the products. “Our in-depth advice service gives them access to our managed portfolios,” he says. “They especially may be interested in our tax-efficient portfolios, which include exchange-traded funds (ETFs), and our newest portfolios that focus on income.”
Saving on taxes and having enough retirement income from your investments are two reasons to consider working with an advisor. They can be complicated topics and an advisor can help you walk through different scenarios to see which portfolio may be right for you.
Melissa agrees,” I find that if clients are nearing retirement, no matter how much money they have they appreciate the financial planning that comes with our in-depth advice.” It helps address any insecurities of not knowing if they have saved enough.
Zach says several of his clients started working with him when they lost a spouse. “Sometimes they weren’t involved in the finances before their spouse passed, or sometimes they just don’t want to manage their money alone. Either way, I’m glad we’re here to provide that service.”
Investment Advice, Planning and More
An in-depth advice service can go beyond giving you investment advice for your portfolio and a financial plan. “Advisors use their knowledge and expertise to construct personalized financial plans that aim to achieve the financial goals of clients,” says Melissa. But that’s not all. These financial plans can also cover your savings, budget, insurance and tax strategies.
Who May Not Be a Good Fit for Ongoing Advice?
“If a client is concerned about having control over their investments,” says Addison, “then our in-depth advice may not work for them.” With this advice option, clients will receive a portfolio that is managed regularly by our investment professionals. The portfolio is recommended based on their comfort with risk and what kind of strategy they are looking for, such as tax efficiency.
That’s true for financial planning too, says Melissa. “When a client declines the financial plan, it is because they have done their own planning, they are already well into retirement, or they have income from other sources like pensions and aren’t as reliant on their savings.”
"It’s a hands-off option for the client, and although many times they are relieved our investment professionals are managing the portfolio, it’s not for everyone,” says Zach. “But the good news is clients have other options for advice. We can also help them decide at no charge.”
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The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
Diversification does not assure a profit nor does it protect against loss of principal.
You could lose money by investing in a mutual fund, even if through your employer's plan or an IRA. An investment in a mutual fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
American Century's advisory services are provided by American Century Investments Private Client Group, Inc., a registered investment advisor. These advisory services provide discretionary investment management for a fee. The amount of the fee and how it is charged depend on the advisory service you select. American Century’s financial consultants do not receive a portion or a range of the advisory fee paid. Contact us to learn more about the different advisory services. All investing involves the risk of losing money.
Digital Advice is provided by American Century Investments Private Client Group, Inc., a registered investment advisor, for clients with a minimum $10,000 investment. Digital Advice provides discretionary investment management. American Century does not charge an advisory fee for this discretionary advice. The Journey Portfolios offered through Digital Advice all contain American Century exchange traded funds (ETFs) and mutual funds, which charge investors investment management fees, underlying fund fees, and other administrative and servicing fees. Depending on the different weightings or allocation of such ETFs and mutual funds, your fees for investing in a Journey Portfolio will vary, but generally range from 0.25% to 0.40% per year. American Century Investments' financial consultants do not receive a portion, or a range of the advisory fee paid by clients. Client-oriented trades outside of our recommendations, personal consultations by phone or in-person with our financial consultants, and other activities like wire transfer fees are offered for an additional fee.
All investing involves risk.
Private Client Group advisory services are provided by American Century Investments Private Client Group, Inc., a registered investment advisor. This service is generally for clients with a minimum $50,000 investment. Call us to determine the level of service that is appropriate for you. The advisory service provides discretionary investment management for a fee. All investing involves risk.
Annual Investment Advisory Fee is 0.90% for balances $5 million and under and 0.70% for balances over $5 million. American Century Investments Private Client Group charges a single annual fee based on the value of your assets under management with us. The single fee includes our Private Client Solutions, along with any underlying trading costs, commissions, and custody services related to our recommendations. American Century Investments' financial consultants do not receive a portion, or a range of the advisory fee paid by clients. Client-oriented trades outside of our recommendations and other activities like wire transfer fees, may result in additional cost.
IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.
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